China population: demographic window of opportunity 'will shut soon' as births drop, ageing crisis deepens

A demographic crisis arising from China's unprecedented low number of newborns is being compounded by an elderly population that is ageing faster than ever, and experts warn that this might be an irreversible trend that could result in older people being relied on to drive consumption and even fill the labour pool.

Mothers in China gave birth to just 10.62 million babies last year, an 11.5 per cent drop from 2020, which contributed to an overall population increase of just 480,000, while the number of people aged over 60 expanded.

"The number of our newborns is declining. As a matter of fact, the proportion of children aged zero to 14 [in the total population] will continue to drop while the share of the elderly population will rise rapidly," said Song Jian, a professor with the Population Development Studies Centre at Renmin University.

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"China is still benefiting from the window of opportunity of its demographic dividends, but the window will shut soon," added Song during a National Health Commission press conference on Thursday.

China therefore could soon lose its demographic dividend, which is characterised by economic development driven by a high proportion of the working-age population.

China's working-age population aged between 16 and 59 last year stood at 882.22 million, representing 62.5 per cent of the population.

Last year, China had 267.36 million people aged over 60, representing 18.9 per cent of the population, up from 264.02 million a year earlier, with 200.56 million aged over 65 in 2021, up from 190.64 million in 2020.

Beijing has relaxed its strict family planning rules over the last decade in response to the declining working-age population which was caused by China's notorious one-child policy, which contributed to the falling birth rates.

In 2016, Beijing allowed couples to give birth to two babies, with a third allowed from last year in response to the results of the seventh national population census in 2020.

But an easing of the number restrictions, plus a host of measures introduced on both local and central levels including cutting the cost of child care, more parental leave and making education, housing and other resources more accessible, have not been able to turn the tide of plunging birth rates.

And the decline of China's birth rate, which fell to a record low of 7.52 births for every 1,000 people in 2021, from 8.52 in 2020, is mainly due to the influence of socioeconomic factors, according to Cai Fang, director of the Institute of Population and Labour Economics at the Chinese Academy of Social Sciences, in a paper published in 2020.

"Whether it's a result of social and economic development or repercussions of the policy, the declining birth rate and population ageing are irreversible," Cai said.

"Therefore, the second demographic dividend can never be created through a rebound in birth rate. [China] must learn how to 'dance with' population ageing, how to adapt to the new backdrop and proactively avoid its negative effects."

China's ageing population could pose two major threats to the economy, namely a shrinking workforce and decreased spending power, Cai added.

The government should train and equip the elderly population with skills that help them better adapt to industrial demands and also come up with incentives to encourage them to work after reaching their legal retirement age, rather than cutting the pensions by postponing the age they can retire, Cai said.

In response to its ageing population, the central government confirmed last year that it will start to raise the retirement age by a few months every year. China's mandatory retirement age has remained unchanged at 60 for men and 55 for women - or 50 for blue-collar female workers - for the past 40 years.

A stable income, in addition to a more universal pension system, would increase the spending power of the elderly as China struggles with weak consumption against economic headwinds.

An estimate by the Chinese Academy of Sciences in 2019 projected that China's state pension fund would run out of money by 2035, while last year, plans were announced to set up a state pension company with registered capital of 11.15 billion yuan (US$1.76 billion).

A slowing or even negative population growth has been a shared dilemma in developed countries, especially in Asia, where countries and regions are struggling against the world's lowest birth rates and worst ageing crisis.

In Japan, the number of people aged over 65 accounted for 29.1 per cent of its total population in 2021, with more than one in four still working in 2020.

In South Korea, 34.1 per cent of people aged over 65 are still in the labour market, according to data published in November.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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