BEIJING--China's lawmakers will allow all couples to have two children from the beginning of next year, implementing a new birth policy aimed at mitigating a potential demographic crisis.

In a congressional meeting Sunday, Chinese lawmakers approved the new birth policy, which will take effect Jan. 1, 2016, the official Xinhua News Agency reported. Top Communist Party leaders had previously approved the new policy.

The announcement sets a timeline for a policy that will replace the country's controversial 35-year-old one-child policy. The National Health and Family Planning Commission, which implements China's reproduction policy, said at the time it would move slowly to avoid population spikes.

Demographers have warned China's leaders for the past decade that falling birthrates in the nation may cause a future labor shortage that would endanger economic growth.

China has the world's largest population at 1.37 billion, but its working-age population--those aged 15 to 64--is shrinking. The United Nations projects the number of Chinese people over the age of 65 will jump 85% to 243 million by 2030, up from 131 million this year.

Many health experts say that while the new policy will likely enable up to 100 million couples to have additional children, they don't expect a baby boom. Many Chinese couples say the cost of having children is prohibitive, and some will opt to have only one child. A previous relaxation of China's one-child policy did not lead to a significant increase in baby numbers.

Health officials previously said they are moving to simplify the birth application procedures for couples, who currently have to go through a complicated procedure that can often take months.

Write to Laurie Burkitt at laurie.burkitt@wsj.com