The Aging Population of China Poses a Challenge to the Country’s Transition to a New Model of Economic Growth
trading robot

The aging population in China poses a significant challenge to Beijing’s policy goals for the next decade. These goals include increasing domestic consumption and reducing the country’s growing debt. This demographic shift could have a detrimental impact on the economy’s long-term growth prospects.

China’s Demographic Decline Has Been Going On for Years

In 2023, an unprecedentedly low birth rate coupled with a surge in COVID-19 fatalities led to yet another year of population decline, intensifying worries about China’s ongoing demographic decline.

A significant number of individuals among the 1.4 billion residents in the world’s second-largest economy will leave the workforce and enter a stage of life where their consumption patterns decline. This will worsen the existing structural imbalances that policymakers have committed to resolving.

The proportion of economic output attributed to household consumption in China is currently among the lowest globally. Meanwhile, numerous provincial governments, which bear the responsibility for pensions and elderly care, find themselves burdened with substantial debt due to years of investment-driven growth fueled by credit.

“The shift in China’s age demographics is expected to have a dampening effect on the country’s economic growth,” stated Xiujian Peng, a senior research fellow at the Centre of Policy Studies (CoPS) located at Victoria University in Melbourne.

300 Million People Will Retire in the Next 10 Years

In the upcoming decade, approximately 300 million individuals who are presently between the ages of 50 and 60 and constitute China’s most significant demographic group are expected to retire. This figure is nearly equivalent to the entire population of the United States. This retirement wave comes at a time when pension funds are already under strain.

According to data from the finance ministry, the Chinese Academy of Sciences predicts that the pension system will be depleted by 2035. Additionally, around one-third of the provincial-level jurisdictions in the country are facing budget deficits in their pension funds.

trading robot

The Age of Retirement Is Low

In China, the country has a somewhat limited acceptance of foreign workers, only allowing those who possess exceptional skills. Interestingly, China also boasts one of the lowest retirement ages globally. Men can retire at the age of 60, while white-collar women can quit at 55. As for women working in factories, they have the opportunity to withdraw at the age of 50. A staggering number of 28 million individuals have plans to quit in the current year.

Workers in state-owned companies are usually required to retire once they reach a certain age. In contrast, private employers tend to have a lower tendency to retain employees for extended periods. Conversely, in particular Western nations, the retirement age is more adaptable.

Li Zhulin, a 50-year-old resident of Shaanxi province, is concerned about her financial situation once her husband retires in 2027. Currently unemployed, she worries about depending solely on her husband’s pension, which amounts to approximately 5,000 to 7,000 yuan ($697 to $975) per month.

Li has been reducing her expenses and searching the internet for advice on financial planning in order to alleviate the economic strain on her only daughter.

“Not only would she provide for her own family upon marriage, but she would also assume the responsibility of caring for four elderly individuals,” Li stated, which includes the parents of her future spouse. “It’s hard to fathom the level of difficulty that would entail.”

In Chinese society, it has been a long-standing expectation for children to provide financial support for their parents as they grow older, often by residing together to ensure their well-being.

However, like in numerous Western nations, the process of urbanization has caused young individuals to migrate to larger cities, distancing themselves from their parents. Consequently, there has been an increasing trend of older adults depending on self-care or government assistance.

According to University of Wisconsin-Madison demographer Yi Fuxian, the number of workers supporting each Chinese retiree is projected to decrease significantly in the coming years. In 2020, there were five workers for every retiree, but by 2035, this ratio is expected to drop to 2.4 workers and further decline to 1.6 workers by 2050.

“At that stage, the pension crisis in China will escalate into a devastating humanitarian disaster,” Yi warned.

Based on the Japanese government, the ratio in Japan was 2 to 1 in 2022 and is expected to decrease to 1.3 to 1 by 2070. However, Japan had already established itself as a prosperous economy prior to the rapid aging of its population.

Consumers Who Are Getting Older

Around 230 million individuals in China, constituting the country’s second-largest demographic, find themselves in a highly suitable phase of life. This age group, ranging from 30 to 49 years old, is at a stage where their professional lives have progressed sufficiently to enable them to invest in significant purchases such as houses and cars. Additionally, as parents, they are also starting to allocate funds towards their children’s education.

As the group enters their 50s, their children will complete their education and begin earning their own money. This suggests that the cohort is likely to reduce their involvement in domestic spending.

The upcoming generation, who are currently in their 20s, is the smallest cohort since the famines of the 1950s, which can be directly attributed to China’s one-child policy from 1980 to 2015.

This needs to bode better for China’s property sector. It was responsible for approximately 25% of the country’s economic output until its bubble burst in 2021. The collapse was caused by developers who had taken on too much debt and an oversupply of apartments. This situation has drawn parallels to Japan’s predicament in the 1990s, which led to decades of economic stagnation.

“According to Larry Hu, chief China economist at Macquarie, Japan’s example demonstrates that when the proportion of the working age population decreases, the demand for housing also decreases.”

Problems With Innovation

China experienced an increase in births following the abandonment of the one-child policy, although the recovery fell significantly short of pre-implementation levels and was also temporary. There has been a decline in the number of children born over the past eight years, including 2023.

According to demographers, the quantity of children in a given economy is closely linked to domestic consumption.

Peng from CoPS suggests that as the domestic market contracts, China’s dependence on exports will grow. China, which is already responsible for producing a significant portion of the goods consumed globally, has shifted its focus from property to manufacturing in order to enhance industries and prevent falling into the middle-income trap.

However, according to Peng, a workforce that is getting older “results in reduced motivation to come up with new ideas and a decrease in the rate of productivity growth, rather than an increase.”

Peter Bergman (

By Peter Bergman (

Peter Bergman is an experienced financial writer with a passion for helping people achieve financial freedom. With over a decade of experience, he has written extensively on topics ranging from personal finance to investment strategies, and his work has been featured on and other leading financial websites.

Leave a Reply

Your email address will not be published. Required fields are marked *