Ageing mainland faces challenges

The government is finding that providing care for its senior citizens is a huge task

PUBLISHED : Monday, 04 February, 2013, 12:00am
UPDATED : Monday, 04 February, 2013, 4:16am

A nursing home located near a diplomatic area in Beijing cares for 26 people aged between 60 and 92.

"We have 26 beds. But it's far from being enough," said Liu Yuqin, the head of the Dongzhimen Street Senior Home, set up in 1986 in Dongcheng district. "Nearly 100 people applied for beds but left disappointed. We have to give priority to those who live nearby."

Inmates of the government-aided nursing home are charged 1,850 yuan (HK$2,300) a month for meals, utilities, bed space and other services. The cost is lower than that of many private institutions and is affordable for elderly residents of the capital city where the minimum wage was raised to 1,400 yuan a month this year.

"In this prosperous area, every inch of land is valued like gold. It's not easy to find a good nursing home here," said Liu, who has worked in the home for 13 years. "The local government is planning to expand the service to new sites, but no decision has been made yet."

According to a Xinhua report, welfare institutions in the district offer 1,500 beds for the care of seniors, well short of an estimated need of 8,000 beds.

The shortage is just one of many challenges facing the nation's rapidly ageing population.

The nation's working-age population of 15 to 59-year-olds fell for the first time last year, National Bureau of Statistics chief Ma Jiantang said last month, calling attention to the mounting challenge.

Working-age citizens who must support the elderly dropped by 3.45 million last year to 937 million, according to Ma, and is expected to continue to fall steadily until at least 2030.

"The impact will be profound," said HSBC economists Frederic Neumann and Julia Wang in a research report. "Ageing populations mean that fewer workers are around, slowing growth unless productivity gains can be dramatically increased."

The trend would also add strains to public finances and cause a shift in household spending and savings as older people "are keener to build a nest egg for retirement", they said.

The challenges come as the nation's economic growth slowed to 7.8 per cent last year from 9.3 per cent in 2011. It was the slowest rate since 1999.

Deutsche Bank greater China chief economist Ma Jun said "pension and health-care costs will be the biggest financial risks" facing the country.

If timely reforms were not carried out, the nation would face a huge gap in pension fund payments equivalent to 83 per cent of its 2011 gross domestic product, he told a forum last year.

It takes three income earners to support the needs of one retired person, but as the nation gets older, Ma said there would be just one earner to support one retired person by 2050.

According to the International Monetary Fund, spending on pension funds in China will rise by more than 3 per cent of GDP over the two decades to 2030, the third sharpest increase among emerging markets after Turkey and Egypt.

Over the next decade, Ma said, Beijing should replenish the national pension fund by allocating more state-owned assets to the pool, set up an insurance system for nursing the elderly, and develop a local government debt market to reduce financial risks.

"If the reforms aren't carried out in a timely manner, the debt crisis emerging in China in a few decades will be no 'Tales of Arabian Nights'," he warned.

Du Peng, the head of the Institute of Gerontology at Renmin University, also called for improvements to the social welfare system and health-care services.

The government should establish a long-term nursing insurance system, just as Japan and South Korea had done, Du said.

In Japan, people aged above 40 are required to set aside a portion of their income each month as a fund for health-care and nursing costs after they turned 65, he said. "China's long-term sustainability and growth will be endangered if Beijing doesn't take action quickly."

Andrew Colquhoun, the head of Asia-Pacific sovereigns at Fitch Ratings, shared the concerns. China's demographic outlook was "unfavourable" compared with other emerging markets or even many higher-income countries, although rising pension costs were not yet "a material concern", he said.