The fiscal constraints related to ageing
are well known, caused mainly by spiraling healthcare and pension costs.
However, the repercussions are much wider. In an ageing society, labor
markets, saving patterns and migration flows will change. Most
worryingly, labor shortages, declining labor market flexibility and
slowing productivity pose a serious threat to growth.
In the past three decades, a dramatic increase in life expectancy
underpinned by the strict family planning policy prompted the greatest
demographic transition in the world. During three decades of economic
expansion, China's growing workforce added a "demographic dividend" of
about 2 percent a year to GDP.
With rapid ageing, the situation has now reversed. The demographic
dividend is vanishing, while the dependency ratio of children and
elderly on the working age population is increasing. The labor force
shrank for the first time in 2012. By 2050, about 30 percent of the
population will be above 60, against a world average of 22 percent.
但如今人口日益老龄化，情况发生了改变。人口红利逐渐消失，劳动力人口需承担的人口抚养比例在逐年增加。劳动力市场于2012年首次缩小。到2050年时，中国60岁以上人群将占到总人口的30%，而世界平均比例只有22%。ageing in China is particularly complex because it is happening at a
low-income level. Social safety nets are weak, with most of the elderly
depending on family support. Declining family size and the erosion of
traditional values magnify the challenge and place a heavy burden on
High-income countries have offset the
losses caused by a declining workforce by adopting innovation-driven
growth models. China could achieve the same by decisively rebalancing
the economy, shifting to consumption-led growth and developing the
高收入水平国家采取创新型发展模式，以此弥补劳动力减少对经济的损失。中国同样能够采取平衡经济发展、转型为消费拉动增长模式、发展服务业等措施，来弥补损失。ageing also requires specific policy measures. The new leadership needs to focus on three issues.
First, support systems for the elderly require comprehensive reform. A
program for old-age income support and healthcare is needed, financed
through tax revenue. Financing should be based on accurate actuarial
projections, with benefits and contributions designed to be sustainable.
Initially the system could prioritize the elderly, poor and those with
functional dependencies, rather than providing far costlier universal
benefits. At a later stage, the coverage could be expanded.
The pension system has recently been strengthened, but much more is
required. While coverage has been expanded, benefits are very low, and
the system is financially weak. In addition to structural reform, the
underfunded social security sector needs a large upfront financial
injection. The 2-percent increase in social security expenditure planned
by 2015 is insufficient.
Strengthening pensions also requires financial liberalization. A more
sophisticated financial system, including a wider range of investment
options and an open regulatory framework, would lay the foundation for
the establishment of private pension funds to complement government
Second, labor markets need to be opened and the workforce expanded. The
household registration (hukou) system and restrictions on the
portability of social benefits hinder migration, geographical mobility
and, ultimately, urbanization. Compounded by skill shortages, they
impede China's movement up the value chain. The 12th Five-Year Plan
(2011-15) envisages a gradual dismantling of the hukou system, and the
new leaders have indicated their intention to improve living conditions
for China's 220 million migrant workers. These efforts should be
In line with high-income countries, China should also consider raising
the retirement age. The current general retirement ages, 60 for men and
55 for women, date back to 1950, when life expectancy was much lower.
China may also need to consider other measures to increase labor supply,
such as reviewing immigration policies.
Third, workers' skills need strengthening, and productivity and
innovation need to be enhanced. Otherwise, deficits in the labor force
will erode the country's competitiveness, reducing exports and economic
growth. Substantial investments in research and development and a shift
toward student-centered education are essential to increase labor
productivity and support innovation.
As production becomes more sophisticated,
the technical and vocational skills of the workforce are increasingly
important. Skill development must be aligned with labor market needs and
help companies respond flexibly to changing circumstances. China
currently suffers from skill shortages in several sectors, and a rapidly
ageing population is likely to reduce labor market flexibility.
Greater investments in human development will result in higher labor
productivity and help indigenous innovation to take root. High literacy
rates and universal primary education are not sufficient for China to
raise incomes. Tertiary education, and technical and vocational
education need to be aligned with the country's development strategy,
supported by private and public initiatives. The government must ensure
that all income groups have an opportunity to acquire the skills
demanded by innovation-driven growth.
The new leadership has embraced the need for reform. China's strong
fiscal position provides ample room to finance the transition to
consumption-based growth, supported by increased public spending. The
two annual sessions present a unique opportunity to broaden what is
already an impressive and far-reaching reform agenda.