‘Silver economy’ likely to create golden economic opportunities

CHINA has undergone important demographic changes in recent years.

The number of people aged 65 or above has been increasing rapidly, accounting for 14.9% of the total population by the end of 2022, with the elderly-dependency ratio reaching 21.8%.

And the country has entered a period of negative population growth.

According to data released by the National Bureau of Statistics in early 2023, the total population of China at the end of 2022 was 1.41 billion, a decline of 850,000 compared with the end of 2021.

The United Nations, in its World Population Prospects 2022 report, also stated that China entered a period of negative population growth in 2022.

Countries such as Greece, Italy, Portugal and Japan have experienced negative population growth due to endogenous demographic changes, in addition to temporary population decline caused by factors such as natural disasters and wars.

South Korea joined the list of countries with negative population growth in 2021, with its total fertility rate falling below one.

Ageing populations and negative population growth because of low fertility rates are natural phenomena in the process of economic development.

As an economy develops, more and more women acquire higher education and participate in the workforce, leading to declining fertility rates.

Negative population growth translates into a decline in total demand. But that is usually true for countries with relatively small populations.

In China’s case, its large population base means the impact of negative population growth on total demand would be limited.

However, the declining working-age population and rapidly rising ageing population have led to declining labour supply, and falling savings and investment rates, resulting in a slower potential growth rate.

China’s potential growth rate during its14th Five-year Plan (2021-2025) period is projected to be about 5.5%.

Although the contribution of the demographic dividend to economic growth has weakened, the contribution of human capital to economic growth is becoming increasingly apparent – it is expected to exceed 10% by 2050.

This means China can no longer rely on the traditional model of factor inputs driving economic growth to meet its development needs.

Therefore, there is a need to seize the “key variable” of human resources to drive high-quality development.

In this context, the central authorities have proposed to implement “a proactive national strategy to address population ageing” and offset the negative impact of the declining working-age population by improving labour productivity.

First, improving the quality of the workforce is key to compensating for the labour shortage. This can be done, among other things, by raising education quality and shifting from the traditional examination-oriented education system to cultivating students and promoting innovation.

The role of education

Second, improving the distribution of educational resources between different regions and between urban and rural areas is essential.

For example, there are significant disparities in the distribution of teachers and education infrastructure between urban and rural areas. In such a case, distance teaching could be an important way for rural children to get fair educational opportunities.

And third, it is essential to develop vocational education to build a skilled and educated workforce. At present, universities mainly focus on producing general-purpose graduates and postgraduates for the labour market.

True, cultivating general-purpose talent contributed to the rapid improvement in human capital in the early stages of China’s economic development because there was an overall shortage of talent.

But with the Chinese market maturing, general-purpose talent can no longer meet all the new demands of the labour market, leading to an increasing gap between the demand for and supply of skilled workers.

In such a situation, education reform can address the structural contradictions between talent supply and demand, while establishing a sound employment service system to provide job information, career guidance and recruitment services can help workers better integrate into the labour market.

It is also necessary to eliminate employment discrimination and create a fair and equitable employment environment to ensure workers are not discriminated against based on their gender, age or other factors.

While there is a need to leverage digital technology to transform and upgrade the labour market, and improve productivity, it is imperative to develop resources for the elderly, issue favourable policies so they can re-enter the labour market.

As for population ageing, along with challenges, it has also created new opportunities.

The 14th Five-year Plan for the Development of Ageing and the Elderly Care Service System emphasises the importance of developing the “silver economy”, integrating the eldercare industry with other industries, and meeting the diverse needs of the elderly. In fact, the development of the silver economy can improve the well-being of the elderly and create a new driver of growth.

Given the rapidly rising ageing population, the eldercare industry has enough reasons for expediting development.

In fact, the combination of community-based institutional and family-based eldercare systems, along with the increasing use of digital technologies in eldercare services, has facilitated the development of the eldercare industry as a whole, thus creating more jobs.

Also, the integration of medical care and eldercare will help expedite the overall development of the healthcare sector, including disease prevention among the elderly and treatment for chronic diseases.

Financial matters

Besides, the pension insurance system should be developed in a way that allows individuals to choose different insurance and investment plans so they can save enough to lead a dignified retired life.

The reformed pension insurance system should alleviate the pressure on the government and society to attend to elderly people’s needs.

In this regard, financial institutions should be allowed to develop retirement financial products such as payment services, savings plans, wealth management, insurance and mutual funds that cater to the different needs of the elderly .

Simultaneously, the government should provide policy support for tax incentives, strengthen market supervision and promote the healthy development of the pension insurance industry. — China Daily/ ANN