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China's demographic shift could weigh on growth at an earlier stage than previously thought, advisors say.
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The rapid ageing of China's population is set to sap growth more quickly than expected, and before the country reaches high-income status, policy advisors in Beijing told MNI, calling for urgent moves including the extension of the retirement age.
The government should seize the final window of opportunity before the country's population peaks, by as soon as 2025, by increasing a multi-trillion-yuan investment in housing, community, transport and other infrastructure needed to adapt the economy to an increasingly elderly population and by increasing the supply of healthcare, said Liang Chunxiao, director of the Ageing Society Research Center at the Pangoal Institution.
The countryside presents particular challenges, as younger people leave for the cities, Liang said, noting that authorities should also take care not to allow the aged to be left behind as the economy digitalises.
Pessimism over pension earnings could also further sap consumption and investment, said Liang, noting that, unlike Japan and some European countries, China faces getting old before it gets rich.
Authorities are already considering a gradual increase in the retirement age for all employees to 65, to be phased in over 10 years, from 60 for men and 55 for women today, said Song Xiaowu, director of the Academic Committee of the China Society of Economic Reform under the National Development and Reform Commission. In his annual working report last week, Premier Li Keqiang said increases in the retirement age would be phased in, and policies would be introduced to encourage an "appropriate" birth rate.
But while China has abandoned the old "one-child" policy, the high cost of raising children remains a deterrent, and many couples are reluctant to have more than one child, said Liang, adding that this would take time to change, and that the problem of an ageing society has not received enough attention from policy makers.
The next 15 years will be crucial, and ageing society has to be factored into long-term economic growth plans, said Li Jun, a researcher at the Institutes of Quantitative &Technological Economics at the Chinese Academy of Social Science.
China will continue to age until 2055, according to CASS. The country's birth rate hits its lowest level since 1949 in 2019, when the number of Chinese aged 60 or above reached 254 million , 18.1% of the total population, National Statistic Bureau data shows.
Tightening labour supplies are already hitting investment returns and changing the pattern of consumption, said Li , adding that companies will have to become more capital-intensive and that financial regulators should beware of potentially destabilising inflows of funds into asset markets from increasing savings by workers preparing for old age.