January 17 was a historic day for China. After decades of presenting itself as a powerhouse of unlimited growth, the country revealed that its population had declined for the first time since the 1960s.
With life expectancy rising and birthrates falling to record lows, even after ending the one-child policy in 2016, China’s 1.4 billion people are not only shrinking, but aging as well. quickly.
This historic moment signifies a monumental shift in the way China must chart its future. Left unchecked, population aging poses crises on multiple fronts: the country will have more elderly people in need of health care and, at the same time, fewer working-age adults to fuel the economy that finances this care.
China is also facing unprecedented ageing. It is projected that by 2040 there will be 400 million people over the age of 60, more than in the entire United States.
The country’s leaders know that they have to quickly sow the seeds of an effective system in the future. In March, Beijing announced a five-year plan—its global vision—to address care for the elderly. Some cantons, concerned about the declining marriage rate, are trying a number of creative strategies to convince couples to marry and have children.
On a large scale, China’s response as a nation has lagged behind. Recent baby-boosting policies were enacted too late, and government-funded aged care services cannot even keep up with current demand, they explain to Business Insider various experts in China.
Five professors specializing in the study of the population and economy of China have helped Business Insider to analyze the country’s race against time.
A national insurance plan being tested
China is the only developing country in the world that is getting old before it gets rich, so it needs to find a way to pay for care for the elderly.
Sabrina Luk, Associate Professor of Public Policy and Global Affairs at Singapore’s Nanyang Technological University, says there are no quick and easy solutions to China’s aging problem.
China is currently testing a national insurance plan that specifically covers care for older people with long-term needs, such as patients with dementia or diabetes. The pilot program involves 15 cities, including Chengdu, Shanghai and Guangzhou, explains Luk, author of two studies on aging in China.
It is up to each city to decide how it funds the plan, who benefits, and what kind of care they receive.
Most of these cities pay for treatment with funds from mandatory insurance programs that people have been contributing money to for years. In China, if you are an adult working in a city, you are required by law to pay for health insurance.
These insurance programs often pool contributions into a large pool and cover workers even after they have stopped working, which means that a retiree can receive health care even if they have stopped paying premium.
But if China progressively ages while having fewer working-age adults, demand for old-age care insurance will skyrocket even as the number of people paying for these programs falls, Luk says.
And care for the elderly is expensive: it is usually three times higher than that for the younger generations, he adds.
“It is obvious that relying on health insurance contributions to finance elderly care services will not be viable in the long term,” he says.
The insurance system already has cracks
According to Luk, the cracks are already starting to show.
Luk says that some cities are already running shortfalls in their co-insurance, which is estimated to reach $100 billion nationwide by 2024. There are also not enough centers to accept the new regime, nor enough staff in the program to care for the elderly, he adds.
Professor David Goodman, director of the Center for China Studies at the University of Sydney, points out that local agencies in poorer regions will have a particularly difficult time meeting the costs, in a country where rates of wealth and urbanization can fluctuate. drastically. In Beijing, China’s richest province, GDP per capita was $28,517 in 2021, compared with $6,362 in Gansu, the country’s poorest province.
“I can imagine some of the wealthier cities will be able to do that, and actually have quite a bit of philanthropy as well,” Goodman says. “But I think one thing is certain: it will not be common prosperity. It cannot be.”
Aging at home: the ultimate goal
As in the United States, China’s main goal is for people to grow old in their own homes and, as much as possible, not have to go to nursing homes or assisted living facilities, explains Gu Qingyang, a professor Associate of Economics from the National University of Singapore.
“China is trying to create day centers where people can go home and be looked after by their children at night,” Gu explains.
That’s the goal for older people everywhere in the world, says Stuart Gietel-Basten, a professor of social sciences and public policy at Khalifa University in Abu Dhabi, whose research covers demography in China.
“You want to grow old at home. You want to grow old in your own home and stay there as long as possible,” says Gietel-Basten.
It’s an especially effective solution for the poorest elderly in rural China, where the average resident earns $2,700 a year and pensions are too small to afford long-term health care.
For example, an elderly farmer who has done physical labor for most of his life and is in good health can support himself for many years with the support of a community, explains Gietel-Basten.
“The problem comes if you suffer from some type of long-term chronic illness. At that point, it is very difficult to access complex health and social services in the middle of nowhere and in dispersed populations,” he adds.
Alzheimer’s is quickly becoming a concern in China, according to Luk. The country will register some 15 million people with dementia in 2022, the highest number in the world.
“It is estimated that dementia in China in 2030 will account for about 10% of the projected global cost of $1.1 trillion in 2030,” says Luk.
China’s National Health Commission launched a national dementia strategy in 2020 to strengthen services for Alzheimer’s patients under its “Action Plan for a Healthy China.”
But it hasn’t yielded significant results yet, Luk warns. “In China, many people with dementia and their caregivers are still unable to get the support they need,” she says.
With the years still left on the clock, China can also reduce the burden by teaching its population to adopt habits that help them age healthily, such as cutting back on alcohol, quitting smoking and exercising regularly, Luk says. .
“Helping older adults stay healthy is really helping them achieve healthy aging,” Luk says. “Without a healthy body, people can’t do the things they want to do and enjoy life.”
“It’s not just about adding years to life,” he stresses, “it’s also about adding life to years.”
One possible solution: outsourcing to the private sector
Still, while China has yet to achieve widespread success in elderly care, it has a good chance of achieving stability in the coming decades, experts say to Business Insider.
“Is China aging rapidly? Definitely. On the other hand, it has many positive aspects,” says Gietel-Basten.
The government’s one-party system allows it to pivot quickly and implement sweeping changes, compared to democracies where the keys to power can change hands every few years, he says.
But it is not yet clear whether the central government will decide to harness that power and push further to improve care services for the elderly, as Beijing did with its radical “covid zero” campaign, which confined hundreds of millions of people and it choked businesses for years.
“It’s likely to happen if the middle class creates a tipping point where there’s such a demand for senior care services that local governments say, ‘Okay, it’s time we did something,'” says Goodman, director from the Center for China Studies.
On the other hand, a drastic campaign on a national scale may not be necessary.
Beijing has been pressuring the private sector to build day centers, residences and other infrastructure for elderly care to shore up gaps in local government finances, Gu said.
Forced by the Xi Jinping administration to share their wealth, Chinese corporate giants such as Alibaba, Tencent and Geely Automobile have pledged billions to “common prosperity funds.”
Another proposed solution: resort to immigrant labor
One option for China could be to rely on migrant labor, attracting foreign workers on short-term contracts to work in factories, care for the elderly and even farm, as Taiwan and South Korea did in the 1990s, he argues. Carl Minzner, Senior Fellow for China Studies at the Council on Foreign Relations.
However, China has few foreigners compared to the rest of East Asia, and Xi has been closing China’s door, rather than opening it, to the rest of the world, according to Minzner.
“Naturally, this is where some will vaguely point in the direction of technology or robotics as a magic wand that will enable Beijing to overcome these challenges,” Minzner says.
But aging countries like Japan and South Korea are much wealthier than China, and continue to rely on immigrant labor rather than fancy technological solutions, Minzner adds.
“Why would China be any different?”
