Challenges and Opportunities of Population Aging in the People's Republic of China

Publication | July 2014

This policy note focuses on reforms to increase labor productivity, health care services for an aging population, and measures to face the increasing dependency ratio.

The population in the People's Republic of China (PRC) is aging rapidly. The proportion of people aged 60 years and above is expected to increase from 12% in 2010 to 33% by 2050, turning the PRC into the oldest population in the world. Health care costs and dependency ratios will increase in parallel.

Aging results in labor force shortages, which in turn increase average salaries undermining the economy's competitiveness. Rapid population aging, if unaddressed, might hamper the industrial transformation process needed to attain higher income status. The fact that the PRC is aging at a low level of income magnifies the challenge.

Given the limited health resources and safety nets in the PRC, aging will exert financial pressure on the provision of health care services, in particular long-term care for a growing number of elderly. This will aggravate fiscal constraints in local governments, who shoulder the bulk of providing these services.

While aging poses great challenges, it also provides opportunities for employment generation and services development, which are priorities in the government reform agenda. However, capturing the benefits requires policy actions to speed up the transformation of the pattern of growth, coupled with labor market reforms and improved human capital to foster labor productivity. Higher public expenditure to finance the growing needs of the elderly, including pensions, is also needed.

Contents 

  • Abstract
  • Introduction
  • Population Aging and the Labor Market
  • Population Aging and Long-term Care
  • Population Aging and Dependency Ratios