China’s ageing population and structural solutions

Brian YS Wong January 18, 2022 10:53

China has an ageing population problem. This proposition requires some unpacking – more precisely, there are two sub-propositions to consider:

The first, is that China’s population is “ageing” – measured, usually, by an examination of the ratio or proportion of individuals aged 60/65 or above, as juxtaposed against the rest of the population.

The second, is that such a demographic trend poses problems for China – in short, it “has a problem” when it comes to its population structure; such a problematic warrants proper and structural redress.

Both propositions are true. To the first, note that China’s population aged 60+ is anticipated to increase to nearly 500 million by the middle of the century (38% of the total population), from the 264 million in the status quo. Recently published statistics reveal that China has clocked amongst the lowest population growth rates on record – as the country enters into what Chinese demographers have termed a “zero-growth” period. The slowing population growth, induced by declining propensities of procreation (a fancy way of saying, folks are unwilling to have kids), is in turn a primary causal explanation for China’s ageing population – alongside, of course, the much-improved lifespan and quality of life for Chinese citizens as the country continues to develop socioeconomically.

On the second, this is a clear issue, for several intuitive, self-explanatory reasons. An ageing population possesses a heightened dependency ratio – where able-bodied members of the workforce are compelled to take on greater burdens of both covering the healthcare costs/transfer payments to retirees who are no longer able to work, as well as paying for retired members of their own households (specifically, those who lack independent financial streams or sources of post-retirement income). Additionally, a greying population may also experience setbacks to productivity gains, as the government inadvertently must spend more on elderly services and healthcare, and shift portions of the budget away from more industrially/economically productive investments. Finally, and most fundamentally, an ageing population paves the way for a shrinking population – indeed, Japan’s ageing population has been steadily declining since 2010.

So what gives? There are three structural solutions that Beijing would benefit from considering – it would be implausible to argue that they have not. First, on the question of stimulating more organic births, much ink has been spilled on lifting the negative, punitive restrictions on birth (e.g. One/Two-Child Policy) and encouraging individuals to discharge their civic responsibilities through having children. Here’s the thing – individuals do not solely respond to, and rarely do respond substantively to negative disincentives (and their removal) alone; the trick is to offer positive reasons for individuals to depart from status quo – for instance, subsidies, tax rebates, or structural support that enables parents to raise children more easily. Additionally, where such positive incentives cannot be offered, the state could consider nudging strategies (cf. Thaler and Sunstein) as a means of subtly – but potently – prompting individuals to start families and raise children of their own. Amelioration of barriers such as costs of living and childcare must go hand in hand with positive “carrots” for individuals, in order for parents to take up the momentous task of committing to bearing children.

Second, an alternative approach would be to boost immigration rates. Some claim that America is made up of “magical stuff” – such magical stuff lies (ostensibly) in its openness, pluralism, cosmopolitanism, which are civic and cultural characteristics that contribute towards its being an incredibly welcoming haven for migrants. China seems to struggle here in two regards: firstly, in attracting foreign talents and expats to work in the country; secondly, in ensuring that foreign talents opt to stay, as opposed to leave, after having made their living and established their careers in the country. Migration offers an easy and significant source of manpower that could replenish the dwindling population within the country – whilst, obviously, there exist socio-political and ideological reasons for which China is unlikely to tolerate (for now) a highly ethnically heterogeneous country, this should not be equated with an argument against increasing the level of migration into the country. Even if we were to grant that there exists value in a quasi-mono-ethnic, quasi-totalistically Sinicised country (which, as a staunch cosmopolitan, I firmly reject), this should not be construed as a literal carte blanche by which any and all pro-migration policies must thereby be rejected. To do so would be reckless.

Third, and finally, for all the talk of “living with X”, it’s perhaps a tad surprising that there has – as of yet – been relatively little said on the prospects of our living with an ageing population. An ageing population need not pose an issue, if viable alternatives are available as a recourse and means of preserving industrial output even notwithstanding declining population – for instance, the automation and digitalisation of labour, through effective synthesis of artificial intelligence and creative technology, could plug the shortfall in economically active and productive labour, as well as providing care for dependant elderly. Such technology-fuelled reforms must and should be actively explored, even if, indeed, we’ve managed to identify alternative remedies to the malaise that afflicts the country today.

China’s ageing population is certainly fixable. Those who zealously insist otherwise – well, may well be disappointed.

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Brian YS Wong

Assistant Professor, HKU