China's Baby Subsidies Could Drive Domestic Consumption

Its population may not grow much, but purchases certainly could

- DANIEL MOSS

No longer the world's most populous nation and confronted with projections that its citizenry will dwindle significantly in a couple of generations, China is trying something new. The message is more telling than the substance.

Beijing announced recently that it will subsidize households to have children. Babies born after January 1 this year will receive 3,600 yuan (about $500) annually until age three.

While not a large amount, it represents a further step away from rules imposed in the 1970s that constrained fertility. There's much to be said for starting small and scaling up. It's not hard to see the money being increased—and extended to all children.

The government has traveled a long way since Mao Zedong's death in 1976, when leaders prioritized economic development and poverty elimination. Smaller households were considered a route to higher standards of living, as was the case in South Korea, Singapore, and a swag of other Asian success stories. They worked too well, and President Xi Jinping's government is trying to address the aftermath.

The latest shift is a step in the right direction, though not for the reasons you might expect.