China announced on Monday that each couple would be permitted to have up to three children, a major policy shift from the existing limit of two children, after census data showed a dramatic decline in births.
The policy change was approved during a politburo meeting on Monday chaired by President Xi Jinping, the official news agency Xinhua reported, without saying when the change takes effect.
China's population grew at its slowest since the 1950s as births declined, sowing doubt over Beijing's ability to power its economy as it succumbs to the same ageing trends afflicting developed nations like Japan.
With growth having ebbed ever since a one-child policy was introduced in the late 1970s, the 2020 results of the country's once-a-decade census on Tuesday showed the population of mainland China increased 5.38% to 1.41 billion. That was the least since modern census-taking began in 1953.
Data showed a fertility rate of 1.3 children per woman for 2020 alone, on par with ageing societies like Japan and Italy. The shrill alarm for China's policymakers is that the world's second-biggest economy may already be in irreversible population decline without having first accumulated the household wealth of G7 nations.
The number meant China narrowly missed a target it set in 2016 to boost its population to about 1.42 billion by 2020, with a fertility rate of around 1.8. In 2016, China replaced its one-child policy - initially imposed to halt a population explosion at the time - with a two-child limit.
The sharp deterioration in demographics will fuel pressure on Beijing to ramp up incentives to couples to have more children - incentives that have thus far failed to offset the impact of career choices and cost-of-living challenges that couples say have deterred them from starting extended families.
Analysts said that with substantial ageing of the population already in view, the census numbers will also give ammunition to policymakers arguing in favour of raising the country's retirement age sooner than later.
"From the trend of population development in recent years, the population growth will continue to slow in the future," said Ning Jizhe, head of the National Bureau of Statistics, speaking after the release of the census results.
"China's population will reach a peak in the future, but the specific time is still uncertain. It is estimated that China's total population will remain at more than 1.4 billion in the near future," Ning said.