(Yicai Global) March 9 -- China is facing the increasingly serious issue of an aging population. This year marks the start of the country’s 14th Five-Year Plan as well as the first year of a national strategy to actively respond to its aging society.

The government plans to introduce a series of policies, including those to reduce the cost of childbirth and child-raising and develop inclusive and mutually supportive elderly care measures.

As a main objective of the 14th Five-Year Plan period, this year’s government work report suggested implementing a national strategy to actively respond to the aging population situation, with efforts to achieve an appropriate birth rate and gradually raise the statutory age for retirement.

Based on international standards, the share of the population aged 65 and above will account for 14 percent of the total during the current five-year plan and the country will enter a period of moderately aging society.

Compared with other countries, China’s aging problem is characterized by a large population base, fast speed, people getting old before getting rich, and the phenomenon of urban-rural inversion, closely related to its national conditions.

Upgrade to National Strategy

China’s aging problem is very acute. The country entered an aging society period around 2000, with a gross domestic product of just USD800 per person, which is a typical example of getting old well before getting rich, Yang Yansui, director of the Research Center of Employment and Social Security at Tsinghua University, said in an interview. 

Moreover, the speed of aging is also very fast, with the country only taking around 30 years to transform from an aging society to a severely aging one. This means that the development of China’s aging society will face a series of challenges, Yang said.

Cheng Feifei, director of the China Philanthropy Research Institute at Beijing Normal University, told Yicai Global that the strategy has been upgraded to the national level, according to the draft Outline of the 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through 2035 submitted to the ongoing Two Sessions, the annual meetings of the national legislature and top political advisory body in Beijing.

The draft supports businesses, institutions and social organizations to provide universal childcare services, encourage kindergartens to develop integrated childcare services, and improve the quality and level of childcare and education.

Echoing Cheng’s views on the national-level strategy, Hu Zucai, vice chairman of the National Development and Reform Commission, noted that the draft outline responds to social concerns. China will highlight inclusive elderly care services, build an elderly care service system that is coordinated with home-based community institutions and combines medical care and health care, as well as improve the community home-based elderly care service network.

The country will also promote the transformation of public facilities for an aging society, and take multiple steps to expand the supply of beds in senior care institutions, improve service capacity and level, and raise the proportion of nursing beds to 55 percent, Hu added.

Dealing with an aging population is also one of the hot topics at this year’s Two Sessions. The central committee of the Chinese Peasants and Workers Democratic Party submitted a proposal, stating that the nation’s fertility rate has continued to decline in recent years, and declining birthrates and an aging population have become major challenges to the population’s long-term balanced development.

The 14th Five-Year Plan period is an important window of opportunity for China to actively respond to the aging process, the proposal said. It suggested the government increase the supply of childcare services, clarify major responsibilities of the state in public childcare services, implement family tax relief measures, and optimize economic support policies.

Pension System Challenge

As the supply of young and middle-aged labor declines, the contribution of the labor force to economic growth will gradually decrease. In addition, some elderly people will withdraw from the labor market before they reach retirement age, intensifying pressure on pension payments. That will have an impact on potential economic growth.

Population aging has led to fewer workers and more retirees. With an aging population, it is an inevitable trend that China’s pension system will face the risk of becoming insolvent, according to a proposal by Zheng Bingwen, a member of the National Committee of the Chinese People’s Political Consultative Conference.

Zheng, who is also director of the Social Security Laboratory at the Chinese Academy of Social Sciences, suggested a transition to an asset-based pension system during the 14th Five-Year Plan period, introducing an incentive mechanism for overpaying in the basic pension system. 

He also proposed accelerating the development of second and third pillar pensions, strengthening the national social security fund, establishing foreign exchange-based sovereign pension funds for replenishment, and considering expanding transfer of state-owned assets.

Population aging not only challenges the social security system, but also the elderly care system. It is widely believed that the 14th Five-Year Plan period is the last window for China to prepare for an aging society. 

Cai Fang, vice president of the CASS, believes that although China will gradually enter a moderately aging society during the 14th Five-Year Plan period, the age structure of the elderly population is relatively young, so the pressure on elderly care resources, especially nursing needs, is not prominent. This will allow for a certain amount of time for the system to be developed and resource mobilization.

Editor: Peter Thomas