The trend of population ageing in China and its impact

The twenty-first century is the era of population ageing. The usual international view is that when the elderly population aged 60 and above accounts for 10 per cent of the total population of a country or region, or when the elderly population aged 65 and above accounts for 7 per cent of the total population, it means that the country or region has entered an ageing society. According to the above criteria, China entered an ageing society in 1999, and is one of the developing countries that entered an ageing society at an early stage. At present, the proportion of people aged 65 and above in China is close to 10%, and according to the forecast of the 2013 China Human Development Report, the proportion of people aged 65 and above in the country's total population will increase to 18.2% by 2030. The issue of population aging concerns the long-term development of China's future economy and society, and it is necessary to conduct an in-depth analysis of the current trend of population aging in China and the possible impacts it may bring, so as to timely adjust the corresponding policies and measures to cope with it.

First, the causes of population aging in China

On the surface, the causes of population aging are relatively simple, i.e., declining birth rate and increasing life expectancy. However, affected by the objective factors of social development, the formation background of population aging in different countries or regions is somewhat different. The process of population ageing in China is influenced both by the general factors of demographic transition and the special factors of family planning.

(I) General factors of population aging in China: the law of demographic transition

Theoretically speaking, the demographic transition refers to the process of gradual change in the type of reproduction of the population from high birth rate and high death rate to low birth rate and low death rate in the process of modernization. Generally speaking, the demographic transition can be divided into three different stages according to the differences in birth and death rates: the first stage is mainly characterized by a high birth rate, a high death rate and a low population growth rate; the second stage is characterized by a high birth rate, a low death rate and a high population growth rate; and the third stage is characterized by a low birth rate, a low death rate and a low population growth rate. From most research results at home and abroad, the starting point of the demographic transition is generally the high equilibrium stage, while the end point is the low equilibrium stage. It can be simply understood that when the demographic transition enters the low-equilibrium stage, it indicates that the demographic transition is basically complete and that the age structure of the population is gradually entering the ageing stage. In accordance with international practice, the year 2003 can be regarded as the inflection point of the change in the mortality rate of our population. Considering the "natural growth rate criterion" and the "mortality rate inflection point criterion" together, the demographic transition in China was completed in 2006.

(II) Special factor of population aging in China: family planning policy

Without the family planning policy, the process of demographic transition in China would have lasted much longer, and the development of population aging would have been slower as a result. Throughout China's economic and social development, the acceleration of population aging in China is due to a two-pronged "pinch effect": on the one hand, the government's implementation of family planning policies has accelerated the reduction of fertility, and on the other hand, the economic and social development has brought about changes in the family's decision-making on childbearing. Since the implementation of China's family planning policy in the late 1970s, through more than three decades of continuous publicity and education, supplemented by appropriate economic and certain administrative means, the family planning policy has achieved good results, and it is initially estimated that about 400 million fewer children have been born as a result of the policy. It is generally recognized by the international community that China is one of the countries in the world that have experienced a very significant decline in fertility, and has completed the transition from a typical high birth rate country to a low birth rate country, which fully demonstrates that the family planning policy has played a very important role in the process of China's demographic change.

Second, the current situation of population aging in China

China is a developing country that entered the aging society earlier, compared with other western developed countries, China's population aging has different characteristics.

(I) The base of the elderly population is large

In 2014, China's elderly population aged 60 and above reached 212 million, accounting for 15.5% of the total population, a scale comparable to the total population of the current three major European countries (Germany, France and the United Kingdom). According to the current trend, it can be expected that by the middle of this century, our country's elderly population aged 60 and above may reach 450-470 million, depending on the birth rate in the future, including the adjustment of the fertility policy. Of course, we also have a large number of senior citizens as well as disabled and semi-disabled elderly, which is also a feature of the large total number.

(ii) Rapid aging of the population

This is mainly manifested in two aspects: on the one hand, "the rich are getting old before they get rich", and on the other hand, the rate of growth of the aging population is fast. Developed countries enter population aging when the level of economic development has been relatively high, with strong economic strength, all aspects of the social security system is more perfect, the speed of population aging is also relatively slow, the time experienced up to several decades or even hundreds of years, so as to prepare for the aging of the population, and can cope with the aging of the population very well. Our country entered population aging at a low level of economic development, which can be described as "aging before getting rich". 1999, when our country entered the aging society, the per capita GDP was only about 1,000 U.S. dollars, while developed countries entered aging when the per capita GDP reached the level of 5,000-10,000 U.S. dollars. Moreover, in the future, China will go through a phase of sharp increase in the aging rate. From 2000 to 2010, the proportion of our aging population increased by 3 percentage points. And in the 40 years after 2010, the proportion of the elderly population will increase by 4.7, 8.0, 5.2, and 5.3 percentage points per decade respectively. By 2030, our aging level will be comparable to that of Germany in 2010, and by 2040, our aging level will be comparable to that of Japan in 2010.

(iii) Unevenness of the aging process

The imbalance includes three aspects. First, there is an imbalance between urban and rural areas, with the proportion of the elderly population in rural areas higher than that in towns and cities, and the proportion of the elderly population in rural areas at 15.6%, 4.7 percentage points higher than that in towns and cities. Second, regional imbalance, the east is faster than the west, Shanghai is the earliest region in China to enter the aging, while the entire western region did not enter the aging society until 2012. If according to the household registration caliber, now Shanghai aging level has reached 27%, while the western region such as Tibet and Xinjiang has not yet entered the aging society. Thirdly, structural imbalance, China's birth population has the phenomenon of big ups and downs, the population age structure imbalance phenomenon is more prominent, the aging process also has obvious phases of imbalance. Since the founding of New China, there have been three birth peaks, the first was in 1950-1957, the second was in 1962-1972, and the third was in 1981-1990. When the first birth peak and the second birth peak are superimposed, the proportion of the elderly population will be drastically increased by 8 percentage points at once.

(D) Weakness of the aging bearing foundation

First, the system is not well prepared. China's old-age policy system is in the initial and perfect stage, in recent years, China's revision of the Law on the Protection of Rights and Interests of the Elderly, departments and localities out of the normative documents above the rules and regulations of more than two hundred, however, in fact, there are still gaps in a number of areas. Secondly, insufficient financial preparation. Social pension insurance as a bottom-up security measures, according to the current level of collection and expenditure, as well as taking into account the arrears of contributions, co-ordination, management and other aspects of the problem, the local area there is a risk that the income will not be able to meet the expenditure. Again, there is insufficient preparation of talents. China's elderly and caregiver work income is relatively low, the sense of professional identity is poor, and because standardized training has not yet been widely pushed, the gap between supply and demand for talent is relatively large. At the same time, the management personnel of senior care institutions are also relatively scarce and inexperienced. Finally, the facilities are not well-prepared.In 2014, the number of nursing beds per 1,000 elderly people in China was only 26, while in developed countries it was 50-70, and some of them were some non-nursing beds in community care centers.

Third, the trend of population aging in China

According to the changes in the age structure of China's population and taking into account the possible adjustment of the fertility policy, it is predicted that by the end of the 21st century, the development of China's population aging will roughly go through four phases: the rapid development phase, the rapid development phase, the slow development phase, and the high and stable phase.

(i) Rapid development stage (2015-2021)

From 2015 to 2021 is the rapid development stage, while China's population is in the stage of mild aging. In this stage, China's elderly population will usher in the first growth peak, which will grow to 258 million people. The elderly population in this stage belongs to the "post-50s", whose ideology, income level and lifestyle are different from those of the "post-30s" and "post-40s", and who not only have strong consumption power, but also only a small number of them have caught up with the family planning program. In addition, only a small number of them have caught up with family planning, and most of them have three or more children. These children are the main supplement to the financial resources of the "post-50s", but they are currently the backbone of society and are unlikely to provide family pension services for their parents. However, they are an important customer group for the development of aging finance, and this stage is the golden strategic preparation period for the development of China's aging industry.

(ii) Rapid development stage (2022-2030)

Starting from 2022 to 2030 China's elderly population will usher in the second growth peak, which is also the largest growth of the elderly population in the 21st century, growing from 258 million to 371 million people. The aging level will reach 20.3% in 2024, beginning the transition to the stage of moderate aging. By around 2023, the aging population will exceed the population of young children, marking the country's transition from an era of primarily child-rearing to an era of primarily elderly-rearing. The elderly population in this stage is mainly the "post-60s". This group of people has undergone strict family planning, and the number of children has been sharply reduced, with an average of less than one child for urban elderly couples, and an average of only two children for rural elderly couples. This group of people has an open mindset, modernized lifestyles, and relatively strong economic power.

(III) Stage of slow development (2031-2053)

From 2031 to 2053 is the stage of slow development, in which our population moves into the stage of moderate aging. In this stage, China's total population enters a negative growth stage, the total population begins to decrease, and the growth of the elderly population slows down, increasing from 371 million to 487 million. Most of the elderly people in this stage are "post-70s", and many of them have huge financial assets for the elderly, which will be the direct and indirect consumers of the aging industry. At this stage, the development of China's aging industry has entered a mature stage.

(IV) High and stable stage (2053-2100)

From 2053 to 2100 is the high and stable development stage. During this period, China's population continues to be in the stage of heavy aging. The growth period of the elderly population ends, decreasing from 487 million to 383 million, and the aging level of the population is always stable at 1/3 up and down, running at a high level, forming a steady state of heavy aging platform period.

IV. Impact of population ageing in China

The relevant United Nations report points out that population ageing is a silent revolution unprecedented in human history, sufficient to influence or change the future. Undoubtedly, population aging will become an integral part of China's basic national conditions and a long-term variable that must be considered in the process of realizing China's two-hundred-year goal.

(i) Impact of population aging on economic growth

First of all, aging directly leads to the reduction of labor supply, and the potential economic growth rate faces downward pressure. In particular, the decline or even disappearance of the comparative advantage of low labor costs formed by the demographic dividend will significantly affect the profitability of manufacturing exports. 2012 was an inflection point in China's labor supply, with the first absolute decrease of 3.45 million in the population aged 15-59 years. According to the current trend forecast, from 2010 to 2050, China's working age population will shrink from 940 million to 710 million. Secondly, ageing has aged the population structure, and the change in the savings rate of the population has shown an inverted U-shape of first increasing and then decreasing. As the replacement rate of pensions is decreasing at a faster rate, this will ultimately lead to a decrease in the savings rate of the whole society, affecting the formation of social capital, and also decreasing the ability to consume, leading to a lack of demand. In this case, government finances face the double pressure of slowing down revenues and increasing social security expenditures on pensions and medical care, which will seriously constrain the government's ability to directly invest and indirectly guide investment.

(ii) Impact of population aging on structural adjustment

Completing the tasks of promoting industrial transformation and upgrading, such as compressing excess production capacity, eliminating backward production capacity, and developing modern service industries, all require adjusting the structure of the labor force and improving the quality of the labor force. Common sense suggests that enterprises are more inclined to invest in young employees and train young people, while aging will age the workforce structure and reduce the willingness of enterprises to improve human capital, thus affecting industrial transformation and upgrading. Studies have shown that with the growth of age, the productivity of individual labor force shows a changing trend of increasing first and then decreasing, generally peaking at the age of 40 and declining significantly thereafter. In the coming period, the median working-age population in China will rise rapidly, and the working-age population under the age of 45 will be reduced by a quarter by 2030, and the labor force will be aging as a whole, which will adversely affect structural adjustment.

(III) Impact of population aging on innovation drive

Under the new normal, the shift from factor-driven and investment-driven to innovation-driven is the way to go. From the current situation, the absolute number of China's labor force is declining, and the growth rate of total investment in fixed assets of the whole society has dropped from 25% in previous years to 20% in the past two years, and further to 15.1% last year. Therefore, it is only possible to work on total factor productivity, especially on innovation. And the aging of the population and labor force will affect social vitality and significantly weaken the ability of the whole society to innovate and create. From the demand side, consumption will become more and more important to economic growth, while population aging may not be conducive to the application and promotion of new products and technologies in the field of consumption, and the older one is, the less receptive one is to new technologies, and the less willing one is to accept new things.

(iv) Impact of population ageing on social security

First of all, the increase in the elderly population will lead to an increase in the government's public finance expenditures on basic pensions, retirement pensions, insurance premium subsidies and medical care. It is estimated that the proportion of GDP spent on pensions, healthcare, care, and welfare and facilities by society as a whole between 2015 and 2050 may approach the average level of European countries in the future. Secondly, population aging changes the structure and size of families, and the dependency ratio rises, weakening the family's function of old-age care and leading to an increase in the risk of family old-age care, and the intergenerational contradictions in the family become apparent. In this context, in 2013 China amended the Law on the Protection of the Rights and Interests of the Elderly, stipulating that young people should visit home more often. Analyzing from the perspective of the whole society, if the fertility policy remains unchanged, in the future, the ratio of China's working population to the elderly population will develop from 7:1 in the 1990s to less than 1.5:1 in the mid-century.The change in the social dependency structure will profoundly change the pattern of distribution of public resources in the society, and is likely to induce contradictions in the distribution of benefits between generations.

V. Response to Population Aging in China

First of all, we should take the aging society as an important national condition of China in the 21st century seriously. The relevant government departments and society as a whole must fully understand the seriousness of the challenge of population aging, establish an awareness of aging, and enhance the urgency and self-consciousness of responding to the challenges of population aging and an aging society. It is necessary to start from the basic national situation of an aging society, and to include addressing the challenges of an aging society as one of China's development strategies for the future.

Secondly, we must make full preparations to cope with an ageing society. The solution of the various contradictions and problems of an ageing society must be incorporated into the overall development strategy of building a moderately prosperous society and socialist modernization in an all-round way. Based on the current situation, while improving policies, increasing investment and accelerating the development of the cause of the elderly, we should improve and perfect the working system for the elderly and effectively solve the institutional problems that restrict the development of the cause of the elderly.

Thirdly, the construction of a social security system for the elderly should be accelerated. Before the arrival of the most serious period of population aging in 2030, a social security system for the elderly that meets China's national conditions and adapts to the requirements of the socialist market economic system should be basically established in both urban and rural areas throughout the country, so as to ensure that the problems of old-age pension and medical care for the elderly in both urban and rural areas are properly solved.

Fourth, we must vigorously develop the aging industry. We should formulate development plans for the aging industry, promulgate and implement national policies to support and protect the aging industry, and establish a management system for the development of the aging industry. Based on urban and rural communities, we should develop the elderly service industry, cultivate intermediary organizations for elderly services, and train specialized social service teams for the elderly. At the same time, research and development of consumer products for the elderly should be vigorously pursued, and the market for elderly goods should be cultivated.

Fifth, forward-looking and strategic research on the aging society should be strengthened. Comprehensive national research institutions should be established, and researchers from relevant disciplines should be organized to make population ageing and the ageing society a major macro-strategic topic for the country, and to undertake research projects.