China may grow old before it gets rich, new study warns
By Hamish McDonald, Herald Correspondent in Beijing
April 28, 2004
Faced with a population ageing at an unprecedented rate, China has been warned it may grow old before it has a chance of reaching widespread prosperity.
"Today's great powers became affluent before they became ageing societies," say the US demographers Richard Jackson and Neil Howe in a new study. "China may be the first major country to grow old before it grows rich."
The proportion of over-60s in the population will rise from the current 11 per cent to 28 per cent - and possibly even as high as 32 per cent - by 2040, the year when communist leaders are confident that fast growth will have brought China close to challenging the economic power and strategic size of the United States.
"In Europe, the elder share of the population passed 10 per cent in the 1930s and will not reach 30 per cent until the 2030s, a century later," say Jackson and Howe in their paper for Washington's Centre for Strategic and International Studies. "China will traverse the same distance in a single generation."
By then the country will have almost 400 million elderly people who, unless broad pension schemes are started soon, will have no support. Although China has a healthy national savings rate of 40 per cent, households provide only a tiny proportion of savings and most are invested in dwellings.
Few people qualify for social security and attempts at setting up new pension funds have led to an "empty account" syndrome, where contributions are siphoned away by official institutions to meet the unfunded obligations of state-owned enterprises.
Most rely on traditional old-age insurance in the form of children. But the one-child policy enforced since 1978 has led to the so-called "4-2-1 problem" where one child will be expected to support two aged parents and four grandparents.
The emerging gender imbalance, resulting from selective abortion of females, also means that daughters-in-law, who do the actual caring for the elderly, will be in short supply.
Those healthy enough to continue work will find job-hunting tough. Many Chinese heading into retirement would have missed out on secondary and college education during the 1966-76 Cultural Revolution.
"As elders, they may find themselves competing with teenagers for sweatshop jobs," the authors say.
The warning in the paper titled The Graying of the Middle Kingdom is partly a job application by its funders, the huge US funds manager Prudential Financial Inc. Like insurers worldwide it seems to be eyeing a role in helping China set up a universal pension scheme in time to avert the crisis.
But it adds to warnings by Chinese demographers that looming population imbalances could bring social turmoil.
It also comes as the Chinese Government published details of unemployment, showing that despite recent 9 per cent economic growth, job creation was still far from soaking up the country's pool of surplus workers.