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Aging population may present challenges, and opportunities

By Wang Hong | China Daily | Updated: 2021-11-22 09:37
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Elderly residents take part in an art class at the day-care center in a citizen service station in Jiaxing sub-district, Shanghai's Hongkou district, on Aug 30, 2020. [Photo by Zhu Xingxin/chinadaily.com.cn]

The world is now witnessing an accelerated aging process. It is estimated that the population of those aged 60 and above will more than double from the current 962 million to 2.1 billion in 2050. It will triple to 3.1 billion by the year 2100.

It is also clear that the aging population is gradually shifting from developed countries to developing countries. By 2050, the growth rate of the population aged 60 and older in developing countries is projected to reach 82.9 percent, while the figure in developed countries will be only 14.3 percent. In the future, about 81.5 percent of the elderly (1.63 billion people) will live in developing countries and regions, while 18.5 percent (370 million people) will live in developed ones.

The fertility rate in developed countries and regions has also dropped sharply, while that in some developing countries and regions remains particularly high. At the same time, differences in global pension levels are usually caused by huge economic gaps and the pressures of life in rural and urban areas. How to cope with these circumstances is a pressing global question.

A common practice in many countries has been to delay the retirement age. Although measures such as delaying retirement and increasing pay can spark widespread controversy, they have still proven to be the way forward for many countries. Most countries in Europe, North America and Oceania, for example, have delayed their retirement age to 63 or even 66 years of age.

When it comes to aging populations, the specific conditions in different countries and regions should be taken into consideration. These are some of the aging trends in China.

First of all is the country's large population base. According to the National Bureau of Statistics, the country's population aged 60 years and above has now reached 264 million (18.7 percent of the total population); the population aged 65 years and above is 190 million (13.5 percent of the total).

Second is the nation's explosive demographic change. According to United Nations statistics, it took China only 27 years for the aged population to increase from 7 percent to 14 percent. By contrast, it took Germany 42 years, the United States 69 years and France 115 years.

Third is China's rapid projected growth. In the next 20 years, China's aged population will accelerate more than ever before. It is estimated that nearly 30 percent of the total population will be over 60 years old by 2030.

As the aged population continues to grow, the old-age dependency ratio, which is the ratio of elder individuals compared to those who are still of working age, will rise rapidly, posing severe challenges to economic and social development.

Fourth are the country's huge regional differences. Nationwide, Northeast China has the most elderly people-24 percent-compared with only 10.7 percent in western regions.

Fifth is the "silver-haired poverty" phenomenon. This is a trend which gives rise to three problems-getting old before getting rich, aging before being ready and retiring before getting old.

Developed countries generally age when their per capita GDP reaches between $5,000 and $10,000. China, however, has experienced an aging society with only a $1,000 per capita GDP. In addition, the sluggish development of old-age services and the eldercare industry has further plagued generations of people.

As people's life expectancies have continued to increase, the number of active elderly people has also risen, posing heavier burdens on pensions.

Last but not least is China's increased, strong demand for eldercare services. In 2020, there were 118 million elderly people living alone in China, 29 million of whom were 80 or above. If even 10 percent of these senior citizens require eldercare services, at least 11.8 million eldercare service positions are needed.

Given the above-mentioned characteristics, Chinese-style eldercare is faced with numerous challenges.

First, the country must urgently establish a multilevel, multidimensional and intelligent eldercare services system.

Today, most seniors in China prefer home-based care. Ninety percent of seniors take care of themselves at home. About 7 percent rely on community support, and only 3 percent live in nursing homes.

At the same time, however, a gap remains between the supply and demand for eldercare with regard to the ability of seniors to pay for these services, as well as numerous disparities in the quality of nursing institutions.

Due to bed shortages, for example, midrange nursing institutions are failing to meet the needs of those who require their services.

Second, the three-pillar structure of China's pension system is out of balance. In 2020, the basic pension insurance fund, the first pillar, accounted for 70 percent of the market. Occupational pension schemes, the second pillar, accounted for nearly 30 percent of the market, and commercial insurance, the third pillar, equaled almost nothing.

Moreover, an overreliance on basic pension insurance and pay-as-you-go financing has put a heavy burden on the first pillar and has led to prominent structural problems.

Third, the development of the pension industry faces both institutional and conceptual obstacles. This is manifested in a number of ways, including the ambiguous distinction between competitive and noncompetitive industries, a lack of a clear boundary between the government and the market, as well as the inability of private organizations to provide financial support and medical insurance so as to compete with public organizations.

Moreover, general misunderstandings about welfare-based eldercare and the nonpublic economy have staggered the process of socialization and industrialization of eldercare services. Seniors' traditional concepts of accumulating wealth and shunning consumption are unlikely to change in the short term and have directly affected growth in the eldercare market.

Fourth, the pension system needs to be further improved. At present, development of the second and third pillars of China's pension system is lagging behind, and there are also concerns about the adequacy and sustainability of pension funds.

As of the end of 2020, China's second and third pillars were valued at 3.54 trillion yuan ($554.2 billion), which was only 3.48 percent of the annual GDP.

Besides, commercial banks are often absent from the pension market, resulting in the low conversion of Chinese residents' personal savings into pension products.

Fifth, human resources and talent teams for eldercare are underdeveloped. Low social status, low salaries and low educational levels of elderly service personnel have all led to higher turnover rates, higher labor intensity and average higher ages of talent in the industry.

China's 14th Five-Year Plan (2021-25) includes proposals for improving the country's multitiered social security system, enhancing its old-age service system and optimizing its childbirth policy.

Building a multilevel and multidimensional elderly service system requires the introduction of a long-term demand assessment mechanism to provide personalized old-age services based on each individual's age, physical condition, income and family environment. On the supply side, a family-centered diversified service system led by the government and supported by the market and society should be established.

Efforts should also be made to set up a unified review system to strictly control industry access, standardize the supply of public nursing institutions and improve the supervisory system.

In the next five years, China's old-age pension gap is likely to hit 8 to 10 trillion yuan. The first pillar has created a huge financial burden. Difficulties such as poor benefits and low coverage of enterprise annuities still remain and progress has been slow. It has, in fact, created opportunities for China's personal commercial pension schemes.

With a pilot program of tax-based commercial pension insurance and exclusive commercial pension, and the integration of an industrial chain featuring "pension insurance plus pension communities plus pension services" with the resources of insurance companies, commercial insurance emerges more easily, bringing more competitive products.

In addition, China should optimize its population structure and implement the "third-child" policy in an all-around manner.

The "third-child" policy has already encountered difficulties such as the obsession with the traditional parenting concepts about elite education, overwhelming education costs and female employment discrimination.

To solve these problems, it is necessary to change mindsets about family education, establish new concepts for cultivating talent, reinforce stable education policies and ensure equal access among children to educational resources.

China also needs to build a sound childcare system to reduce parenting costs, deepen housing system reform and formulate preferential measures for housing loans for multiple-child families.

Efforts should also be made to advocate equal employment opportunities for women, enhance the supervision and inspection of enterprises with high numbers of female employees, and strengthen the awareness and protection of women's rights.

While facing up to the challenges brought by an aging population, we should, at the same time, seize the opportunities that it offers.

For example, the aging workforce has not been fully utilized. Elderly, experienced professionals such as doctors, lawyers and teachers are valuable human resources.

Many seniors who have enjoyed the fruits of reform and opening-up have accumulated personal wealth and are able to afford old-age care. With more leisure time than younger generations, they can play a role as major consumers of sports, cultural and tourism activities.

Although China is a country with a rapidly aging population, there are also many opportunities for the eldercare industry to grow and mature. I believe that China will blaze a trail in response to its aging society according to its own characteristics.

The writer is president of China Europe International Business School and a professor of management at the school.

The views don't necessarily reflect those of China Daily.

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