(Yicai Global) July 29 -- Local governments in China need to do their best to provide better financial assistance to encourage families to have more kids now that the nation has ushered in its three-child policy, but they should make sure that they can afford to do so and carefully monitor the use of funds.

The city of Panzhihua in southwestern Sichuan province became the first in the country today to introduce cash handouts to families with more than one child. It is offering a monthly allowance of CNY500 (USD77) for each second and third child until they are three years old. Local families raising three kids can receive CNY36,000 (USD5,560) over the period.

Other local governments should not rush to follow suit but should first evaluate if they can afford to introduce childcare subsidies. Places where the debt burden is high and income is less than expenditure should not offer such support.

They need to properly assess at what level the subsidy rate should be set after a comprehensive review of factors including future economic development, population size as well as financial revenue and expenditure.

The financial burden of raising children mainly affects fertility in low- and middle-income groups. At a time when local government finances are tight, the target of childcare subsidies should be these groups rather than high-income earners.

Local regulators can set income standards and use personal tax and social security data to screen which families are eligible for the allowance. They should include the subsidies in their budget performance, and strengthen the supervision of the funds so as to prevent fraudulent applications and claims.