China population: US$970 billion ‘silver economy’ deemed pivotal to overcoming pyramid paradox

China’s demographic structure is gradually shifting towards an inverted pyramid shape as its population is greying faster, central bank adviser Cai Fang says

World’s second-largest economy is seeing an unprecedented era of ‘getting old before getting rich’, while also facing falling births, a pension crisis and a workforce shortage

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China’s population aged over 65 stood at 216.8 million last year, representing 15.4 per cent of the population. Photo: AFP

Published: 2:03pm, 28 Feb 2024Updated: 11:09am, 29 Feb 2024

China’s “inverted pyramid” population structure is generating a profound impact on consumption and haunting its long-term growth potential, forcing economists to join demographers in calling for immediate government action.

And as pronatalist policies would take time to refine the demographic structure and tackle the paradox – national consumption capacity will weaken as China’s population is greying faster – central bank adviser Cai Fang has set his sights on the so-called silver economy to turn the crisis into development opportunities. This includes calling for elevating the welfare of the elderly and boosting the high-quality supply of services, from caring to digital inclusiveness.

“If the population pyramid paradox cannot be addressed early on, the conflict between consumer demand and demographic structure will worsen,” Cai, also a prominent labour economist at the Chinese Academy of Social Sciences (CASS), wrote in an article published on the website of China Finance 40 Forum last week.

“This, in turn, will significantly heighten the possibility of economic growth shortfalls.”

Cai’s comments come at a time when 216.8 million – or 15.4 per cent of China’s population – were aged 65 and above at the end of last year, which outnumbered the combined populations of France, the United Kingdom and Thailand. In 2022, China had 209.78 million people aged 65 and over, up from 200 million in 2021.

China’s demographic challenges, including falling births, fast ageing, a pension crisis, a workforce shortage and the silver economy, are likely to be among the key topics for discussion at the “two sessions” annual parliamentary meetings, which start next week.

It is a global trend that elderly populations have shrinking spending power, but Cai warned the world’s second-largest economy is seeing an unprecedented era of “getting old before getting rich”.

A CASS study in six Chinese cities in 2016 showed that the average spending power of the 60-65 age group was around two-thirds that of the peak level observed in the 20-25 age group. The figures for the 80-85 age group, meanwhile, only accounted for 46 per cent of the peak.