China's demographic crisis may be right now
Aging population, drop in working-age numbers is triggering a huge pension problem
(Photo credit: Ulrich and Mareli Aspeling on Unsplash)
In April of 2021, I wrote a post about how China was getting increasingly worried about its upside-down population distribution — too many retirees, not enough younger workers. The People’s Bank had just issued a report that called for the immediate liberalization of birth policies. “Failure to do so,” I wrote, “would mean that by 2050, China would have a lower share of workers and a higher burden of elderly care than the USA.”
Now it looks like we can forget about 2050. The crisis may already be at hand.
According to this report by Reuters, China’s working-age population has dropped to its lowest level since 2009, and is below one billion for the first time since 2030.
From the report:
“China’s total working-age population, or the number of people between 15 and 64, was 998.3 million people last year, compared to 1.0026 billion at the end of 2016… The number of people 65 or older meanwhile increased 10 11.4 percent of China’s population of 1.39 billion people, up from 10.8 percent in 2016.”
Longevity on the one hand, declining birth rate on the other…just as I’ve reported.
Why does it matter?
The money quote:
“China’s rapidly aging population has led to a growing shortfall in the nation’s pension scheme. Many of China’s provinces only have enough money to pay less than one year’s worth of benefits.”
Central government funds will be needed to shore up deficiencies in local pension funds. But the signs are clearly alarming: the total number of employed people in China grew by just 370,000 last year, a much smaller increase than in previous years.
China faces other immediate financial problems, including a looming mortgage crisis. But this one may be deeper and more insidious. You can’t fix demographic imbalances quickly, and we may be seeing a textbook case of what happens when longevity is compounded by falling birthrates — a phenomenon that is occurring in plenty of other countries, too.