Finance
China is tackling weak consumption with child care subsidies
Customers browse children’s clothing at a wholesale store in Chongqing, China, on March 1, 2025.
Cheng Xin | Getty Images News | Getty Images
BEIJING — Among the top five priorities China has laid out for boosting consumption is child care subsidies.
It’s an effort to tackle the country’s rapid drop in births, while freeing up cash for discretionary spending.
As with many Chinese policies, the plan released Sunday only lays out a framework: “Strengthen support for childbirth and raising children. Research and establish a system for subsidizing child care.” That’s according to a CNBC translation of the Chinese.
Beijing is moving relatively quickly, however.
The National Health Commission is already drafting an operational plan for subsidizing child care, Li Chunlin, deputy director of the economic planner, the National Development and Reform Commission, told reporters Monday.
A national-level policy of 100 billion yuan ($13.84 billion) for child care subsidies could come soon this year, Jianguang Shen, chief economist at Chinese e-commerce company JD.com, said in Mandarin, translated by CNBC.
That’s based on his estimate of around 9 million births this year, and monthly handouts of around 800 yuan to parents, regardless of income, Shen said. He noted half of the cash could come in the form of vouchers for baby products to prevent households from saving the money.
China recorded 9.54 million births last year, up by 520,000 from the prior year, as many locals considered 2024 an auspicious year for births based on the Chinese zodiac’s year of the Dragon. However, World Bank data showed that the fertility rate, defined as births per woman, was 1.2 in China in 2022, down from 1.8 in 2012.
“The key is to increase fiscal resources,” Shen said, noting that in the context of 300 billion yuan for trade-in subsidies, 100 billion yuan for child care isn’t too much to ask for. He forecasts around 3.5% to 4.5% growth in retail sales this year.
China’s retail sales grew by a modest 3.5% last year, according to official data. The January to February period, which covers the annul Lunar New Year holiday, saw a modest pick up to 4% year on year, the statistics bureau said Monday.
How much is enough?
In a glimpse of what is already being rolled out, the Inner Mongolian capital of Hohhot, last week announced subsidies of up to 100,000 yuan for children of registered locals who live and work in the city.
The couple can enjoy a one-time subsidy of 10,000 yuan upon the birth of their first child. Their second child is eligible for 10,000 yuan in annual subsidies until the age of five. If the couple have a third child, the city will provide 10,000 yuan each year until the child turns 10.
The tech hub of Shenzhen this month said it is considering a smaller-scale subsidy. State media noted that National Health Commission data as of October showed several local governments in more than 20 provinces were already offering some kind of child care subsidy.
“If the childcare subsidy in Hohhot can be extended to the whole country, it could amount to another 0.2% of retail sales in the initial year,” Citi analysts said in a report Tuesday. They said the subsidy could be most meaningful for low-income families and “could become more significant if the central government steps in to share the burden.”
“It remains to be seen if it will be effective in boosting fertility rate in the longer term,” the Citi analysts said, noting the total cost of raising a child in China is reportedly around 538,000 yuan, not to mention the opportunity cost for working mothers.
The per capita disposable income of rural residents was 23,119 yuan in 2024, while that of urban residents was more than two times higher at 54,188 yuan, according to official figures.
Short-term subsidies for child care could still significantly ease financial pressure on Chinese households.
When Beijing resident Song Jingli, now 41, gave birth to her daughter nearly 10 years ago, there was no child care support. Song said she made 8,000 yuan a month at the time, and day care cost 4,000 yuan.
“We didn’t have a choice,” she said. My husband “needed to go to work, I needed to go to work, and my parents-in-law were not able to take care of her.”
By the time her daughter was in kindergarten, Song said, she was able to benefit from a relatively new policy that halved the cost to around 2,000 yuan. The new policies on child care are “right to the point,” she said. “The only pity [is] it’s too late for us who were born in the 1980s. Hopefully younger generations can benefit from these policies.”
What to watch next
China’s efforts to boost consumption also include calls for increasing the minimum wage, stabilizing the stock market, boosting farmers’ income and resolving payment delays for businesses.
“The direction of [China’s] consumption-boosting measures is correct,” Goldman Sachs analysts said in a report Monday, “but both funding and implementation matter for the effectiveness of China’s consumption stimulus.”
“The announcement of a nationwide childcare subsidy and the April Politburo meeting are key to watch in coming months,” the analysts said, referring to a high-level policy meeting typically held in late April.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
Sign up for our weekly newsletter that goes beyond the livestream, offering a closer look at the trends and figures shaping the ETF market.
New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
What that means for consumer loans
Checks and Balance newsletter: Of God and MAGA
Why software stocks, 2026’s market dogs, have joined the rally
Armanino adds Strategic Accounting Outsourced Solutions
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
