China today officially junked its controversial one child policy, allowing couples to have a second child amid deepening demographic crisis of shrinking workforce and ageing population in the world's second largest economy.

Chinese lawmakers passed a historic decision allowing all couples to have two children from January 1, ending its over three and half decades old policy that prevented over 400 million births in the country.

"The state advocates that one couple shall be allowed to have two children," the state-run Xinhua agency quoted the newly revised Law on Population and Family Planning as saying.

The law was passed by the 159-member National People's Congress Standing Committee, the top organ of China's parliament.

The NPC approval was a formality as the ruling Communist Party of China (CPC) headed by President Xi Jinping has approved itearlier as China, world's most populous country with 1.37 billion people, faced grim demographic crisis under which China is expected to face severe labour shortages due to rapid increase in ageing population.

Despite massive publicity to the lifting of the one child policy being implemented since 1978, the two child rule has evoked less enthusiasm with official surveys indicating that people were not keen to have second child due to heavy costs involved in bringing up another child.

According to the latest figures, the number of people aged 60 or over in China has reached 212 million at the end of 2014, accounting for 15.5 per cent of the country's population, with the number of disabled elderly people approaching 40 million.

The United Nations has predicted that people over age 65 will account for 18 per cent of China's population by 2030, double the number in 2011 which will have a negative bearing on China's labour availability.

By 2050, China is expected to have nearly 500 million people over 60, exceeding the population of the US.

The ageing population has brought greater demand for elderly care services.

According to a report published by Price waterhouse Coopers earlier this month, Chinese people will spend over USD 1.54 trillionfrom 2016 to 2020 on elderly care, increasing 17 per cent per year.