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Elijah Eales analyses the impact of China’s ageing population on the social, political and economic climates.
The ageing population in China presents the government with many challenges in the nation’s political, social and economic environments. In the struggle to provide care and support for the elderly, Chinese society is being forced to abandon traditional values whilst the government is under extraordinary pressure to provide a sustainable system of social welfare. The Chinese economy is also on course for an imminent period of transition as it is being forced to develop new ways of continuing to generate economic growth without a young workforce.
What is happening and why?
Over recent decades, China’s population has been subject to a significant demographic shift that has resulted in an increase in the percentage of the population being 65 years old or older. In 1979, 5% of the population were in this age bracket, compared to now where it has almost doubled to 9%. This trend is set to continue and remain high as China’s population is growing at a faster rate than almost every other country. It is estimated that by 2050, just under 25% of the population will be over 65 years old.
Normally, the reasons for an increase in the older demographic of a population are due to factors such as increased longevity due to increased health standards or research and lower fertility rates. In 1960, the average life expectancy in China was just over 40 years old. Today, the average person lives past 75 years old. Whilst these factors have certainly played a key role, nothing has had more of an impact than the One Child Policy, which was introduced in 1979. They implemented this policy limiting each family to one child as they feared China’s population growth was disproportionate to its resources. The country experienced a decrease in the fertility rate from 2.8 children per woman in 1979 to 1.7 in 2014. There was also a gender imbalance in babies being born based on a cultural bias preferencing male births.
An ageing population in China presents the government with many challenges in the nation’s political, social and economic environments. Chinese society is being forced to abandon traditional values whilst the government is under extraordinary pressure to sustain its health industry and maintain economic growth.
Abandonment of Traditional Values
Elderly care in China has challenged the traditional values of family care and the Confucian norm of filial piety that Chinese people have upheld for centuries. Seeking age care facilities has not always been the primary action for families who are caring for elderly people. The One Child Policy has altered not only the population structure but also the family structure. An increase in 4-2-1 families, where two adults are taking care of four grandparents and their own child, has placed significant pressure on the current working population to support their relatives.
This has led to an increase in people seeking the assistance of elderly care centres and hence, breaking away from traditional values. This is especially prevalent in rural areas, leading the government to fund projects aimed at shortening the urban-rural health divide. On average, the rural population earn less income and struggle to afford healthcare, and as the working population continue to follow the trend of moving to urban areas in search of job opportunities, the cycle of insufficient access to medical services perpetuates.
Constraints on the Chinese Healthcare Service
In the presence of an ageing population, the importance of a thriving and stable healthcare industry is imperative in order to maintain sustainability within Chinese society. The elderly are more susceptible to non-communicable diseases such as cancer and cardiovascular disease. In China this trend is intensified by the immense industrialisation and urbanisation and account for 85% of deaths and require 70% of medical resources. The Iron Triangle of Healthcare refers to cost, quality and access operating in a fluid and dynamic relationship, each one influencing one another. The primary areas where the Iron Triangle is necessary in order for Chinese society to stay balanced are the service industry, infrastructure and the medical social welfare system.
The Chinese healthcare service industry will experience a shortage of nurses, physiotherapists and social workers due to the burden of elderly care being transmitted from the family unit to society. As the demand grows for healthcare, the need for a greater workforce population does too. This crisis is perpetuated not only by the changing dynamic of China’s demographic, but also the gender imbalance of young Chinese. Age-care has traditionally been a female dominated role, especially occupied by daughters-in-law in the family unit.
As China gradually moves away from this model, and the female population decreases, so too does the ability for the family unit to care for the elderly. Even if families sought age care elsewhere like long-term medical facilities, not only is China’s healthcare industry expected to encounter shortages of community care and palliative care centres, but also shortages in the working population due to the lower percentage of females in the workforce. One report found that only 0.6% of Beijing’s population aged above 60 could be supported by Beijing’s pension houses.
Furthermore, infrastructure is crucial to the development of healthcare services due to its reliance on technology to provide the highest level of care to the patient. In China, lower tiered cities have not experienced the same development as Tier 1 cities such as Shenzhen. They have had very little access to developments in infrastructure as a result of foreign direct investment and therefore have access to lower quality healthcare services. Rural migrants workers are also not covered to receive healthcare services in the cities, so they either have to pay more to receive premium care (which they often cannot afford) or they have access to rural medical facilities which are of lesser quality.
The government needs to increase access to quality medical facilities for the rural population however the cost of this would be extremely expensive as they have to factor in building the appropriate infrastructure. In terms of a nationwide solution, they need to find the balance between providing China with sufficient access to healthcare services whilst maintaining quality.
In the last 10 years, the Chinese government has spent millions of dollars establishing a public healthcare system which privileges quantity over quality, meaning although it covers 95% of the population, each citizen receives low levels of benefit as the medical cover is not of great standard. The government has recognised that people over the age of 65 spend three to five times more than people under 65, hence expenditure in the healthcare industry is set to increase by 5 times between 2000 and 2020. This will accentuate the trade-off between quality and quantity as the government will have to decide where to allocate the resources as demand for healthcare increases.
However, China’s healthcare system is structured so that the working population funds the care of the elderly through tax. As the working population continues to shrink and less tax gets paid, the government will be put under significant financial strain because incoming funding is well below expenditure. Based on population growth patterns, China’s dependency ratio (citizens aged below 15 and above 65 divided by the working population) is expected to increase from 36.6% in 2015 to 69.7% in 2050, meaning a smaller percentage of the population will have the responsibility of caring for more of the population. If the Chinese government decides to reduce government services to compensate for lower tax revenue, services will become privately funded, further enlarging inequality throughout China.
Inhibiting Economic Growth
In 1978, China completely shifted the structure of their economy from centrally planned to more market based. This led to China experiencing the fastest sustained expansion by a major economy in history due to the rise and influence of the nation’s manufacturing industry which is currently ranked the largest in the world. It accounts for 46.8% of the country’s GDP and 19.8% of the total global production. An ageing population is extremely problematic for the manufacturing industry as China relies on the young workforce to sustain its economic growth. A shrinkage in the population pool of workers who are suitable to work in this industry is inevitable.
The fertility rate in China has fallen below population replacement levels in recent years to a level of 1.7 children per woman. For China to maintain the amount of output in this industry, levels need to increase to 2.1 children per woman. Failing this, economic growth will begin to decline and China will be unable to keep up with global demands. China’s economy is heavily dependent on cheap sources of labour to maintain the manufacturing industry. In recent years, wages have been consistently increasing to encourage participation in manufacturing, in turn making the industry itself less profitable and making China less competitive in labour intensive industries. It casts doubt over their future economic growth and competitiveness on the world stage.
The government may look to increase domestic consumption and allow the service sector to become the main driver of the economy. This would involve encouraging the population to switch from being savers to spenders. Although this is stimulated with the higher wages, the Chinese government would need to assure consumers that there is a social safety net protecting them.
China’s government expenditure revolves around healthcare, pensions and education. If these aspects were used to leverage domestic spending, the budget would be completely drained, potentially further increasing taxes which would only lead to a more conservative buying approach from consumers. If large scale approaches such as this were ineffective, China will either have to assist the retirement of millions of citizens through compensation or stand by as a large proportion of the elderly population live in poverty.
Waiting for a Response
The fate of China’s future economic success is subject to the effectiveness of the government’s response to these challenges. How they decide to preference the cost, quality and access of healthcare services nationwide will determine the living standards of the entire population, especially the increasing divide between the urban and rural populations. Whether they look to encourage a consumption-based economy or hope higher taxes will be able to regulate the future economic climate, the Chinese government’s actions will have enormous societal implications on the livelihood of Chinese society and the world.