The ‘Two Sessions’ is an annual parliamentary cum budget meeting in China. It is a choreographed show as all CCP events are. The ‘Two Sessions’ marks one year of Xi Jinping’s third term in which he has consolidated his grip on power. He is now a complete one man show. He did not even allow Li Qiang his PM to address a customary press conference. It was a departure from an established practice of the past three decades. This singular act has reduced the PMs post in China to a rubber stamp. Significantly such power consolidation is occurring at a time when China is struggling on many fronts. Its export market has collapsed. Its property sector is in cancer ward. Jobs and wages are on the wane. FDI is at an all-time low and debt problems continue. Most importantly China has entered a deflationary phase. Some analysts discuss that China is in a crisis.
Most of these issues would have been discussed in the Two Sessions and Xi Jinping’s response to these problems was pretty clear. He has embarked on ‘New Productive Forces’ to bail China out. He spoke of ‘ a new round of technological revolution and industrial transformation’ where China ‘must seize opportunities, increase innovation, cultivate and expand emerging industries, and plan future industries in advance’. High flying words with very little meaning just like his earlier plans of ‘Dual Circulation’ and ‘Common Prosperity’.
The real wolf in the chicken coop was not discussed. That is the acute demographic decline China is undergoing. It is common knowledge that birth rates are falling off a cliff and China’s population is shrinking . Its workforce is also decreasing rapidly. Everyone knows that and is routinely downplaying the issue as if it is over the horizon. However the catch is that this problem was to happen around 2030. By then the Chinese were to have answers to all these problems and China was to live happily in a Sino Centric world that Xi was creating. Two years back when I made the point of China’s demographic decline in a conference, all seasoned and nationally well recognised ‘China hands’ looked at me as if I am from some dark hole of a faraway interplanetary system. Suddenly the problem is at China’s doorstep and the country is simply not prepared for it. In fact, what is now being officially acknowledged in China could be just about the tip of the iceberg. Further there is the great Chinese push back on any talk of ‘Japanification’. In my opinion all this will come to a head in under half a decade when we will start seeing its cancerous effects in all Chinese walks of life. At that time ‘Japanification’ will seem to be a boon. Well the more important point is that in China if a problem is not discussed, it is GRAVE!
Declining birth rates, a contracting work force, unwillingness to marry and a skewed gender profile are only the start points of China’s demographic decline. The real McCoy in China’s demographics is it old age problem. For starters China is ageing at the fastest rate in human history. To put in perspective, see the table above. China has an old age population approximately twice the size of India. That is the official figure. It will be more in actuality. In fact, by the end of 2022 itself, Chinese population who were aged 65 and above, outnumbered the combined populations of France, the United Kingdom and Thailand. That is not all. Its old age dependency ratio is zooming faster than the missiles it fires at Taiwan. It is set to be the highest (barring S Korea) as time passes. (see graph below). China will be an aged society sooner than later.
The population of China by broad age groups is as per the graphic published by the UN (see below). This is incidentally based on Chinese data. As per this, 1/4th of the population will be in the 60+ age group by 2030 having added about 60-100 million to the existing figures. By 2040, 1/3rd of China’s population will be above 60 with an addition of another 130-150 million seniors into the kitty. However, given the fact that the Chinese cannot be trusted with their figures as in everything else, these landmarks will be reached at least 3-5 years in advance. There is very little doubt left that China will be an aged society before long.
Let us look at the macro effect this phenomenon is going to have. Senior citizens of any country impose burdens on the society and the government. The aged – weak and the infirm have to be taken care of. Normally old age problems are taken care of through personal savings, private/public pensions or insurance or a societal net to absorb them. Personal savings of many seniors have eroded sharply due to the ongoing property downturn and stock market declines. Any senior who has invested in these instruments of saving has seen his/her fortunes dip by anything between 30-50% in recent times. Indications are that they will never recover these losses. Any senior who has a nest egg in banks does not get any great interest from deposits since China has been indulging in rate cuts to boost consumption expenditure and borrowing!
Turning to pensions. China’s urban worker pension fund, which is the backbone of the country’s state pension system, is predicted to run out of money by 2035 due to the declining work force who contribute to this fund and the increase in pension outlays as the number of pensioners increase. This is compounded by the fact that Chinese pension rates are abysmally poor. In 2021, the average basic pension for rural residents was 179 yuan (US$25) per month. The monthly standard in Shanghai was 1,200 yuan. These pensions are as it is not enough to support seniors and they are also running out! Hence senior Chinese have to face the stark reality of facing physical deterioration and mortality head-on on their own. That is daunting to say the least. Can trigger social unrest.
As far as insurance is concerned, the less said the better. Last year in February 2023, thousands of people protested outside government offices in Wuhan when the local government slashed medical benefits for retirees from 260 yuan to less than 100 yuan per month. Wuhan was not the only place. Similar incidents broke out across the country in other cities and provinces. Why did the reduction take place? The local governments put the medical benefits on the chopping block to cut costs to curb their ballooning debts. The strict zero-Covid policies, housing market slump, and slowing economic growth has already rung a warning bell of the larger problems ahead. Resource constraints to look after the senior citizens will keep on increasing exponentially as the numbers increase. One must also see this whole issue through another prism. The health care system in China is poor to start with. This was ruthlessly exposed during Covid. It is certain that China does not have the capacity to look after its elders.
So what is the ‘solution with Chinese characteristics’ being spoken of? It is called promoting the ‘Silver Economy’. As per this crazy propagandist theory, the focus will now be on catering to the requirements of seniors to trigger consumption and rescue the ailing Chinese economy. That is like selling poison to a rat. As per a study in six Chinese cities in 2016 , the average spending power of the 60-65 age group was around two-thirds that of the 20-25 age group. The figures for the 80-85 age group, is only meanwhile, 46 per cent of the peak. Today when hard times have fallen on Chinese jobs and wages as also loss in savings, to think that the ‘Silver Economy’ will bail out China from its problems in pure unadulterated tripe.
There is another issue. An increasing number of newly retired parents have only one child as a result of China’s draconian one child policy. This has already put tremendous stress on the Chinese tradition of relying on offspring to care for their elders as they age. Adequate private care takers are also not available even at a cost. While the demand for senior care is growing exponentially , There is a shortage of ‘care takers’ in China to care for its senior citizens. The society is not used to this task. Hence the seniors will always be on a limb.
Overall there is no doubt that China does not have the structure or the fiscal space to take care of its rapidly ageing society. In fact as per China’s own estimates the ageing process is faster than anticipated. Every week there is more than one article in Chinese media highlighting this problem. No solutions are in sight. Research by the Chinese Academy of Social Sciences in 2022 predicted that the rate of ageing would be “around 20 per cent” by the end of 2025. However that has been surpassed already! By all estimates the period of China “getting old before getting rich” has arrived! It is also felt internally that amongst many “grey rhino” risks which China faces, the population problem is probably the biggest and time has run out. China has been sleepwalking into a situation where it will have an elderly population equal to that of all developed countries combined by 2030. Oh incidentally, there is also a view that this generation of senior citizens are relatively better off. After all they lived through the boom times and made their fortunes. This is virtually “the last generation” and, will take the once galloping fortunes of China, along with Xi Jinping in the lead, into the old age home that China is set to become! So much for rejuvenation of the Chinese nation.
If after this you think that China is set to be a superpower with all these senior citizens in the arena then my aunty has become uncle
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