Age of opportunity awaits in mainland China

The number of people over 65 years old will triple by 2050, but analysts say that despite the changes businesses will still benefit

PUBLISHED : Monday, 26 November, 2012, 12:00am
UPDATED : Monday, 26 November, 2012, 8:17am

While many would expect China's ageing population to have a negative impact on its economy, some analysts think differently.

Charles Somers, a portfolio manager of demographics at Schroders, said the demographic change also offered opportunities. He told the South China Morning Post in an interview in Schroders' London office that China was in fact facing two demographic changes: an ageing population and an increasing number of people moving from villages to live and work in cities.

"China has reached a stage where it has fewer young people joining industry than those who are retiring," Somers said.

By 2050, he said, the number of people in China over 65 years old would be triple today's figure. This would benefit firms making machines that could substitute for human labour, Somers said.

Cosmetics or skin care companies such as Estée Lauder would also flourish on the mainland as people looked for ways to make themselves appear younger.

Firms that produced baby formula might consider making dairy-based products for elderly people as well, he said.

Retired people also have more time to travel, which will benefit the travel industry and firms that make aircraft engines, such as French firm Safran.

Health care products will also be in demand, as older people need more medical equipment and medicines.

Somers said many more mainlanders were moving to cities and growing richer.

"When people get wealthier, they tend to eat better and eat more meat and dairy products. They also dine out more," he said.

In the next five years, food consumption on the mainland is expected to increase by 8 per cent per year. Somers sees this as good news for fertiliser makers and meat producers.

Companies such as agricultural machine maker Agco and potash producer Potash Corp will reap profits. China Mengniu will also benefit as people drink more dairy products. The growth rate is, however, less than the 11.6 per cent annually from 2005 to 2010.

He expects spending on dining out to increase 18 per cent per year, benefiting firms like Yum Brands, which operates almost 1,000 restaurants on the mainland. The annual growth for dining out was 20.5 per cent in the five-year period.

People in urban areas spend more on entertainment, travel more and buy more luxury goods. To prepare for these trends on the mainland, Somers said companies should diversify.

He said Japan was a good bellwether, where the average age of the population was 15 to 20 years ahead of other countries. A firm called Unicharm, which makes diapers for babies, has expanded to adult diapers to cater for the ageing population. As the pioneer in this new segment, it now has a 60 per cent share of that market.

Unicharm also noticed that as many elderly Japanese relied on pets for companionship. The firm developed a range of pet-related products that have become popular.

Chinese companies could follow these examples and accommodate new trends as the population ages in China, Somers said.