China's Not-So-Golden Oldies

The world’s most populous country is set to become the world’s largest ageing country, with implications for the generation who will have to support them, and for marketers too. Aruna Natarajan explains.

As with any China-related statistics, the absolute numbers are quite startling. There are close to 100 million 65 years+ people in China today. One in every two 60+ Asians is Chinese and one in every five 60+ people in the world is Chinese.
  • By 2010, China will no longer be the world’s most populous country. That will be India.
  • By 2010, China will have 300 million people older than 50. That’s almost as many people as the US will have by then.
  • From 2010 onwards, China’s ‘sandwich’ generation, 20-49 year-olds and the core consumers for a majority of marketers, will actually start shrinking.
  • By 2030, China’s total population will start shrinking.
  • By 2050, close to half the population of China will be older than 50. That’s more than 600 million people, and China’s population will be lower than it is today.
  • By 2050, China’s elderly population will outnumber India’s by 103 million, whereas the total Chinese population will be smaller than that of India by 51 million.
A combination of factors including controlled birth rates, lifestyle changes and improvements in medical care have led to an ageing Chinese population. Strict population policies implemented by the Chinese Government and the role of the state and work units in permitting marriages have controlled the growth of the population. At the same time, better nutrition and advances in medical science have increased the average life span of the Chinese person. The above-50 segment is growing significantly and, within this age group, the 60+ population accounts for more than 50%.

For years the world has worried about the Chinese population and how there are far too many Chinese around. But going forward, a far bigger problem will be how there will be too few Chinese around. This is particularly important for the Chinese themselves. Their economy, known as the factory of the world, depends on an endless supply of young, desperate workers willing to work 16 hours a day, at meager wages. A population decline will reduce the supply of factory workers, increase the upward pressure on wages, and make goods made in China uncompetitive when compared with other parts of the world like South America. Catholicism (a barrier to birth control), proximity to the US (China’s largest trading partner) and poverty combine to reduce costs in that continent and are likely to make it more attractive for manufacturers. In short, population implosion is going to hurt China’s GDP, by decreasing the productivity of the nation and putting less money in the pockets of Chinese employees and consumers.

Different shades of gray
Ageing population is a demographic issue which many countries have been facing for years. Japan is currently the oldest nation in the world and many European countries like Italy and Germany are fast closing in. But compared to these other nations, China is in a unique position. Countries like Japan, Italy and Germany got rich first before they got old, but the same cannot really be said for China. In terms of development indices and prosperity, China is still closer to developing nations, but in terms of population demographics it mirrors the developed nations of Europe and Japan. Additionally, China lacks the social safety nets of the Western nations and Japan to care for the elderly.

Unfortunately for China, its GDP growth has not been able to keep pace with the declining fertility rate, thus causing an imbalance much more acute than anything seen in other countries with ageing populations.

Over the last few decades, China has had one of the strictest population policies the world has ever seen. The one-child policy has been implemented so successfully that in urban China an entire generation has grown up without siblings.

Whilst this strategy may have succeeded in raising the standard of living in the short term, in the long term it has created an entirely new demographic crisis; going into this century, China is going to be the oldest poor country in the world.

And given the unique position that China is in, it’s difficult to take corrective action by emulating the model of Western countries or Japan. Let’s take the example of Japan; it has been living and coping with the phenomenon of an ageing population for a while now. Last year for the first time, the number of deaths in Japan outstripped the number of births and the population of the country actually declined by 19,000. The current fertility rate of less than 1.3 increases the pressure on the working population significantly.

But there are a few critical factors which make the situation in Japan quite different from what China faces. Japan as a nation became rich before it became old. Also, the baby boomers generation in Japan who are just about entering the over-60s age group, are a well-qualified group and are the custodians of years of accumulated technical and managerial skills. This, coupled with the fact that the average life expectancy is 82 years and still climbing, makes it easier for the government and the corporate sector to respond. Japan has identified that the solution lies in fixing employment and retirement systems so as to allow people to work more easily for more years to come.

Changing mandatory retirement laws and removing age restrictions on hiring are other changes that are being actively discussed to battle the problem. This way, Japan will be able to keep its ageing workforce employed for longer. Japan is also slowly opening corporate doors to women, an area that was previously a male bastion. This again will help spread the burden of supporting an ageing society among a larger workforce.

Western countries grappling with the problem of an ageing population have another big advantage apart from trying to keep people working longer: immigration. Immigrants moving en masse to Europe, the US and even Australia help support the tax burden of the older population and also provide the numbers to keep the nation young.

In China, current rates of unemployment and underemployment are already so high that the question of immigration or keeping older people in the workforce for longer simply does not arise. Also, the equivalent of the baby boomers generation in China have spent most of their lives working on state-owned enterprises and the skills they have are not really suited for the current rush of private sector jobs flooding the market. The gender equality mandated under the communist regime has already ensured a place for women in the workforce, so there is no new ablebodied group to look towards to share the burden.

Caught in a jam
In a sense, Chinese society is closer to other Asian societies, where the main investment that people can make for their future is their children. As in India, thanks to the absence of government-mandated social security and medicare, the older generation lack independence and rely on their children to take care of them in their old age.

That brings us to the crux of this demographic crisis. With the changing demographics of the Chinese population, the bigger fallout is not the growing consumer segment in the 60+ age group, but the impact that this segment is likely to have on the core 25-44 consumer group. With an increasing retired population to support and the next generation to look out for, our core consumer group is bound to have increasing pressures on their disposable income and this is likely to significantly impact their purchase decisionmaking process and consumption habits across a variety of categories. Previously the commonly-used adjectives to describe this age group included terms like upwardly mobile, young working class, etc. But moving forward, a key descriptor for this consumer group will be the ‘sandwich generation’.

Aruna Natarajan
MindShare, Shanghai
Jerry’s Jam

This article originally appeared in volume 12 of WPP's Atticus Journal.

Tools Print page E-mail page Reading Room Get Acrobat Reader

About the author