The bells are ringing, and the message is clear: The “Chinese Age” is imminent.
The IMF has reported that China’s economy should pass the U.S. economy in real terms in 2016. And at the Milken Conference this week in Los Angeles, that claim was echoed loudly and often.
Timothy Geithner also said in a recent CNBC interview that because of its size and strength, the Chinese economy is transitioning from one driven by exports to one of domestic consumption. The U.S. isn’t prepared to be strategic partners with China, according to a piece in the New York Times, as the country begins to invest abroad.
Due to its complicated and largely “successful” history of controlling population growth, however, the country now faces what is commonly called the “4-2-1” problem — in which younger Chinese citizens are supporting two parents and four grandparents each. No matter how the numbers are laid out, the conclusion is unequivocal: China’s aging population is exploding. One study estimates that within 20 years, China will have 350 million citizens over the age of 60, a number that surpasses current total U.S. population. Analysts paying attention to this stunning data also point out that China is more likely to become old before it becomes rich, which may have political impact.
China already has a pension shortfall of around $200 billion, and its pension program only covers about 30 percent of the population. There is talk of raising the retirement age for women. Incredibly, Chinese women still have an official retirement age of 55, while the retirement age for men is 60.
So as everyone discusses and predicts China’s economic power, what’s gone largely unnoticed is the lack of planning to manage its aging population. With the potential of 350 million people over the age of 60, assumptions about Chinese economic leadership could falter if its aging population is not integrated into the nation’s economic growth model.
The 21st century competitiveness winners will be those countries that figure out how to turn their aging populations from dependent and disabled to drivers of economic growth and wealth creation. In fact, this is precisely what Europe’s ‘2012: Year of Active and Healthy Aging’ is all about. This has not escaped America’s “baby boomer” culture, which is unwilling to fade off into an old-fashioned retirement model but instead, as Marc Freedman has said, is already moving toward an all-American embrace of active aging.
Still, it will be China, more than any other country, which will have to get the aging thing right if it is to even dream of fulfilling its economic potential.
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