The Economic and Social Impacts of Population Ageing: China in a Global Perspective

Population ageing is one of the mega trends of the 21st century. It is a key driver of economic and social transformations as societies with a growing number and share of older adults are making efforts to maintain economic competitiveness and social vibrancy. In the developed world, population ageing is part of the larger post-industrial challenges that catalyse changes to employment, retirement and welfare state institutions.

In emerging economies, population ageing is taking place in a context within which the welfare state has yet to be fully built and development remains a priority, and thus poses a wider range of challenges. This is particularly the case for China where the challenge of "growing old before growing rich" is amplified by its continental size, large internal disparities and compressed demographic transition. China has come halfway through its economic and social modernisation.

China is about to reach high income levels, but it has yet to become a developed economy; it is urbanising rapidly, but rural roots remain strong; education levels are rapidly improving, with the country becoming a technology leader in some areas, while overall productivity remains low; women are increasingly postponing, but are not forgoing, marriage; traditional care for the elderly is in flux, but has yet to disappear.

The still malleable economic and social structures, along with more abundant resources than before, give China more options for tackling the challenges of population ageing and conducting numerous experiments in all aspects of ageing policies. How China addresses the multiple dimensions of ageing will determine its future growth rate, the health of its public finances, the shape of its families and villages, and even its politics.

Much will also depend on how China shifts to reap the second demographic dividend from higher social investment and productivity. In the past three decades, China has benefited much from the first demographic dividend, but the favourable conditions—an extended period of falling child dependency ratio, low aged dependency ratio and a growing number and share of the working-age population—are rapidly disappearing. At the same time, technology could compensate for the anticipated decline in the labour force and help extend the working life of the elderly, if they are tech-savvy enough.

China's most recent 2020 census indicates that the economic, social and political issues related to ageing have become more urgent. While the census shows that China's population is still growing, growth has come down to a trickle at 0.5 per cent per year. As expected for several years, China's population will start to decline in the coming decade and the downtrend will likely continue for the rest of the 21st century. China's total fertility rate (TFR), the number of children a woman will have over her lifetime, now stands at 1.3, the lowest among countries with similar income levels, well below the 2.1 needed for a stable population, and considerably lower than the United States' 1.7 and even Japan's 1.4.¹ As is evident in the TFRs recorded in other high-income countries—South Korea (0.98), Singapore (1.14), Italy (1.26) and Spain (1.26)—China's TFR could fall further as income levels increase. Even during the implementation of the one-child policy, which was abolished in 2015, the TFR was never lower than 1.6. Evidently, after a brief baby blip in 2017, the abolition of the one-child policy and the switch to a two-child policy have not changed the tide.

With a TFR of 1.3, China's population will decline faster than originally projected, and its future population will be much lower than previously planned. The current "medium-variant" projection of the United Nations Population Division² assumes a TFR of 1.7, which implies an estimated Chinese population of one billion by 2100. The current actual TFR is in fact closer to the 1.2 figure that is assumed in the "low-variant" projection, which would yield an estimated Chinese population of below 700 million...