Riding the ‘silver economy’
Rising elderly population presents some challenges, but it can also create a new growth driver
China witnessed significant demographic changes in recent years. The number of people aged 65 or above has been increasing rapidly, accounting for 14.9 percent of the total population by the end of 2022, with the elderly dependency ratio reaching 21.8 percent. And the country has entered a period of negative population growth.
According to data released by the National Bureau of Statistics early last year, 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, too, stated that China entered a period of negative population growth in 2022.
Aging population and negative population growth because of low fertility rates are natural phenomena in the process of economic development.
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 workingage population and rapidly rising aging population have led to declining labor supply, and falling savings and investment rates, resulting in a slower potential growth rate.
China’s potential growth rate during the 14th FiveYear Plan (2021-25) period is projected to be about
5.5 percent. 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 percent 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 highquality development. In this context, the central authorities have proposed to implement “a proactive national strategy to address population aging”.
First, improving the quality of the workforce is key to compensating for the labor shortage. This can be done, among other things, by raising education quality and shifting from the traditional examination-oriented education system to fostering wellrounded students.
Second, improving the distribution of educational resources between different regions and between urban and rural areas is essential.
And third, it is essential to develop vocational education to build a skilled and educated workforce. Cultivating general-purpose talents contributed to the rapid improvement in human capital in the early stages of China’s economic development. But in the current era, generalpurpose talents can no longer meet all the new demands of the labor market.
In such a situation, education reform can address the structural contradictions between talent supply and demand, while establishing a sound employment service system that can help workers better integrate into the labor 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 labor market, and improve labor productivity, it is imperative to develop resources for the elderly so that they can reenter the labor market.
As for population aging, along with challenges, it has also created new opportunities. The 14th Five-Year Plan for the Development of Aging and the Elderly Care Service System emphasizes 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 create a new driver of growth.
Given the rapidly rising aging 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, 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.
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. Financial institutions should be allowed to develop varied retirement financial products that cater to the elderly people.
Meanwhile, with more leisure time after retirement and increasing income levels, demand for tourism among senior citizens is rising. Hence, there is a need to improve the facilities of tourist attractions, while making them more userfriendly for the elderly to ensure they enjoy the tourism experience and in turn contribute to the further development of the tourism sector.