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  • Jul 25, 2014
  • Updated: 9:18am
NewsHong Kong

Hong Kong facing hit to economy as ageing population looms

PUBLISHED : Sunday, 29 December, 2013, 4:16pm
UPDATED : Sunday, 29 December, 2013, 4:16pm
 

Schools replaced by care homes and a once-vibrant economy dulled by one of Asia’s oldest populations: experts fear this is the Hong Kong of the not-too-distant future.

One in three people in the city is expected to be 65 years old or above by 2041, threatening to curb economic growth in the major financial hub, the Hong Kong government has warned.

“It is a huge concern for our population development,” Hong Kong University social sciences professor Paul Yip said, explaining that the economy will take a hit if the ageing trend continues.

“There will be more people but less that are working, so fewer people will be contributing to the economy of Hong Kong,” Yip said.

The plight of the ageing population in Hong Kong is getting more and more serious
Samantha Kong

While some critics argue that government forecasts for 2041 fail to make allowances for migration or those who will continue to work beyond the retirement age of 65, the territory faces clear challenges on an economic and social front.

The impending demographic problem is reflected in programmes such as Eldpathy, set up by Hong Kong University of Science and Technology students, which aims to foster more empathy towards the elderly by encouraging teenagers to try on special movement-restricting suits designed to simulate the sensation of age on the body.

“The plight of the ageing population in Hong Kong is getting more and more serious,” Eldpathy co-founder Samantha Kong said.

Choosing pets over kids

For others, the problem is not so much a high population of elderly but Hong Kong’s lack of children.

Financial pressure, career-driven mentalities, limited space and exorbitant property costs are seen as key drivers of a fertility rate that is one of the lowest in the world by some measure, with an average 1.20 births per woman according to the World Bank.

“Young people do want to get married, but they just cannot afford to rent a place to live,” Yip said.

They tend to stay with parents longer in the hope of saving enough money to buy a flat, meaning that they end up waiting longer before getting married and having children, he said.

Social trends in Hong Kong also indicate that an increasing number of women are choosing not to get married. Those who do tie the knot do so much later and have a very small time window to start families, he said.

Many married couples “would rather have a pet than a child”, added Yip.

Based on current fertility and mortality rates, if Hong Kong does not do anything about its ageing problem it will have a median age of 56.3 years by 2040, according to the United Nations.

Based on the same factors, Singapore will hit 50.3 years, China 45.9 years and Thailand 45.7 years, according to UN data.

A higher life expectancy and low birthrate will also raise Hong Kong’s dependency ratio from 355 dependent persons per 1,000 people now to 712 per 1,000 in 2041.

Hong Kong’s semi-autonomy from China expires in 2047, and experts say it is not clear how this will affect its demographic make up.

The former British colony was returned to China in 1997 with its own political and legal system that guarantees civil liberties not seen on the mainland, until 2047.

Hong Kong chief secretary Carrie Lam, who heads a committee which in October started a four-month public consultation on the issue, said the city must broaden and diversify its workforce to tackle the challenge of ageing.

The committee has also considered attracting talent from overseas and mainland China, which has brought opposition from the city’s unions.

Allowing well-educated mainland Chinese parents to have children in Hong Kong has also been a suggestion to help reverse the demographic trend.

Up until the end of last year, thousands of mainland women came to give birth in the territory and gained residency rights for their children, but local families complained they were taking up limited hospital beds.

The city has since banned pregnant mainlanders whose husbands were not from Hong Kong from giving birth at local hospitals.

For some, the spectre of a city with a diminishing work force and lack of youthful dynamism is a very real worry.

“It wouldn’t really be a city I would like to live in,” says professor Yip.

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HK-Explorer
Huh? Hong Kong always has a massive yearly budget surplus and has the largest per capita reserves in the world. Why would we want to borrow when we are not even spending the $$$ we have today. Even 1% interest is still lost money if you have tons of $$$ just sitting around or worse still paying for the US debt.
The government should be investing in efficiency with new building, more rail transportation (all new territories should be connected), they should expand early childcare & standard working hours so more mothers can go back to work. We need to invest in technology such as datacenters, electric vehicles and R&D.
Those 65 and over should be offered part time work. they still have many productive years ahead but don't want a full time job.
An improvement in efficiency will reduce the burden.
singleline
It’s not uncommon in the West (and Japan) for the governments to borrow from the private investors, by encouraging or even forcing insurance companies, banks and pension funds to buy government bonds.
Given Hong Kong's expected positive inflation rate and the near-zero nominal interest rate, the real interest rate is negative --- a free lunch to the Hong Kong government.
singleline
Will the debt be a burden on our future generations?
No.
The holders of the very same debts will be among the supposedly burdened future generations. There will be no net burden on our future generations.
It's just the same when some holders of the government debts are foreigners.
singleline
The Financial Secretary says today that once the government's reserves are exhausted in the future, the government may consider raising Hong Kong's tax rates or issuing debts.
I don't think our government will need to privatize some of her assets.
Raising the tax rates may induce talents to emigrate to Singapore or Shanghai. People affected may also take to the streets to protest about the higher taxes.
Why not issue debts right now? Why wait until the interest costs are (much) higher in the future?
Now the interest rate is next to nothing. And given Hong Kong's highest S&P AAA rating, the government simply can't afford not to borrow.
I don't think the Basic Law prohibits Hong Kong from raising money through the debt market --- it's a good way to further develop Hong Kong's bond market.
Hong Kong's pension funds, insurance companies, banks, etc., may be required by law to buy part of the debts issued by the government --- nobody will take to the streets (not seen so far).
The money raised can be used to finance building more public housings or needed infrastructures.
Or it can temporarily be invested in China's (municipal) bond markets --- the carry trade is a one-way bet.

singleline
The standard indicator, old-age dependency ratio (OADR) (number of people who have reached the state pension age / number of working-age adults) may be out-dated.
Being of working age isn’t the same as actually working --- some young people spend more years on education.
Not all people above the statutory pension age are ‘dependents’ --- some may have sufficient personal savings.
The real elderly dependency ratio (REDR) (total number of people with a remaining life expectancy of 15 years or less / number of people actually in employment, regardless of their age) may be a better measure.
(****www.project-syndicate.org/commentary/john-macinnes-and-jeroen-spijker-propose-a-new--more-accurate-measure-for-population-aging-s-economic-impact)
 
 
 
 
 

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