China’s Changing Demographics – Old Age
Becomes a Key Factor for China
January 2014
Paul French
This publication has been produced with the assistance of the European Union. The
contents of this publication are the sole responsibility of ECRAN and can in no way
be taken to reflect the views of the European Union.
This project is funded by the European
Union
This project is implemented by a Consortium led by
Steinbeis GmbH & Co. KG für Technologietransfer
Executive Summary
Auguste Comte, the father of sociology, famously said, ‘demographics is destiny’. China’s
current demographic situation will have a profound impact on the future of its
developmental project. Crucially, decades of economic development and demographic
control are causing unprecedented alterations in the ratio of retired to working people in
China. Development has brought urbanisation and increased longevity, meaning that the
over 50 age group is more populous, more urban, and older than ever before. Demographic
control in the form of the ‘One Child Policy’ has also contributed to increasing the ratio of
old to young by causing the working age population to shrink. This has resulted in a ‘4-21’family structure, where each working age child has two retired parents and four living
grandparents.
In the past, working-age children have generally taken care of their retired parents and
grandparents in the home. In China’s new demographic reality this will no longer be possible
due to the increased number of retired people per household; the increasing severity,
frequency, and duration of illnesses as these people age; and the lack of working-age siblings
with whom to share the financial and logistical burden. China’s nascent social welfare
system is currently unable to provide for the healthcare and pension needs of the aging
population. Further reforms are necessary, as requiring retirees and families to self-fund
their retirements could slow China’s development. Reforms will continue to be hampered
by financial difficulties related to corruption and the smaller tax-paying workforce, so the
Chinese government needs to take a creative approach to providing for its aging population.
Importantly, the government should recognise that care of the elderly must increasingly be
done by trained aged-care professionals, whether at home or in specialised facilities.
_____________________
ISL19 China’s Changing Demographics
Paul French
2 of 27
China’s Changing Demographics – Old Age Becomes a Key Factor for China
1) Introduction
1.1) The Key Demographic Trends
China’s demographics are in the midst of a period of enormous change - what is often called
the country’s “demographic time bomb,” a rapid ageing of its 1.3 billion population tied to
the three-decades-old one-child policy. According to the China National Committee on
Ageing, some 200 million Chinese adults will be over age 60 as of 2013. China, of course, is
still the world’s most populous nation, and has the second-highest number of young people
in the world, behind India (a country with a very different family planning regimen and no
one-child policy), but the country is moving from being overwhelmingly young and rural to
becoming a country that is, in the majority, older and urban. The National Bureau of
Statistics has indicated that it expects (even with the ongoing liberalising of the one-child
policy) that China’s population number of 12-19 year-olds will drop by a significant 18.2%
from 2010 levels by 2020. China’s teenage population is set to decline further still to
approximately 9.1% of the total population in 2050, from 13.8% today. Estimates as to the
future projection of China’s elderly (classified as over-60) population vary and the latest
statistics from China’s National Bureau of Statistics are outlined in detail in Table 2 below.
However, as a rough guide, China’s National Bureau of Statistics estimates that by 2015
there will be some 200 million Chinese people over 60 while, according to predictions from
the United Nations, nearly three out of 10 Chinese people will be older than 60 by 2040. This
means that elderly people in China will be one of the largest single groups in the world
numbering approximately 300 million by 2030 and perhaps 480 million by 2050. Elderly
Chinese will also be one of the largest single groups of older people seeking to access postwork retirement financial products (pensions) and geriatric healthcare. This marks the
decline in the number of economically active people in China, and an increasing proportion
of elderly dependents.
The twin phenomena of enhanced longevity and the One-child policy, introduced in 1978,
means China has seen the most rapid move from a demographic “sweet-spot” to an ageing
society. This move towards an ageing society will have serious ramifications for China’s
government, economy, markets and the people themselves as they are forced to adjust to a
national economy with a smaller available working population and higher rate of retirees
and elderly citizens. Discussions on how China will manage this transition from a youthbased to an elderly-based society are today often referred to as the “will China get rich
before it gets old?” debate. Inevitably China will see its economy challenged by both a
decline in the working population and a rise in fiscal deficits linked to increased government
spending to cope with the ageing population. Healthcare spending, pensions, social welfare,
long term care – all will be additional costs to China’s social system. This comes at a time
when China’s urban social welfare system is still in a nascent stage – pensions, healthcare
and labour force reform (employer funded retirement programmes, mandatory retirement
ages, etc) are all still in a process of change.
_____________________
ISL19 China’s Changing Demographics
Paul French
3 of 27
Table 1: CHINA POPULATION STATISTICS, 2013
Birth rate
12.31 births per 1,000 population
Death rate
7.17 deaths per 1,000 population
Sex ratio (at birth)
1.14 male/female
Infant mortality rate
15.62 deaths per 1,000 live births
Population growth rate
0.481%
Source: National Bureau of Statistics
1.2) Greater Longevity
Chinese people are living longer; already, increased longevity means that Beijing and
Shanghai are among the ‘oldest’ cities in Asia after Japan’s. Of course, increased longevity is
good news, but it will inevitably place more burdens on the healthcare system. Long-term
care and provision for the aged and their age-related diseases will place strains on a system
already being challenged by increasing instances of pollution-related diseases. According to
China’s National Bureau of Statistics, average life expectancy is now 73 for men and 79 for
women, up over 12 years since 1970.
China’s longevity has certainly increased, though not as much as might be expected after 30
years of reform and economic growth. From 1990 to 2008, life expectancy in China rose 5.1
years, to 73.1, according to a World Bank (WB) compilation of United Nations (UN) data.
Nearly every other big developing country, be it Brazil, Egypt, Ethiopia, India, Indonesia or
Iran, had a bigger increase over that span, despite much slower economic growth. Since
2000, most of Western Europe, Australia and Israel, all of which started with higher life
expectancy, have also outpaced China in terms of average life expectancy age. This slowerthan-expected growth in life expectancy is due to a combination of conflicting “wealth
benefits” and “wealth deficits” – according to the UN, “With rising incomes in China, people
could afford better food, clothing and shelter. But they were also exposed to more disease
because so many of them were moving to cities. In addition, China’s demographic statistics
have been uniquely affected by the one-child policy, which introduced decades of centrally
imposed fertility restrictions.
_____________________
ISL19 China’s Changing Demographics
Paul French
4 of 27
Table 2: THE POPULATION OF THE OVER-60S IN CHINA, 2000, 2005, 2010 AND 2015
2000
2005
2010
2015
As a % of the Chinese population
10.66 13.01 14.85 16.91
Number of people (million)
132.5 167.4 198.0 233.1
Number of women (million)
66.6
85.5
100.2 117.0
% women
50.3
51.1
50.6
50.2
60-64
39.4
50.7
66.4
85.6
65-69
37.2
42.7
45.9
51.8
70-74
27.9
34.5
37.7
38.0
75-79
16.1
22.0
26.7
32.3
80-84
8.2
11.8
14.1
16.7
85-89
2.8
4.2
5.8
6.7
90-94
0.9
0.3
0.4
0.5
95+
0.1
0.2
0.4
0.5
Total
132.5 167.4 198.0 233.1
Number of people (million):
Source: National Bureau of Statistics (NBS)
1.3) The One-Child Policy
Launched in 1979 after the population topped one billion, the one-child policy remains the
most ambitious of the Communist Party’s many attempts at social engineering. The
government believes the one-child policy curtailed population growth by 400 million extra
births, but implementation has always been patchy. The policy has been most effective in
cities rather than the countryside, and consequently the number of one-child families is far
higher in urban China than rural China: above 80% in most tier 1 and 2 cities. In urban China,
residents have faced heavy fines and can lose their jobs if they have a second child. In
addition, many urban couples now state that they prefer to have fewer children, citing
societal norms, the high cost of raising children, and lack of space as explanations. But in the
countryside, where parents depend on children to help them and support them in their old
age, resistance has been widespread and continual.
_____________________
ISL19 China’s Changing Demographics
Paul French
5 of 27
1.4) Job Done: The End of the One-Child Policy?
When the one-child policy was introduced, it was intended to last for only one generation,
long enough to control the nation’s population explosion, but short enough to avoid
distorting the age structure beyond all repair. In 2004 the National Strategic Research
Project Group on Population Development was formed to advise on the next course of
action. When its report was published in January 2007, the recommendation was simple: do
nothing. The main conclusion of the report was that for the population peak to be controlled
at around 1.5 billion, the national gross birth rate over the next 30 years needed to be
‘stabilized’. Unsurprisingly, the policy has not always been popular, and the recent
nationwide population census led to an influx of babies abandoned at orphanages, as people
feared penalties which can include fines in urban areas, or the family’s house being
bulldozed in rural areas. The government has attempted to ameliorate the unpopularity of
the policy using inventive campaigns to encourage family planning. Rural families in some
areas have been paid not to have more children, while in other areas advertising campaigns
were used. One example of a sign that appeared in villages read, ‘If you want to get rich,
have fewer kids and raise more pigs’.
In 1995 Beijing approved a pilot project in six rural counties where family planning workers
would try to limit births by expanding health services for women, providing more
information about contraception and allowing couples to make their own decisions. Then in
1998 the UN population agency encouraged China to take the experiment a step further,
providing funding and training to 32 rural counties that agreed to eliminate the birth
permits, targets and quotas associated with the One-child policy, and stop promoting
abortion as part of family planning. According to Chen Shengli, a senior SFPC official, health
workers across the country have been impressed by the results of the UN project. Xie
Zhenming, a senior official at the government-affiliated China Population Information and
Research Centre who campaigned for the changes, estimates that cities and counties
accounting for nearly a quarter of China’s 1.3 billion people have eliminated birth permits
and quotas over the last five years.
Faced with fast-paced demographic change, Beijing has been slowly repealing the one-child
policy in China’s major cities (though to a far lesser extent than in the countryside) by
introducing various exemptions. According to the latest government statistics, 36 per cent of
the population is still required to follow a strict one-child policy in the richer coastal
provinces, while in 19 of the poorer provinces 53 per cent may have a second child if their
firstborn is a girl. Those families that belong to ‘national minorities’ follow looser
regulations, while there is no family planning policy at all in Tibet. Despite this it seems that
the model three-person household will remain the dominant form of family unit for some
time to come among the rising urban middle class. A Shanghai Academy of Social Sciences
survey in 2012 found that over 90% of Shanghai couples are now eligible to have more than
one child, but that 45% of families had ruled it out as an option due to cost, apartment size
and the fact that three-person families are now the norm. In late 2013 it was announced
that China would make substantial changes to its one-child policy (see 1.5 below); however,
the policy had been in a process of some relaxation for a number of years with various
exclusion categories being introduced prior to the 2014 changes.
_____________________
ISL19 China’s Changing Demographics
Paul French
6 of 27
Table 3: URBAN EXEMPTIONS TO THE ONE-CHILD POLICY, 2012
* If both parents are from one-child families (i.e. both parents have no siblings)
* Both parents are university graduates
* The first child is severely handicapped or disabled
* If an RMB50,000 (US$8,000) fee is paid (applies to migrants to urban areas)
* A Chinese citizen is married to a foreigner
* Twins
* Adoption
* Registered as an official category of ethnic minority (and therefore exempt entirely from
the one-child policy)
Source: State Population And Family Planning Commission
1.5 The End of the One-Child Policy?
In late-2013 the Standing Committee of the National People's Congress (NPC) passed a
resolution allowing couples to have two children if either parent is an only child. This is an
extension on the previous guidelines (as listed in Table 3 above) that allowed for a second
child if one parent was an only child and urban registered. The new guidelines allow for any
couple who are both from single child households to have a second child. It is expected that
this new reform to the one-child policy will be rolled out gradually and incrementally around
the country, with provincial authorities entrusted to make their own decisions on
implementation according to the local demographic situation. While this new relaxation will
mean some additional births (and, it is hoped, a reduction in forced abortions and
abandoned children) many analysts do not expect large numbers of urban couples to opt for
a second child due to financial issues. According to Zheng Zhenzhen, at the Institute of
Population and Labour Economics in Beijing, less than 2% of parents cite the state’s policy as
the reason they have only one child. With the population already ageing rapidly, while any
additional children will increase the potential future labour pool and the ability of the
extended family to provide care, it will not in any way be an immediate panacea to the
current problems of elderly care or the state’s growing pension burden.
2) Key Results of China’s Demographic Change
2.1) China’s Shrinking Workforce
The IMF forecasts that China’s present labour surplus of about 150 million people will
decline to 30 million by 2020. According to IMF predictions, China will reach its Lewis
Turning Point, where development begins to trigger inflation because the industrial sector
can no longer source labour from the agricultural sector, in 2025. Further, the IMF projects
that by 2030 China could have a labour shortage of 137 million workers or more. Coupled
with the aforementioned increase in the proportion of non-working retirees, this will mean a
_____________________
ISL19 China’s Changing Demographics
Paul French
7 of 27
swing in dependency ratios. According to Michael Beckley of Harvard Kennedy School’s
Belfer Center for Science and International Affairs, the fiscal cost of this change alone may
exceed 100 per cent of China’s GDP.
It may be the case that China’s economy can continue to grow with a reduced workforce,
however a reduction in the number of tax-paying workers does mean that the cost of care
for the elderly and financial provision for their welfare is placed upon the shoulders of a
small number of working age Chinese. China’s core working-age population, those aged
between 20- to 39-years-old, is already shrinking. China’s National Bureau of Statistics
reported that the number of working-age Chinese fell by 3.5 million in 2012. The
phenomenon of China’s shrinking workforce has obvious implications for government
spending projections, and the reduction in the available pool of labour helps explain the 12%
to 15% jump in wages across China in the past decade. Crucially for elderly care provision,
the ratio of workers to retired people will decline from about six to one in 2013 to
approximately two to one by 2040. This will be roughly equivalent to Western Europe now.
It is worth noting that China’s government can take steps to slow the arrival of the Lewis
turning point, even though the IMF warns the “looming demographic changes are large,
irreversible and inevitable in the medium term”. In 2014 the authorities have, as mentioned
above, significantly relaxed the one-child policy. However, there are other measures
available to the central government. For instance, they could also encourage greater labourforce participation, especially by loosening restrictions on people moving around China to
allow an easier flow of the underemployed to where there are shortages and demand. It is
also government policy to try and move the economy up the “value curve”, boost
productivity and encourage the services sector to expand. However, the fact is that there
will be fewer tax payers in the coming years and that the ratio of working to retired citizens
will become increasingly skewed towards retired people.
TABLE 4: PRIMARY REASON FOR RETIREMENT, 2012
%
Reached statutory retirement age
78
Due to ill health
8
To become a full time carer for spouse/partner/family member
4
Early Retirement (voluntary)
2
Other reasons
8
Source: China Health and Retirement Longitudinal Study, 2013
_____________________
ISL19 China’s Changing Demographics
Paul French
8 of 27
2.2) Elderly Citizens’ Housing Requirements
In terms of housing needs, China’s ageing population can be divided into two groups. The
first group, comprising the majority of elderly Chinese, is composed of those who own their
apartment, occasionally with mortgages (approximately 20% of over 50s in urban areas) but
more often outright. In some ways this group, which does not have ongoing rent
commitments, can be seen as fortunate. However, many of its members bought older
apartments that require costly renovation and maintenance. Additionally, some retirees will
begin to find their current homes unsuitable as they age and will need to change to more
accessible, low maintenance accomodation. Given China’s skyrocketing urban property
markets this may be difficult (see section 2.2.1).
The second group contains those who were unable to take advantage of the property
privatization of the late 1990s [and have effectively missed out on the opportunities of the
economic boom of the past 30 years in China]. Many of these elderly and retired people are
supported by, or live with, their grown-up children in multigenerational homes (though may
retain mortgages on other properties). Others live in rented apartments, though (as Table 5
shows) this is now becoming a minority of retired urbanites. While their rents may often be
subsidised by the government, army, former work units (danwei) or other bodies, rent still
represents an ongoing cost that erodes their savings and/or pension power.
TABLE 5: PROPERTY FINANCIAL STATUS OF RETIRED URBAN CHINESE, 2012
%
Property being purchased on a mortgage
21
Property being purchased on a mortgage (self-paid)
9
Property being purchased on a mortgage (paid by children)
Property owned outright
12
73
Property owned outright (self-paid)
65
Property owned outright (paid by children)
8
Other arrangement
6
Total
100
Source: China Health and Retirement Longitudinal Study, 2013
NB: renters are included in “other arrangement”
_____________________
ISL19 China’s Changing Demographics
Paul French
9 of 27
Based on this information, housing can be seen as a relatively minor concern for the
majority of China’s ageing population, compared to the need for adequate healthcare and
pensions. Already rates of home ownership for urban Chinese are high in the tier one and
tier two cities – approximately 87% for the over-50 age group (though a percentage of these
are multi-generational family homes) - and the vast majority will live in an owned property
(albeit with perhaps others of their family). The strong tendency of Chinese adults towards
having some kind of secure property ownership before they reach retirement age indicates
that housing will not be a major issue for China’s burgeoning elderly in the future. One area
that warrants further study concerns the accessibility and suitability of owned housing. A
significant proportion of those elderly who own their homes could potentially need to move
to a new house as their health and mobility deteriorate with age. For example, a third of
over-50s home-owners inhabit public-built apartments, invariably the property they bought
at deep discounts when the state sold off its vast public housing stock in the 1990s. The
suitability of these old-style apartments for elderly persons should be the focus of future
research.
2.2.1) Downsizing Housing Needs
In Western Europe’s more developed private property market the concept of downsizing
housing at retirement is well established. In general retirees need less space once their
children have homes of their own. Selling a larger property to buy a smaller one is thus a
common way for European retirees to release capital tied up in the larger property. This
adds to the financial pool that can be invested into products such as improved healthcare
plans, life insurance and retirement savings.
In China, downsizing is a newer and less common phenomenon. This can be partially
explained by the novelty of the privatised property market, the norm of intergenerational
homes, and generally smaller apartment sizes, however these factors alone do not seem to
explain the results of recent retirement surveys. Interestingly, three in ten adults have
expressed a desire to live in a larger house when they retire. The reasons for the existence of
this significant minority group should be further studied; one possible explanation is that the
tight property market causes these retirees to foresee a need to accommodate adult
children who do not yet own a home of their own. Still, financial considerations may be the
final arbiter of downsizing decisions. The same surveys have found that approximately one
in five (22%) future retirees (regardless of whether or not ideally they would like to move to
a larger property upon retirement) would ultimately opt to downsize anyway. The major
reason for this is to eventually release the capital from a larger property in order to help
with future expenses.
A final element to the post-retirement downsizing issue is that one in five urban future
retirees would like to retire to the countryside. This reflects the high rate of migration to
China’s cities over the last 30 years and the fact that many people would like to move back
to their home villages when they stop working. Naturally property prices are significantly
lower in rural areas so releasing the profit from a sold urban property to buy rural, and using
the leftover to fund retirement, is a potentially viable alternative pension strategy for many.
However, healthcare and other services for the elderly are less advanced and accessible in
many rural areas so returning to the countryside may not always prove possible in reality.
Alternatively, high numbers of “returnees” could create pressure in rural areas for better
geriatric care and services.
_____________________
ISL19 China’s Changing Demographics
Paul French
10 of 27
2.2.2) Multi-generational Homes
A key Confucian tradition among Chinese households is that children should care for their
elderly parents. Already multi-generational housing is a standard feature of Chinese urban
life: overall, just over half of those already retired are living in multi-generational households
with their children. Interestingly, however, younger retirees are more likely to live with their
children than older retirees. In recent surveys, 69% of retirees aged 50-54 admitted to living
with their children, a percentage that gradually drops down to approximately 25% of
retirees aged 70 and above. This could be due to the fact that older retirees are more likely
to require a higher level of care than children can provide, or to the fact that older retirees
have older, more established children who are more able to afford to buy properties for
their ageing parents to live in.
Multi-generational homes are common for more than one reason. Younger, working adults
also often live with their parents until they are able to buy a home of their own -meaning
they can still be living with their parents well into their twenties (42% live with their parents)
or thirties (29% live with their parents). However, many in their forties, having bought a
home, will again be living with their parents, who move to live with them after retirement.
Approximately one third of working-age urban adults have their parents living with them.
While multi-generational homes may be a Confucian tradition, they can nevertheless raise a
number of issues. Some are natural and household-specific, such as conflicts over the
division of household chores and child-minding in a newly recomposed family. More
interesting for the purposes of this study, however, are those difficulties that are
systematically related to China’s ageing population. The combination of increasing longevity,
urbanisation, and the decades-long one child policy means that traditional Confucian multigenerational homes are more prone to overcrowding than ever before. Parents and
grandparents are more likely to survive into old age, and working-age children no longer
have siblings with whom to share the burden of housing elderly parents. This difficulty is
encapsulated by the 4-2-1 family structure. Further, as longevity increases, the elderly are
increasingly likely to require higher levels of care than their children can provide in the
home. The twin problems of overcrowding and the need for round-the-clock care from
trained healthcare professionals point to the future unsuitability of the Confucian model of
intergenerational housing for elder care.
2.2.3) The Retirement Housing Reality
Talk of downsizing, upsizing or even returning to ancestral villages is all very well but the
reality is that, among those already retired, two thirds still live in the same home as they did
before retirement. Only 5% of retirees have actually downsized their property, while over
20% claim to have upsized. It is not possible to ascertain whether some of these moves can
be explained by retirees moving in with their children or grandchildren, or whether they
represent urban retirees returning to the countryside. Interestingly, more than three
quarters of current retirees have chosen to stay in the same neighbourhood they lived in
while working. This suggests that return-to-the-farm type arrangements may be less
common than perhaps anticipated by the Chinese government.
_____________________
ISL19 China’s Changing Demographics
Paul French
11 of 27
TABLE 6: POST RETIREMENT PROPERTY SITUATION CHANGES OF RETIRED URBAN CHINESE,
2012 (%)
Same house/apartment I lived in before
67
A new larger house/apartment
21
A new smaller house/apartment
5
In a care/senior citizens home
1
Other
6
Source: China Health and Retirement Longitudinal Study, 2013
2.3) Healthcare for China’s Elderly
The dismantling of state-run industrial companies over the last two decades has ended the
cradle-to-grave benefits system known as the ‘iron rice bowl’. In its place came a marketbased medical system many Chinese could not afford. The Chinese government has tried to
improve the social security net in China, and key to that has been reform of the healthcare
system. Part of the drive to create a fairer healthcare system has been to address the cost of
healthcare born by individuals, and this is being done through the introduction of healthcare
insurance. Under such insurance, the cost of prescription drugs should be partly met by a
government subsidy, partly by insurance cover (either paid by social taxes deducted from
wages or by post-retirement government/employer retiree healthcare coverage) and
minimally out of consumers’ own pockets.
Yet, according to the Ministry of Health, some 36% of rural and 48% of urban people failed
to seek medical treatment for ailments in 2008. This indicates that, even with such high
rates of coverage, in real terms provision is still insufficient to cover costs of medical
treatment for many Chinese people. Though basic coverage may now include 90% of the
population, according to the China National Health Services Survey for 2011, it is still the
case that Chinese people will face increased healthcare costs as they get older due to an
increasing incidence of health problems associated with old age. Under the current
healthcare insurance benefits system they will increasingly see out-of-pocket spending from
their pensions, needing to draw on their life savings or sell their homes in order to pay for
expensive treatments. Retirees who cannot afford the high cost of healthcare will be an
ongoing financial burden upon their families.
Research among retired people aged 50 and over shows that their primary concerns are in
relation to health and mobility. However, one third of respondents (the highest response
rate) say they are concerned that their pension will be too low for them to live on. For this
group, concerned about their pension levels, the possibility of becoming ill with an ailment
that would cost a lot in terms of care and treatment also means the possibility of becoming a
burden on their family (28%). This explains why financial products such as long-term life
insurance, private health insurance, private critical illness insurance and private savings
plans are heavily subscribed to (see Financial Planning for Retirement section).
_____________________
ISL19 China’s Changing Demographics
Paul French
12 of 27
The general lack of appropriate state healthcare, despite reforms, means that many Chinese
adults have to save heavily and plan ahead financially in order to create their own safety net
for possible illness as they get older. This contributes to the large amounts of consumer cash
locked up in savings accounts and out of the consumer economy. Chinese savers already
suffer from “financial repression” – low or non-existent interest rates, combined with the
limited range of personal financial products available- meaning that savings are a neverending process for most Chinese and consequently an adequate retirement fund is difficult
to achieve.
The Confucian ethic of filial piety, expressed in caring for elderly parents, remains a strong
one in Chinese culture. Despite the “4-2-1 phenomenon” (each single child is responsible for
two parents and four grandparents) it seems the government will largely seek to rely on the
tradition of children caring for the elderly remaining strong. The Ministry of Health has
stated that, as far as care for the elderly is concerned, they envisage 90% of care being
home-based (i.e. within the family largely), 7% being community-based and just 3% being
provided by nursing homes or hospitals. The basic concept of “9-7-3” has now been
enshrined and has not changed for several years. These percentages are thought to be
based on the experience of Singapore, obviously a much smaller, wealthier country that has
a longer history of healthcare reform and an active immigration policy to replace lost
younger workers. Even with these significant advantages Singapore has struggled to provide
this amount of home-based care, indicating that the task could be impossible for China.
The ongoing importance of filial piety means that it is often children who pay for their aging
parents’ healthcare and medication. The responses below are from people with retirement
age parents in urban China:
TABLE 7: WHO PAYS FOR WHAT IN CHINESE HEALTHCARE? (%)
Prescriptions
Hospital
Fees
Children/offspring pay proportion of costs
45
45
Elderly parents pay proportion of costs themselves
37
35
Third party pays (insurer, state insurance etc) proportion of costs
44
45
Source: Sampling Survey of the Status of the Elderly in Urban and Rural China
2.3.1) The Breakdown of China’s Confucian Compact
Although filial piety remains valued in China, the breakup of traditional extended-family
networks due to work-related migration means the Confucian welfare support system that
used to maintain the elderly has disappeared. China’s economic development now means
that many people live far away from their parents, and this duty becomes increasingly
difficult to perform. In addition, the effects of the one-child policy means that many only
children are left with the burden of caring for elderly parents by themselves, and this creates
_____________________
ISL19 China’s Changing Demographics
Paul French
13 of 27
a situation where traditions like filial piety are becoming increasingly untenable.
The breakdown of the traditional system for aged care creates a void to be filled by statefunded welfare support. More elderly people in China will have to find places in retirement
homes, yet not enough retirement homes exist for the numbers of retirees, with places
currently oversubscribed and costs high. This will perhaps be one of the most significant
future opportunities in the services sector in China in the coming years. Besides the
additional expenditure required to provide such government services, both nationally and
regionally there is the mounting strain on the resources of China’s huge bureaucracy. In
order to cope with increasing age-related health problems, China’s government system will
need to balance changes in policy and administration with local government priorities, often
at odds with those of the central government. This is a potential source of friction in China’s
political sphere.
2.3.2) China’s Healthcare System
The ruling Communist Party knows that healthcare is in crisis and has plans to overhaul the
system. The benefits of successfully managing this overhaul will be multiple: the goal of
what the Hu/Wen leadership called a ‘harmonious society’ will be closer to achievement, the
CCP’s “performance legitimacy” gained by delivering improvements in the standard of living
will be solidified and perhaps they can convince Chinese families to stop saving at such high
rates and start consuming more with all the knock-on benefits to the economy that would
entail.
The problems in the current system are myriad and include the wide discrepancy in service
and availability levels between China’s rural and urban areas. However, the biggest changes
in recent years have occurred in cities, where the fear is no longer that treatment won’t be
available – it usually is - but that it will come at a high price. The small social security net
provided (the Basic Medical Insurance (BMI) programme, available in all Chinese cities since
1998) rarely extends to anything beyond minor ailments. This has led to notorious press
reports and TV investigations into massive bills run up by sick people in hospital – bills that,
at best, have sent their families digging deep into their savings and, at worst, bankrupted
them completely. Ill health is Chinese society’s greatest fear and accounts for the saturation
marketing and sales of supposedly preventative medicines, including everything from
vitamins, to tonics, to traditional medicines. Keeping healthy in China is synonymous with
keeping wealthy.
Despite these fears, the system has improved in some areas, for instance, government
funding for healthcare increased significantly between 2002 and 2004, largely to help
improve the system of countering epidemics in the wake of the SARS crisis. Between 2002
and2005, the average time it took for a report of a new case of one of China’s 37 major
communicable diseases from the county level to the central government fell from 29 days to
just one day. Average Chinese life expectancy remains higher than in Brazil, India or Russia,
while detection rates for communicable diseases such as tuberculosis (TB) are far higher in
China than other developing countries.
Indeed, China’s success in tackling TB demonstrates the success of past systemic planning, as
well as the need for a radical overhaul of the present system. As China’s leading infectious
disease, TB was a major cause of death, but between 2002 and 2005 the detection rate for
TB shot up from 30 per cent to 80 per cent. Thanks to government guidelines to healthcare
workers and a massive increase in anti-TB programme funding, the detection rate is now in
_____________________
ISL19 China’s Changing Demographics
Paul French
14 of 27
excess of 80 per cent and the treatment rate approximately 95 per cent. The fight against TB
showed that the Chinese healthcare system could gear up and tackle a major communicable
disease, but, arguably, that is what the healthcare system has been able to do since 1949.
The same health care system has used mass campaigns to great effect in identifying and
tackling communicable diseases such as malaria schistosomiasis (snail fever) and syphilis, as
well as outbreaks of infectious disease epidemics. Despite this, to date, the system has not
shown itself similarly capable of tackling non-communicable and lifestyle diseases as
successfully. As the China Economic Quarterly noted in a recent survey of China’s healthcare
landscape:
Citizens do not receive, on average, objectively worse health care than they did in
the past. It is more accurate to say that the health care system has failed to keep up
with rapid changes in the nature of demand.
It is also worth noting that many of these successfully-tackled diseases were concentrated in
China’s rural areas or poorer urban communities. As diseases such as TB and malaria
become ever rarer in China, the growing areas of healthcare demand will be noncommunicable and lifestyle diseases affecting a more affluent, urbanized society – heart
disease, cancer and diabetes, for instance. Furthermore, as these patients enter the system
they will demand far higher levels of care and treatment than previous heavy users of the
system, while their ailments will increasingly be chronic. These diseases of long duration and
slower progression will invariably cost more to treat in terms of medicines, healthcare
worker time and facilities.
2.3.3) Provision of Geriatric Healthcare
China arguably faces a crisis in geriatric healthcare. There is a lack of dedicated geriatric
departments across China. The few specialist departments of geriatrics that do exist, such as
those at the Beijing and Chengdu hospitals and the Department of Psychogeriatrics at
Shanghai Mental Health Centre, were all founded within the past 10 to 15 years as some
officials of hospitals or universities became aware of the needs of an aging population.
However, there are still only a handful of formal geriatric fellowships and national board
certifications in geriatrics compared to more-established specialties such as cardiology and
paediatrics. Typically, directors and other doctors within the few existing dedicated geriatric
departments are specialists in other non-geriatric areas (e.g. cardiology, pulmonology and
psychiatry). This problem is currently beginning to be addressed, and geriatrics departments
are reportedly training future specialist geriatricicians, but encouraging young residents to
specialise in geriatrics is proving difficult as opportunities for additional income are seen as
minimal compared to other disciplines and resources for equipment, training and support
are limited.
The most established and best, in terms of reputation, geriatric departments have
developed out of the growing need to care for retired government officials, senior People’s
Liberation Army (PLA) personnel and elite professionals (e.g., university professors) who
have private and privileged access to hospitals and clinics reserved for them only. Extending
the level of privileged geriatric care provided to this elite group of the Party-State in China
across the wider healthcare system would be difficult. Clearly as China ages there will be an
urgent need for more education in the areas of aging and care of frail older people for both
physicians and nurses, as well as other healthcare professionals including dieticians,
physiotherapists, mental health workers etc. Some of the challenges will include relatively
basic implementation of education and training to teach standard geriatric practices (e.g.,
_____________________
ISL19 China’s Changing Demographics
Paul French
15 of 27
learning about falls prevention, polypharmacy, etc.), not just about age-related diseases
common in older people (such as ischemic heart disease or cancer). There will also need to
be greater development of certifying organizations to ensure that minimum qualifications
for future geriatricians are met; and moves towards the eventual transition from nongeriatricians to geriatricians as directors of geriatric departments.
2.4) Provision of Long Term Care for the Elderly – the “9-7-3” Concept
2.4.1) Home-Based care – the baomu system
As noted previously, the Ministry of Health has stated that, as far as care for the elderly is
concerned, they envisage 90% of care being home-based, 7% being community-based and
just 3% being provided by nursing homes or hospitals. Given the size of China’s aging
population, this is clearly ambitious despite the cultural background of Confucianism.
Without continued growth in the level of "informal" support, the burden of caring for older
people on the state system will increase. However, the informal system will still require
many working-age people to become primary carers for their aged parents. It will also
become expensive for families forced to hire outside home help due to the demographic fall
in available labour among the younger age groups able to take on this work. This is without
taking into account the ability of untrained “carers” to adequately cope and provide a
decent quality of life for the elderly.
One aspect of home support that is likely to grow concerns the practice of hiring live-in
housemaids (baomu) to help. While this kind of home care is currently be considered a
luxury available only to a small percentage of the Chinese population, it is likely to become a
more important element of Chinese eldercare as the effects of the 4:2:1 phenomenon
persist. While the expansion of the baomu system may be part of China’s ongoing elderly
care system, in order for the system to safely meet growing demand, training and
certification measures will need to be introduced and enforced. Another challenge in
preserving this part of the healthcare system is how to assist the older relatives of the
baomu who, because of her employment, is less available to her own relatives. It is also not
clear whether the supply of service workers, such as the baomu, will be able to keep up with
the demand for care of older people as the population pyramid changes between now and
2050.
In this sense the government’s debate and China’s demographics and shrinking labour force
have not meshed well. The government has talked of old age care as often being provided in
cities by women from the countryside – a migrant worker army of live-in maids, similar to
the preponderance of domestic workers – “ayihs” – used for home chores and childcare.
However, the changing demographics mean there are fewer women available to move from
the countryside to the city and that many of them have no interest, or crucially training, in
elderly care. In addition, the baomu system as it currently stands makes no distinction
between domestic assistance (of the sort provided by a maid) and elderly care (of the sort
provided by a nurse). The enduring perception in China that elderly care involves little more
than helping with the washing, cleaning and cooking shows the gap in the understanding of
what the real long term needs of the elderly are now, and are increasingly going to be, in
China. Possible detriments to the elderly’s quality of life due to lack of professional care or
being based in inadequate living facilities (overcrowded, unable to use lifts or stairs to exit
buildings, etc.) is an area that has not been addressed in government debate on the elderly,
despite the emphasis continually placed on at-home familial support systems.
_____________________
ISL19 China’s Changing Demographics
Paul French
16 of 27
2.4.2) Retirement Homes – Scarce but now Acceptable to More
Retirement homes are a relatively new phenomenon in China. While many still insist that
care can take place within the home, the reality is that additional care homes, retiree
villages, old people’s homes, etc. will be required. As people live longer, rates of age-related
symptoms such as dementia and incontinence rise. All these ailments and conditions make
remaining in the home (typically small, shared and in a high rise apartment block)
additionally problematic and increasingly impossible. In the past, many people believed that
putting their aged parents into a home would lead to criticism. This perception has,
however, largely changed and retirement homes have increasingly been interpreted as an
acceptable way of fulfilling the filial obligation of providing good quality care for parents.
Hence, the need to address the retirement home issue.
The vast majority of retirement homes now appearing across China are privately run and
expensive. The number of government run homes (even including those exclusively for
senior Party cadres or senior PLA officers) is minimal with extremely long waiting lists.
According to a report in the Beijing Evening News more than 10,000 applicants are waiting
for the 1,100 beds on offer in the capital's state-run No. 1 Social Welfare Home, where only
approximately a dozen places become available each year. This public care home charges
between 83 euros (RMB685) and 420 euros (RMB3,468) a month for a place, making it
extremely popular. Still, homes like No.1 Social Welfare Home are rare and most people
wanting to use care homes for the elderly will need to pay considerably more and enter the
private system. Private care costs can be significantly higher. According to the Beijing
Municipal Civil Affairs Bureau, the organisation technically responsible for the oversight of
private care homes in the capital, they can easily run to 2,500 euros (RMB20,642) per
month; far beyond the financial capacity of the vast majority of Beijing residents.
As a measure of state provision vs private, Beijing, the best-prepared city for retirement care
homes in China by far, has 215 state-run public nursing homes and 186 private homes –
approximately three beds for every 100 senior citizens, compared with over eight in the UK
(according to the Care Quality Commission’s ‘State of Health Care and Adult Social Care in
England 2012/2013’ report). Official records from NBS show that the number of available
beds in nursing homes now open in China can only cater for 1.8% of the country’s elderly
population, whereas the standard in many Western countries is between 5% and 7%. Li
Jianguo, vice-chairman and general-secretary of the Standing Committee of the National
People's Congress acknowledged this, telling the Congress, "We'll need to increase the
number by 3.4 million beds to accommodate 3% over the next five years." At present it is
also the case that retirement homes are not distributed evenly across the country but tend
to be near big cities and largely in the southern province of Guangdong. Here Hong Kong
private operators have been able to spread their operations easily across the border into
mainland China but have concentrated on the neighbouring province of Guangdong rather
than nationally. Part of the reason for this, and a further element clouding the statistics on
the provision of elderly care in mainland China, is that many of the places in Guangdong
nursing homes are taken by Hong Kong residents seeking lower cost care. Though the actual
number of available elderly nursing home beds in Guangdong occupied by Hong Kong
citizens is not officially recorded, a report in the mainland Chinese newspaper The Global
Times estimated it at a third of all available beds.
_____________________
ISL19 China’s Changing Demographics
Paul French
17 of 27
TABLE 8: PLANNING FOR PARENTS’ POST-RETIREMENT LIFE, 2012 – WHAT CHILDREN OF
ELDERLY PARENTS ARE PLANNING (%)
Making financial plans for a retirement home for parents
29
Planning to buy bigger home so parents can move in too
22
Like idea of retirement home but unsure how to afford it
21
Not thought about this subject yet
16
Parents will live with children to save money
10
Cannot afford either options
2
Source: Sampling Survey of the Status of the Elderly in Urban and Rural China
2.5) Pensions
For generations of farmers, sons have been their pensions. Family-based welfare lives on in
rural China, encouraged by the state, yet tradition is no guarantee for the future. Historically
strict birth-control policies, the changing nature of eldercare, and changing social mores
mean that parents are less and less able to depend on their offspring for support in their old
age. Similarly, in the cities, the dismantling of the “iron rice bowl” system post-1978 meant
that urban Chinese could no longer rely on their employer to provide cradle-to-grave care.
Due to demographic change China will now have a significant growth of pensioners long
before it has fully developed economically and created the means of looking after them. The
intergenerational care model is not adapted to China’s demographic realities, and the
government has attempted to engineer reforms to fill these welfare gaps.
China set up a national pensions fund in 2000, a welfare support system that is perhaps the
most enduring legacy of the Hu-Wen administration. Just a decade ago, only 55 million rural
residents and 147 million urban employees had formal pensions; in 2013 approximately 800
million rural and urban residents have old-age insurance of one kind or another. However,
only about 365 million people (overwhelmingly urban) currently have a formal guaranteed
pension (as opposed to a more basic “savings pot” that can be eroded by inflation). Rural
pensions in particular are rarely generous. The typical savings scheme requires a
contribution of RMB 100 (12 euros) a year during the working life into the rural pension
scheme which will mean the saver will qualify for a monthly payment of RMB 55 (6.6 euros).
Other pension systems and savings rates are available and certain groups, notably retired
soldiers and Party cadres, get top-up amounts, but this is the average rural state pension
payment and return deal. China’s pension system is currently under massive reform, but the
social security net still has large gaps in it, and these continue to leave significant concerns
for the elderly and those planning their retirement.
It is estimated that even the current system of basic, cheap pensions, with non-universal
coverage has created an unfunded national pension liability roughly 150% of China’s GDP.
Almost half the (separate) pension funds run by China’s 32 provinces are reportedly in the
red (according to the National Bureau of Statistics), and many of China’s social protests can
be traced back to unpaid pensions.
_____________________
ISL19 China’s Changing Demographics
Paul French
18 of 27
China’s low (by international standards) mandatory retirement ages may be placing
unnecessary strain on the pensions system. Currently the retirement age to receive a
pension is 60 for men and 55 for women. Raising the retirement ages to remove this strain
could worsen China’s problem of youth unemployment by preventing older people vacating
suitable positions. In 2012, 4.13 million young Chinese graduated from universities, and fully
30 per cent of them remain unemployed (some sources believe the rate is higher and
covered up by many simply not registering for work while unemployed). Unemployment is
also high among youth who are not university graduates. Prolonging employment for older
workers would make this predicament worse. Beijing has also considered lowering
retirement limits to create work for younger people but the concomitant strain on the
pensions system is a concern.
Table 9: CHINA’S URBAN AND RURAL POPULATION AGED 60+, MAIN SOURCE OF SUPPORT,
2012 (%)
Cities
Towns
Rural
Total
Own labour income
6.9
31.7
51.3
36.7
Family
20.5
41.0
40.5
35.7
Pension
68.4
21.4
4.1
23.1
Welfare
2.1
3.1
2.3
2.4
Other
2.1
2.9
1.8
2.1
Source: National Bureau of Statics (NBS)
It seems that, while there have been a lot of media reports about China’s pensions shortfall,
many Chinese are still not providing adequately for their old age. According to research from
the market research firm Mintel, half of adults aged 20-49 are planning to retire at the state
pension age. However, almost one tenth of respondents had not really thought about when
they would retire and nearly one fifth felt they would still be working past the state
retirement age. Mintel have also noted that, “There is much greater optimism among
younger respondents about being able to retire before the state retirement age, while older
respondents seem to be more realistic in acknowledging that they will only be able to retire
at or after the state pension age. Slightly more men than women of all age groups indicate
that they expect to still be working after the state retirement age, suggesting that women
feel less pressure than men to continue working to provide a salary.”
2.5.1 Pension Coverage: Far From Universal
The latest available government data shows that about 800 million people are now covered
under some kind of government pension scheme. According to the Ministry of Human
Resources and Social Security, by the end of 2011 some 326 million rural residents had been
enrolled in a public pension. However, this still leaves 600 million, largely rural, people
_____________________
ISL19 China’s Changing Demographics
Paul French
19 of 27
without coverage. Data from China’s National Bureau of Statistics shows that 68% of the
urban Chinese population is now contributing to basic pension insurance. It is hoped by the
central government that the uptake of pension provision will mean that greater numbers of
the elderly will become more financially independent and have more of a social safety net
than before.
2.6 Attitudes of the Elderly and Self-Protection Strategies
According to NBS surveys of over 50s, the two major concerns of China’s elderly, and of
those that must support them in the future relate to healthcare provision, and access to
adequate and reliable pensions. Fully one third of respondents report concerns that their
pension will be too low for them to live on. Additionally, just under a third of over 50s worry
about the possibility of illness because of the burden that the cost of care and treatment
would place on their family. The source of retired peoples’ concerns about health can thus
be seen to be linked to their worries about financial self-sufficiency, making financial
concerns the single largest worry of China’s elderly.
TABLE 10: MAJOR CONCERNS OF CHINA’S ELDERLY, 2012 – ASKING THE RETIRED WHAT
WORRIES THEM? (%)
Illness
65
Healthcare costs
36
Ability to look after self
35
Reduced mobility
35
Pension too low to live on
33
Becoming a burden on family
26
Spend all savings
12
Inadequate living accommodation
10
Losing dignity in society
10
Source: National Bureau of Statics (NBS)
NB: Respondents were asked to include all concerns that they had
2.6.1) Financial Planning Strategies among China’s Pre- and Post-50 Retirees
The reality of the lack of an effective social security net for Chinese people combined with
repeated proclamations by the central government that people/families will largely have to
look after themselves in old age has clearly shaped the way they act as consumers and
financial planners. Despite some reforms to the social security system, progress is slow, and
_____________________
ISL19 China’s Changing Demographics
Paul French
20 of 27
most Chinese people understand that they need to rely on themselves, and more specifically
on their savings, to provide for their future financial needs. Repeated surveys indicate that
people are aware of the need to save more for retirement, but actual rates of saving are not
necessarily commensurate. For instance, according to a survey by the QQ company in China
over 90% of 25-49 year olds say that they plan to start saving money or investing in long
term life insurance, private health insurance, or critical illness cover, yet the rates of actual
investment and participation in these insurance schemes are significantly lower at 48%, 78%
and 58% respectively. Additionally though rates of participation in private health insurance
may appear high these are rarely comprehensive and often simply savings accounts that are
termed “private medicine’. These are designed to provide money for one-off treatments or
payments rather than fund ongoing care of the type that will more often be required in the
future as Chinese people continue to have more chronic, age-related conditions.
Among the over 50s, the largest participation is simply in savings accounts (over 75%) rather
than specific financial products, such as insurance policies or private protection plans. This
reflects the nascent state of the financial services industry in China and the relative lack of
effective post-retirement healthcare and pension savings financial products and savings
vehicles available to Chinese investors. Extremely low interest rates (often negative at times)
have meant that intense long-term saving is required for most people to reach their pension
and/or healthcare-welfare goals. Thus, while general savings rates remain high in China,
targeted saving is still less active due to a lack of suitable financial products. Additionally,
savings for specifics – i.e. old age – is often starting too late given, again, the poor interest
rates and the lack of products. Investment levels are generally higher among the older
consumers who are closer to reaching retirement age and more acutely aware that they
need some kind of provision in place, and who are more likely to have already made
investments to care for retired parents. However, starting late means reaching the goals
required is problematic.
Additionally, the popularity and reputation of life insurance can be a problem in attempting
to persuade consumers to choose other, more targeted financial products. Matthew Crabbe
of Access Asia research in Shanghai comments on insurance: “Long-term life insurance
shows a lot less significance as a financial tool among both genders than critical illness cover.
Covering the cost of significant illnesses is a big worry for Chinese people, given the lack of
public healthcare cover, especially as limits set on pay-outs on treatment are often woefully
below the actual costs.” He also sees a gender-aspect to the issue of insurance – “The sharp
uptick in investment in long-term life insurance among women especially in their forties is
probably due to the expectation that they will outlive their husbands, and be looking to
provide extra support for themselves” Crabbe adds. With an insecure and often chaotic
healthcare system still the norm for most people, ensuring protection while still alive and
facing the possibility of illness is deemed more important than post-life insurance at present.
2.7) Conclusions and Policy Recommendations
China’s central and local governments as well as the Ministry of Health and other relevant
bodies have shown themselves keen to learn from the experiences of other countries when
dealing with the prospect and reality of aging societies. This has involved a number of visits
by politicians and healthcare professionals/policy makers to various European countries to
observe the ongoing developments in geriatric medicine as well as long term care for the
elderly. Similarly the government continues to seek advice on improving and extending its
pension provision to the entire population as well as developing a range of financial services
_____________________
ISL19 China’s Changing Demographics
Paul French
21 of 27
products to help the non-retired prepare for their own retirement and care for their parents
and dependents post-retirement. In general, as outlined above, China remains wedded to
the 9-7-3 policy which places the emphasis on care in the home undertaken by family
members and domestic workers. However, opportunities for both European care providers
and healthcare companies exist in the emerging market for private care homes and geriatric
services.
2.7.1) The Rise of Demand for Geriatric Care May Force Change in China’s Healthcare
System
The current system that requires high out-of-pocket payments for healthcare is impacting a
range of issues in China during its demographic shift. The traditionally high savings rate, low
urban levels of disposable income, the threatened ability of families to look after their
elderly members and the concerns of the elderly about their ability to look after themselves
are all related to the high cost of healthcare. A hospital stay in China is among the most
expensive in the world when compared to average earnings in China. What is required, and
what the central government is grappling with, is a reliable health insurance system that
both provides cover from cradle to grave – with old age as a growing component of that
cover.
Herein lies the dilemma for China’s healthcare planners. China’s economy and the success of
its urban middle class, as well as those not quite yet raised out of poverty, is predicated on
investment and job creation. To achieve this, the country needs to remain competitive and
maintain the so-called ‘China Price’. The options for healthcare reform fall broadly into two
categories and both, if mishandled, could cause far wider systemic problems in the Chinese
economy:
1) A healthcare system based on insurance paid by individuals and company schemes – i.e.,
a similar system to that operating in the US. Putting aside the problem of what to do about
people who can’t or won’t pay for medical insurance and then require treatment, it is clear
that without significant government infusions of cash, the insurance premiums for such a
system would be high and extremely burdensome on people. The inevitable result would be
a demand for higher wages to meet these additional costs. That demand, if not met, would
leave impossible numbers of people outside the system, but if met, would mean rising
wages and the ‘blowing’ of the China Price, leading to a drop in investment and job creation.
Additionally, requiring people to pay high insurance premiums for a healthcare system
would, at best, just divert money currently being saved in bank accounts into premium
payments and do nothing to achieve the government’s avowed intention of freeing up
personal savings to drive up consumption. Requiring companies to contribute to additional
healthcare insurance on their employees’ behalf will likewise increase companies’ operating
costs and decrease China’s international competitiveness.
2) A socialised, or comprehensive service, healthcare system – i.e., one paid primarily
through taxation, similar to the UK’s National Health Service (NHS), other European models
and those operating in Canada, etc. A similar problem would occur here in that requiring
people to pay higher levels of personal taxation would again lead to wage demands
adversely affecting the China Price. Additionally, a core problem would be whether or not
people felt they were indeed getting a fully socialized treatment-on-demand system, and if
they were not, would probably still save for private health treatment at current rates,
thereby not delivering the much desired consumption boom of released savings. Installing,
funding and staffing a fully functioning national health service financed largely from taxation
_____________________
ISL19 China’s Changing Demographics
Paul French
22 of 27
would take time and may not be immediately seen as an improvement nationally. It would
mean that an effective two-tier system would operate with people continuing to demand
pay for treatment alongside socialised coverage. It is also worth noting that most Chinese
hospitals are busy places at the moment, and a socialized system that encourages people to
seek treatment free of financial fears could soon overburden the existing healthcare
infrastructure.
Ultimately, both broad forms of financing could have disastrous knock-on effects within the
wider economy. There are also many problems that currently exist with the Basic Medical
Insurance (BMI) system, especially regarding those who lack coverage, such as workers in
short-term or irregular employment, many migrants, the nonworking members of families,
and workers at firms that don’t enrol employees, claiming they can’t afford it. A more fully
privatized insurance system would inevitably involve higher costs than the current BMI
(which is a system that, by and large, requires the patient to pay and then seek
reimbursement later) and presumably more companies would avoid the scheme while the
low-paid, marginal and migrant workers would potentially find themselves even further
away from healthcare than is currently the case. For those covered by BMI but unable to pay
the upfront charge before being reimbursed, the system is next to worthless anyway; hence,
once again, China’s high savings rate is a necessary coping mechanism to get around this
flaw in the system.
2.7.2) Work for the Old – Second Careers in Legal Loophole
The Beijing government is actively investigating post-retirement careers and incomes as a
potential solution to the shortfall in savings and healthcare coverage. While second careers
are common in the West and are often embraced as a chance to satisfy long-held ambitions,
for huge numbers of Chinese city dwellers eking out another decade or two of paid work can
be crucial to funding their old age. According to a study published in the October issue of the
Journal of Occupational Health Psychology (published by the American Psychological
Association), and widely reported and commented upon in China’s media, older people who
hold temporary or part-time jobs after retirement enjoy better physical and mental health
than those who stop working entirely. Additionally they retain the ability to continue saving
through their wages.
66% of Chinese responding to a survey by Aetkins, an insurance company, wished to work
post-retirement. However, while some companies have actively sought to employ older
workers, including companies such as McDonald’s and Tesco, Chinese law is complicated
when it comes to providing them with benefits and labour law protections beyond the
official retirement age. This is mitigating many older people’s desire for a second postretirement career. When workers in China reach the statutory retirement age they are no
longer technically workers. Under Chinese law, they are deemed not to have an
“employment relationship” (劳动关系) and are instead categorized as labour service
providers (劳务关系), similar to domestic helpers etc. The consequence of this is they are no
longer automatically entitled to the employee benefits and protections according to China’s
labour laws, including overtime and severance pay but also, crucially, pension and medical
insurance benefits. This situation technically persists today, making it undesirable for many
older people to continue working and for employers to hire them. There have been
suggestions that older workers should be considered as employees and not as labour service
providers but this is not yet enshrined in the labour law.
_____________________
ISL19 China’s Changing Demographics
Paul French
23 of 27
2.7.3) Promoting Comprehensive Pension Reform
According to a report by Qinghua University released in August 2013 and looking forward at
China’s pension system in 2035 (by which time there will be one dependent person for every
two to three Chinese workers), “China is already 15 years behind in terms of restructuring its
pensions.” One of the biggest challenges for the Xi Jinping leadership will be designing a
welfare system that is both comprehensive and equitable. The present system is
fragmented, inflexible, hard to administer and tough to navigate. In addition, the current
system’s inconsistent approach to welfare entitlements, especially the generous benefits
given to government employees, breeds resentment and inequality. The urban pension
system alone has different systems for civil servants, workers in public services, urban
employees and urban residents. Effectively the pension for public servants is two or three
times higher than for other urban residents, according to Yang Lixiong, deputy director of
the China Social Security Research Center at Beijing’s Renmin University. The Social
Insurance Law, passed in 2010, took some initial steps towards ironing out the
contradictions within the system. But this was more of a statement of principles than a clear
set of rules to create a fairer system.
China is poised to reform its pension system once again – probably announcing the reforms
by the end of 2014 While the final details of this new phase of reform are not concretely
known, it is expected to include merging separate state and private sector employee
pension schemes, increasing coverage and broadening the range of assets pension funds are
invested in to boost returns and improve efficiency. All of these would be welcome moves.
Merging civil servant and private sector pension schemes, and taking the latter out of local
government control, will be difficult as it requires overcoming opposition from civil servants.
However, if it can be achieved, centralising pensions into national funds would improve the
efficiency of resource allocation and smooth the regional disparities that currently result in
some provinces having pension surpluses whilst others have huge shortfalls. It should also
help improve administration of funds, which according to the Chinese Academy of Social
Sciences, has been patchy due to variations in the level of experience of officials from
different provinces.
2.7.4) Help with Cleaning-up the Welfare System
China acknowledges that its attempts to improve its social welfare system have been
hampered by graft and corruption. Scandals around the misuse or theft of pension funds
have become serious political issues for Beijing. This problem goes back to at least 2006 and
the well known Shanghai pension fund scandal which resulted in the dismissal of several
senior Chinese Communist Party officials. The case involved allegations of the misuse and
illegal investment of about one third of Shanghai's RMB 10 billion social security fund in
various real estate and road projects. In 2012 an investigation of 18 social security funds by
China’s own National Audit Office found that RMB 3.6 billion (431 million euros) of
payments had been siphoned off for other purposes — ranging from car purchases to
unrelated government investments — or to unqualified individuals. The government’s
current anti-corruption drive may net some of the worst abuses, but it will be hard to
contain the creativity of venal officials. An effective social-safety net will depend on better
monitoring of local officials and more input from ordinary people, according to Chak Kwan
Chan of Nottingham Trent University. Whether leaders are willing to increase public
oversight, and whether local cadres will comply, remains to be seen.
_____________________
ISL19 China’s Changing Demographics
Paul French
24 of 27
2.7.5) The Western Care Home Experience – Lessons for China
As China ages so the number requiring professional care homes will also increase. China
knows this is coming - according to the China National Committee on Aging (CNCA), nearly
50% of the oldest seniors (80-plus years) are unable to take care of themselves currently and
this age group is set to grow in the coming decades. As previously noted, Li Jianguo, the vicechairman and general-secretary of the Standing Committee of the National People's
Congress, has said, "We'll need to increase the number by 3.4 million beds to accommodate
3% [of China’s elderly] over the next five years." This is already a large task, but 3.4 million
beds may not be enough. Wang Hui, director of the Department of Social Welfare and
Charity Promotion under the Ministry of Civil Affairs, told participants at the Sino-Japanese
Symposium on Aging in September 2013 that China needs about 10 million nursing home
beds in total.
The 2012 Sampling Survey of the Status of the Elderly in Urban and Rural China conducted
by CNCA indicates that 11.3% of urban senior citizens and 12.5% of rural senior citizens are
open to the idea of institution-based care. To date, nationwide elderly care beds total about
four million. However, many of these facilities have been criticized for inefficient
management and poor services by, for example, the National Development and Reform
Commission's Social Development Institute. The institute's report on the state of nursing
care in China exposed a lack of competition among service providers and a need for
performance-based salary structures covering employees at state-run nursing homes.
Without these and other changes, the report said, nursing care would continue suffering
from slipshod management, overstaffing and rigid operations.
The opportunities for private operators exist at a variety of levels:





High-end care homes mainly target healthy seniors, offer group living, outsource
most services, and usually only offer basic medical care.
Comprehensive senior communities often target seniors who wish to live
independently, providing them with residential apartments and creating an inclusive
community and a comprehensive set of facilities and infrastructure including banks,
supermarkets, and post offices.
Affiliated senior apartments provide an elderly friendly layout and design and have
been recently introduced to the market through developers who target independent
seniors that would like to live close to their children.
Destination resort senior sanatoriums offer a model in which seniors can choose a
destination with very limited elements of senior care.
High-end nursing homes target seniors that need assisted living or nursing care and
often contain internal hospitals to provide medical services to residents.
To date many private enterprises have not been willing to invest without evidence of profit
potential based on market demand. Put bluntly, private healthcare companies need to see
that there is money in elderly care before committing to this specialisation, as opposed to
more proven profit generators, such as private cosmetic surgery provision. Given the fact
that many senior citizens have limited financial resources the private sector has so far shown
little interest. To attract private capital attached to the care home industry Beijing is
exploring asset securitization and exit mechanisms for funds to hopefully encourage such
investments. The aim is to encourage marketization alongside government support and
subsidy. For instance, the State Council has said that nursing homes must be included
_____________________
ISL19 China’s Changing Demographics
Paul French
25 of 27
whenever a new urban area is built. Existing urban and residential areas are also required to
add facilities through various means. The idea is that gradually these services could be
absorbed into the facilities run by enterprises though built initially by the government. The
evolution of the hotel industry in China could provide a useful model for the government as
it looks to promote growth of the aged care sector. Over the past 30 years, the industry has
shifted from one based on state-run guesthouses to a vibrant sector with a wide variety of
consumer-oriented hotels catering to every taste and budget. The government could follow
this model to encourage aged-care industry growth by lowering utility bills and other costs
for new care home facilities.
2.7.6) The experience of Training and Supporting Carers and Home Help
At the same time as China requires more care home beds it also requires more certified
caregivers. Unfortunately, in-home care providers (baomu) are currently rarely able to offer
skilled medical services—a key requirement. At present most in-home care providers are
provided via private agencies rather than the national health service. Many trained nurses
are loathe to leave the state service to work in the private sector due to reasons of job
security, even though the pay is generally better in the private sector. The lack of qualified
elderly care givers is acute. Dr Du Peng, director of the Institute of Gerontology at Renmin
University in Beijing has stated that, “We (China) have four million beds available, one
caretaker for every three elderly. We should have more than a million caretakers, if in the
future we will have 30 million elderly then we need 10 million caretakers. But at the
moment in China every year only 6,000 gerontology professionals are certified.” With more
private companies entering the elderly care market and operating care homes and at-home
services there is now a bottleneck in the number of qualified at-home care givers available.
This will ultimately make the government’s 9-7-3 ratio of care, with the emphasis on athome care for the elderly, impossible to meet. Additional training centres, course,
instructors and certification are urgently required.
3) Conclusion
The major problem confronting the Beijing government is that China is poised to become an
aged society before it is rich enough to support an ageing population. The growing number
of retirees and shrinking workforce add pressures and the challenge of caring effectively for
the elderly is made more acute by China’s shrinking labour force. With increased longevity
and low retirement ages at present China is about to face the problem of 50-year olds
retiring with parents who are barely 70-years old, leading to families in which two
generations are retired and under-funded for that retirement. At a time when the
government is seeking to boost personal consumption, large amounts of income and savings
will have to be diverted into care for the elderly, geriatric healthcare and medicines. If
China’s government fails to find a solution, the economic consequences could be dire.
China’s population is aging but is not necessarily receiving the elderly care and geriatric
treatment it should. At present, a meagre 2% of China’s senior population chooses
institution-based care – even with the stigma associated with retirement homes largely
removed, the availability and affordability of places is minimal. The government would like
to see these numbers rise as indicated in its latest Five-Year Plan (2011-15), which aims to
provide institution-based care to 3% of the total senior population—or about 3 million
people—by the end of 2015. Providing quality of life for China’s elderly will require the
success of the current economic reforms to create jobs, maintain wage rises, allow for
_____________________
ISL19 China’s Changing Demographics
Paul French
26 of 27
continued savings and also permit a more regulated and participatory tax base to allow for
additional government spending on geriatric care. Projections suggest marginal surpluses in
the state urban-based pension scheme until 2018, but deficits thereafter. Arguably there are
already major deficits in the majority of rural schemes. It is impossible to divorce China’s
demographics from its macro-economics – a secure and pleasant old age will, for most
Chinese, depend on continued economic growth.
_____________________
ISL19 China’s Changing Demographics
Paul French
27 of 27