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Will China get old before it gets rich?

Insights

2019-03-20 20:04

Despite the recent slowdown, the Chinese economy remains the single largest contributor to world GDP growth. However, one of the biggest concerns is that CHINA's aging population will slow down its growth potential.

The government statistics show that in 2018, CHINA had 249 million people aged 60 and above, accounting for 17.9 percent of its total population, becoming the country with the largest and fastest-growing elderly population in the world. CHINA will be an "aging society" by 2026.

Facing these challenges, the Chinese government has begun to seek solutions. It has been announced that employers would be able to lower their contribution rate to the basic pension insurance for urban workers from some 20 percent to 16 percent.

Hu Naijun, an associate professor from the University of the Chinese Academy of Sciences, pointed out that the problem of CHINA's aging is not only the increasing number of elderly people but also the structure of our aging population. Thus, in the short term, the lower rate of the employer's contribution is affordable, while in the long run, CHINA has to build a more sustainable pension system as its population ages.

In sharp contrast to Western Europe and the U.S., many Asian countries are "getting old before getting rich." Is this a trap that cannot be avoided in the economic development of Asian countries?

00:49

Professor M.D. Nalapat, Vice-Chair of Manipal University's Advanced Research Group, believes that India will face the same risks as CHINA's aging in the future. The more important issue is that we need to ensure India's rapid economic growth, which can create more jobs for the younger generation.

"If the young population is not going to be an asset, it will be as much of a problem for all people," he added.

According to Professor Takesato Watanabe from Doshisha University, in order to solve the problem of senior services, Japan's pension industry needs young people from other countries like Vietnam, Philippines or Indonesia to join and work together. However, their employment benefits are not well protected. This didn't balance the wishes of young workers and the reality. “This is made the Japanese society very unstable now.”

01:53

Based on Western experience in pension benefits, Clare Pearson, former Chair of the British Chamber of Commerce in CHINA, suggested that "If you're giving tax incentives for people to contribute to commercial pension funds, you will get three benefits."

"First of all, you will get more coverage. People who do business think about their future," thinking that if they invest enough there should be a tax break, she notes. Second, you'll also decrease pressure on health services, because people who have pension coverage are going to be less demanding in the hospital. The third area I think is that people would take their future into their own hands and it will increase economic stability in the country.

02:05