The 21st issue of Policy Briefing, NADS: The Tendency, Effect, and Measures of China’s Aging Problem

What are the trend, the causes, and the consequence of China’s aging population? Since January 1, 2016, China replaced the one-child policy with a universal two-child policy. But would the new policy relief China’s aging problem effectively? Does China’s demographic dividend disappear? How can public policies help to against aging problem and extend demographic dividend? The following paragraphs will focus on the questions above.  

Under the help of the combination of low natality and mortality, the aging rate of Chinese population is accelerating. However, among all factors, the predicament that birth rate keeps declining and remaining low is more fatal. The aging population overloaded both pension system and health care system, and it also left negative impacts on the labor market and the development of economic society. The universal two-child policy that practiced in 2016 may already too late to ease the aging problem. The move of dismantling birth control and encouraging procreation is considerable for the current situation.

The change of demographic structure will generate two kinds of demographic dividend. First, the low birth rate will result in small amount of babies, and by this way, the increment of labor force will increase. The second type of demographic dividend represents higher labor productivity resulting from the growth of capital wealth per capita. Since the aged processed more capital and wealth, the proportional lifting of aged citizens will boost the capital and wealth per capita. To extend the first kind of demographic dividend, there are four aspects need to consider: first, advocating flexible retirement age, with the help of pension system and market mechanism, is to encourage labors extending their working lives; second, adjusting education mismatch and over education and  appreciating vocational education; third, increasing female and aged people’s participation rate in labor market; fourth, reforming household registration system, extending migrant workers’ working time, strengthening their human capital, fully scooping up rural human resources. To exert the second kind of demographic dividend, it is essential to avoid the first pillar – basic pension – takes responsibility to provide private savings. Instead, it will be more practical to bolster pension system’s second pillar, which is enterprise annuity and occupational annuity, and third pillar, which is personal saving.

Besides, the orientation of controlling aging problem also includes the improvement of pension insurance levels, the perfection of health care system, the marketization and socialization reform of retirement services, the upgrade of industry, and the development of retirement industry.