China population: what’s driving central bank concern about the nation’s ageing workforce?

The People’s Bank of China (PBOC) has been increasingly vocal about the potential economic consequences associated with the country’s demographic challenges

Chief among its concerns are how China’s declining fertility rate and ageing population will weigh on the pension system and productivity

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China’s low fertility rate and rapidly ageing population threatens to weigh on the pension system and productivity. Photo: Xinhua

Published: 7:45pm, 25 Apr 2021Updated: 7:45pm, 25 Apr 2021

A pension deficit and looming debt crisis driven by a rapidly greying population. That’s the nightmare scenario for Chinese authorities, including the nation’s central bank, who are increasingly worried about the financial implications of the country’s demographic challenges.

Official concern about the country’s population problems was highlighted by the People’s Bank of China (PBOC) in an unusually frank research paper published last week.

The PBOC warned China had only about a decade left to enjoy the benefits of its large working age population, which has helped propel growth over the past four decades.

Authorities should “fully liberalise and encourage” childbirth to offset the economic effects of a falling fertility rate and ageing, warning “the pay as you go pension system can hardly cope with the ageing crisis”, the central bank said.

The comments foreshadow worry about the results of the seventh national population census, which are expected to show a fast-evolving demographic crisis facing the country when they are released late April.

Amid the heightened concern, analysts are anticipating new measures to address China’s demographic challenges, including the launch of more retirement plans.

Beijing announced last week the monthly pension of its 120 million urban retirees would be raised 4.5 per cent on average this year, the 17th annual rise in a row. The monthly pension for about 160 million senior farmers, which averages about 170 yuan (US$26), is also expected to increase.