Clock ticks for China's demographic challenge

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Clock ticks for China's demographic challenge

(Xinhua) 15:47, November 20, 2013

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BEIJING, Nov. 20 -- When it comes to tackling China's aging population, the country's policy makers know time is not on their side.

The sense of urgency is evident in the sweeping reform package released after a four-day Communist Party of China summit that sets the tone for the world's second largest economy over the next decade.

China will loosen its one-child policy by allowing couples to have a second child if at least one of them does not have siblings.

A fragmented pension system will be strengthened by merging pension schemes for urban and rural residents.

Retirement will be delayed in a "progressive manner," a move that will partially alleviate the state's pressure to dole out pensions.

Meanwhile, state-owned companies will double their contribution to public finances to 30 percent of their profit by 2020, as the country finds itself overstretched to meet pension claims from a graying population.

The decision to allow couples to have a second child and major reforms to support an aging population came after demographers' repeated calls for a change in the one-child policy. They argue a declining fertility rate has blunt the labor cost advantage and reduced input to the social security fund.

"The authorities relaxed the one-child policy because they know not doing so would exert overwhelming burden on the economy," said Li Jianmin, a demographer with Nankai University, in Tianjin.

The fertility rate, the number of births for each female, now stands at 1.5 in China. Demographers say expanding it to 1.8 is needed for balanced population development.

POLICY HANGOVER

When China introduced the one-child policy in the late 1970s, it was meant to rein in explosive population growth. However, as people born in the 1950s and 60s begin to retire, the policy is widely considered to be outdated and counter-productive to improving the country's labor force.

A marked effect of the policy is a highly skewed gender ratio. Chinese people, especially those in rural areas, have traditionally preferred boys for inheriting the family's bloodline, labor and supporting aged parents. As a result, China has 117 boys born for every 100 girls, far exceeding a balanced ratio of 107 to 100.

Also, the world's most populous country with 1.3 billion people is facing a graying population. A declining fertility rate has reduced the share of children younger than 15 years old to 16.6 percent of the total population, while pushing up that of people older than 60 to 13.26 percent, statistics from a national census in 2010 show.

Developed economies have all faced similar challenges, but this is particularly disturbing for China, a country that is already seeing signs of a rapidly aging society before it crosses the threshold to become a high-income nation.

This calls into question the country's readiness to care for its growing numbers of senior citizens. As the single child of each family comes of age, most of them find themselves in the middle of an inverted pyramid structure - each couple has to support four parents while raising their own child.