Hong Kong’s first five-year plan and latest policy address have put demographic sustainability on the public agenda. Among the measures announced are an extension of the newborn bonus scheme and increased financial support for the second and subsequent children.

These are welcome steps. But the fertility debate should not be reduced to whether a bonus is large enough to change family decisions. The bigger challenge is whether Hong Kong can remain dynamic and competitive while its younger generation continues to shrink. Demographic trends are often discussed in terms of ageing, labour shortages and pressure on public finances. Yet low fertility has a less discussed consequence: its impact on innovation.

Innovation ultimately depends on people: scientists making discoveries, entrepreneurs building companies and skilled professionals turning ideas into products and services. The stronger the talent pipeline, the greater the likelihood of breakthroughs. This matters even more in the age of artificial intelligence.

AI may offset some labour shortages, but it still depends on capable people to develop, deploy and improve it. Economies competing in an AI-driven future will need more highly skilled workers, not fewer. That is why low fertility should be viewed not only as a social challenge but also as a competitiveness challenge.

A key reason fertility has fallen across advanced economies is that society and families experience its costs and benefits very differently.

The benefits of raising children are widely shared. Children grow into workers, taxpayers, consumers, researchers, entrepreneurs and carers, sustaining growth and supporting ageing populations. Yet the costs fall largely on individual families, from housing, childcare and education to career interruptions and lost earnings.

That does not mean having children should be treated as a public obligation rather than a personal choice. But governments, employers and institutions shape the conditions under which the decision is made. For that reason, it is encouraging that Hong Kong is treating demographic sustainability as a long-term policy issue.

But one-off financial incentives are unlikely to be enough. Parents are also concerned about housing affordability, access to childcare, education costs and the impact of family responsibilities on career progression. These concerns cannot be addressed through a single payment at birth.

Experience across Asia suggests a broader approach is required. Governments are increasingly moving beyond one-off incentives towards policies that provide sustained support throughout childhood. From next April, Singapore will provide support from birth until the age of 17, including a S$10,000 (US$7,822) baby gift, annual “child credits” cash payouts, Child Development Account grants and a top-up to an education account. The package provides the same level of support regardless of birth order.

Japan also expanded its child allowance system in October 2024. Coverage now extends through to high school-age children, income restrictions have been removed and the monthly allowance for third and subsequent children has increased to ¥30,000 (US$190).

The underlying principle is straightforward: if raising a family is a long-term commitment, support for families should also be long-term and predictable.

Still, financial support represents only one part of a larger ecosystem. Affordable childcare, parental leave, family-friendly housing policies and a supportive labour market all influence fertility outcomes.

Perhaps most importantly, societies must address the perceived conflict between professional success and family formation. For many, the years in which they are expected to establish themselves professionally are also when it is biologically easiest to start a family. In expensive and highly competitive cities, this creates a difficult trade-off.

Women continue to bear a disproportionate share of caregiving and often face greater career disruption after becoming parents. Young professionals worry that family commitments may limit opportunities for advancement. High housing costs add more uncertainty.

If parenthood is viewed as incompatible with ambition, persistently low fertility should not come as a surprise. This is why employers must be part of the conversation. Family-friendly workplace policies should not be seen merely as employee benefits. They are increasingly a talent strategy.

Flexible working arrangements, meaningful parental leave and clear pathways back to career progression can help talented employees remain engaged without forcing them to choose between work and family. In ageing societies, employers that successfully support families will be better positioned to attract and retain skilled workers.

Creating a more family-friendly Hong Kong will require sustained government leadership, enabling policies, and support from employers and the wider community.

Demographic policy is economic policy: a long-term investment in human capital. Hong Kong will continue to benefit from global talent. But it also needs a stronger domestic pipeline of innovators, entrepreneurs and professionals. That starts with making it easier to pursue family life and professional ambition together.

Asia’s low-fertility challenge took decades to emerge and will not be reversed by a single policy announcement. But the direction should be clear: supporting families is an investment in talent, innovation and resilience. For Hong Kong, the fertility debate is ultimately about competitiveness. By James Liang