Ageing is increasingly evident in China: S&P

Updated: 2013-03-21 11:10

By Michael Barris in New York (China Daily)

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By the midpoint of the century, the disproportionate growth in the number of elderly people in China will put the nation's public finances under pressure as it experiences one of the most dramatic demographic shifts in history, according to a new study of global aging trends by US credit-rating firm Standard & Poor's.

Released on Tuesday, the report, Global Aging 2013: Rising to the Challenge, notes that by 2050, China will be caught between a huge jump in the number of older citizens depending on young workers to keep the country functioning and a declining birth rate that will gradually shrink the work force. Within two decades, the deterioration in the demographic profile will be evident, said report author Marko Mrsnik.

"China is facing quite a significant demographic shift, which I think it can gradually defuse, but it has to start thinking about it now," said Mrsnik, S&P's director of sovereign ratings.

The report shows that in 2010, China had a population of 1.34 billion and an old-age dependency ratio - the number of people aged over 65 relative to the population aged 15-64 - of 11 percent. By 2050, the population is projected to fall to 1.29 billion while the dependency ratio soars fourfold to 42 percent, according to the study.

By 2030 the dependency ratio will have doubled from 2010, to 24 percent, Mrsnik said. "That's a very significant deterioration in the demographic profile," he said, adding that "this rapid shift is already under way".

"The pressures will be gradually building up and, especially in 2020, we will see that putting more pressure on the public purse."

By highlighting the consequences of the declining birth rate, S&P's report could refocus attention on the debate over the future of China's family planning policy. The government introduced the restriction in 1979 to limit births in the world's most populous country, but the policy is now undergoing scrutiny because of challenges a rapidly aging population poses to China's economic competitiveness. The National Population and Family Planning Commission has estimated that the policy has prevented 400 million births.

China has already taken one step to change its family planning policies. Last week during the central government's annual two sessions, China's new government merged the National Population and Family Planning Commission with the Health Ministry.

Mrsnik noted that there is an advantage in having a policy the nation can adjust to control the impending demographic shifts.

"You actually have policy flexibility, which is something that other countries like European economies don't have," he said.

Although Zhang Weiqing, former head of the National Population and Family Planning Commission, said in November that China was considering changing the 34-year-old policy, he said reforms were unlikely to happen fast.

The United States also is bracing for a dramatic demographic shift as its population ages, but the change is projected to be less severe than in China, according to the S&P study. Between 2010 and 2050, the US population is forecast to grow to 403.1 million from 310.4 million, while the old-age dependency rate increases 1.5 times to 35 percent from 20 percent.

Michael Hodin, executive director of the Global Coalition on Aging, a group of industry leaders engaged in the global aging discussion, said the S&P report dramatizes how China's economic growth spurt makes it important to tackle the dilemma of an aging population quickly.

"There's a different proportion of old to young, living longer and low birth rates, which have enormous consequences for fiscal sustainability, social structure and economic growth," Hodin said. "And to the degree that those analytics describe the Chinese makeup, the impact to China's fiscal sustainability and economic growth over the next two to four decades is very, very consequential."