Following the official release of China’s “Implementation Plan for Childcare Subsidy Program” on July 28, eligible residents have begun submitting their applications via third-party service platforms such as WeChat and Alipay. Photo: IC PHOTO

The Third Plenary Session of the 20th Central Committee of the Communist Party of China stated that “We will improve the population development strategy in response to population aging and the declining birth rate. A sound system will be instituted to provide full life-cycle population services to all in order to promote high-quality population development.” However, achieving this goal is a comprehensive, long-term, and complex process. To further adapt to new demographic dynamics and meet the requirements of high-quality development, China must shift from a management-oriented approach to one that places greater emphasis on guidance and incentives—premised upon a clear understanding of the internal logic underlying family fertility decisions.

Intergenerational development: key factor influencing Chinese families’ fertility decisions

Family reproductive behavior is endogenous to socioeconomic development and is influenced by factors such as income, education, and living costs. Chinese families have long exhibited a strong preference for upward intergenerational mobility—across occupations, income, and education—rooted in the enduring parental aspiration that “children should live better lives.” Education serves as the most universal channel for realizing intergenerational advancement, as children’s educational attainment is closely associated with their future social status and expected income.

In the early years of the PRC, widespread poverty meant that rising income initially led to an increase in overall fertility rates. Following the reform and opening-up, rapid urbanization and industrialization created the world’s largest middle-income group. With both the willingness and means to invest in education, these families adopted a “fewer births, better education” strategy. As their share of the population expanded, overall fertility declined sharply even as human capital accumulation accelerated. Looking ahead, as living standards continue to rise, the scope and potential for upward intergenerational mobility may become an increasingly important factor influencing fertility decisions.

From ‘utility of children’ to substitution of education for fertility

From the perspective of theoretical development, American economist Gary Stanley Becker was among the first to apply economic methods to the study of family fertility behavior. By conceptualizing children as a form of durable consumption good, Becker established the foundational analytical framework of the “utility of children” theory. Because childrearing generates utility for parents, rising income induces households to increase their demand for these “child goods.” A related line of research based on the notion of “raising sons for old-age security” argues that childrearing provides economic returns in later life, reaching similar conclusions.

Subsequent researchers observed, however, that higher-income families often have fewer children while lower-income families tend to have more, contradicting earlier theoretical expectations. To explain this, later studies introduced the trade-off between quantity (fertility) and quality (education) into fertility decision models. As income increases, the marginal return on educational investment rises, shifting parental preferences from quantity toward quality, thereby inducing substitution between education and fertility. Other researchers, approaching the issue from the perspective of childrearing costs, argue that high-income families face higher opportunity costs of time and thus prefer fewer children. These explanations, however, remain debated: critics note that they rely on overly strong assumptions and that the old-age support motive is not representative globally, as direct financial transfers from children to parents are relatively rare. Moreover, as social security systems develop and mature, the influence of old-age motives on fertility decisions diminishes further.

Since the late 1980s, the negative correlation between income and fertility has weakened. Some attribute this change to the development of childcare markets, which enable high-income families to offset time costs by purchasing childcare services, leading to rising fertility alongside higher income. This body of research highlights heterogeneity in fertility–education decisions across income groups. Fertility is shaped by a wide array of factors, and non-institutional forces such as higher per capita incomes, higher education levels, and evolving fertility norms have profoundly influenced micro-level family reproductive behavior.

In China, since the 1990s, socioeconomic factors have replaced family planning policies as the primary determinants of fertility decisions. Limited and unequal access to public services, along with high housing costs, have substantially dampened fertility intentions. Among these factors, the level of intergenerational development plays a particularly important role. Parents display altruism within the household: improvements in children’s income, achievement, and social status yield psychological satisfaction and emotional comfort, which enter their parental utility function. Chinese parents, characterized by strong aspirations for intergenerational advancement, therefore invest heavily in their children’s education—decisions that, in turn, shape family fertility choices.

Fertility decisions vary among Chinese households of different income levels

Empirical evidence from China shows that fertility rates and intergenerational development levels vary systematically across income groups. Fertility rates tend to be lower among middle-income households and higher among both low- and high-income households. Conversely, intergenerational development levels are higher among middle-income families but relatively lower at both ends of the income spectrum. This pattern aligns with economic reasoning: low-income families often lack higher education and professional skills, limiting their developmental potential, whereas high-income families benefit from solid economic foundations that sustain their capacity for further development.

Taken together, these facts reveal a coherent economic narrative. Middle-income families, driven by relatively strong incentives for upward mobility, prioritize educational investment over additional childbearing, resulting in lower fertility rates. Following the reform and opening-up, industrialization expanded the opportunities available to the middle-income group, while inclusive education policies, equitable access to education, and efficient education–employment linkages facilitated smooth intergenerational mobility. Under these conditions, educational competition was less intense, and rising incomes contributed to increased fertility. However, as the scope for upward mobility narrowed, parents intensified their participation in the “involutionary” competition of educational investment. The expansion of the middle-income group—both in size and proportion—has thus been a key driver of declining fertility at the macro level.

Incorporating intergenerational development into theoretical models enables analysis of how promoting upward intergenerational mobility affects families’ fertility–education decisions and reveals heterogeneity across income groups. Model simulations indicate that improving intergenerational development can enhance overall fertility. Using multiple micro-level datasets—including the China Family Panel Studies (CFPS), Chinese General Social Survey (CGSS), and national population sample surveys—empirical tests confirm that intergenerational advancement significantly influences both fertility intentions and actual fertility outcomes, with endogeneity and robustness checks across multiple dimensions. The observed heterogeneity shows that as income rises, fertility declines among middle-income households but increases among low- and high-income households. In addition, educational investment rises sharply once income surpasses a certain threshold. These findings indicate that middle-income families face greater pressure from educational competition, consistent with the theoretical mechanism.

Implementing targeted incentives to balance population quantity, quality

Refining China’s population development strategy in the new era requires policy measures that rely more on guidance and incentives tailored to different income groups. As intergenerational advancement exerts a profound influence on families’ fertility–education decisions, expanding the scope of upward intergenerational mobility and ensuring open, accessible mobility channels can ease the competitive pressures associated with advancement, thereby effectively raising fertility rates. This effort begins with promoting equity in educational resources and restoring education’s fundamental role in human development. Institutional practice should deepen systemic reforms and accelerate the establishment of a public service system, institutional environment, and social atmosphere conducive to high-quality population development.

First, it is necessary to accelerate improvements to the fertility-support policy system. This requires reducing the costs of childbirth and childrearing, expanding affordable childcare services, and lowering the resource drain associated with educational investments, thereby significantly alleviating the financial burden of childbearing, rearing, and education. It also necessitates establishing and enhancing fertility subsidy schemes with a stronger focus on low-income families.

Second, a multidimensional and differentiated education service system should be built. This necessitates fully leveraging the guiding role of public policy, balancing educational resource allocation across regions, and promoting equitable access to basic public education services to ensure high-quality and balanced compulsory education. It is also important to optimize the structure and spatial distribution of higher education while accelerating the development of modern vocational education by expanding undergraduate-level vocational programs and advancing the integration of general and vocational education, industry and education, and science and education.

Third, common prosperity can be promoted by regulating mechanisms of wealth distribution and accumulation to narrow income gaps. Addressing demographic challenges at their root requires going beyond the narrow scope of fertility and education to increase households’ share of national income, raising the proportion of labor compensation in primary distribution, and reducing income disparities across regions, industries, and social groups—thereby establishing a more balanced income distribution system.

Finally, population issues must be approached from a systemic perspective. High-quality population development encompasses both “quantity” and “quality.” Population policy ultimately aims to cultivate a modernized human resource base that is not only sufficient in size but also of high quality, well-structured, and evenly distributed. Accordingly, China’s population policy must balance the dual objectives of quantity stability and quality improvement, fostering synergy between population growth and human capital enhancement. Only by linking high-quality population development with the pursuit of a high-quality life for the people can China achieve long-term, balanced population development.

Li Jing is a professor from the School of Economics at Anhui University.