China's rapidly aging population may strain its economy

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12:09 AM CDT on Monday, August 11, 2008
By JIM LANDERS / The Dallas Morning News
BEIJING — With a nationwide Olympics celebration, China is declaring its economic might and victory over poverty. Yet some of the same policies that made that victory possible are also challenging the Chinese government to keep hundreds of millions of the elderly from falling back into destitution.

Thanks to 28 years of enforced family planning, China’s population is aging faster than any other country’s. And thanks to the sharp turn away from communism to free-market capitalism, the Chinese safety net of the elderly living with adult children is unraveling at the same time.

Aging populations present vexing problems in the U.S., Japan, Russia and much of Europe. But “the danger of instability is far greater in China,” said Richard Jackson, director of aging research at the Washington-based Center for Strategic and International Studies.

By 2020, China will have 400 million people age 60 and older, and 100 million older than 80. By 2050, a third of the 1.4 billion Chinese will be at least 60.

Mao Zedong’s style of Chinese communism kept all but a few of his countrymen living where they were born. Reform put hundreds of millions of young Chinese, including women, on the road in search of better-paying jobs.

They left their parents behind. And with no siblings, that meant leaving their parents to fend for themselves.

Chen Zhi Min is a 68-year-old retiree who lives alone in a one-room apartment off an alley near the Yonghegong Lama Temple, one of Beijing’s popular tourist spots. He and his neighbors use public toilets and wash with the sinks in their tiny kitchens.

Mr. Chen spends his days watching TV. His former employer, a power plant in Yunnan province, sends him a monthly pension of $162.

“It’s all right. I live here by myself, and I don’t purchase much,” he said.

Mr. Chen’s son and daughter left Yunnan long ago to live in Beijing. When he retired, he followed. They’ve given him a place to live, a TV, an air conditioner and a refrigerator. He says he’s refused other gifts and wants to live on his own small income.

Around the corner, 58-year-old Liang An Lin doesn’t know when he’ll be able to retire. Five years ago, the leather company he worked for in Sichuan province went bankrupt, wiping out his pension. Mr. Liang and his wife, Chen Zhi Hua, 52, moved to Beijing to start over again. They run a tiny souvenir shop, selling incense and Buddha statues to tourists.

“Since I run my own business, I have no pension,” Mr. Liang said. “If we get ill, we have to depend on ourselves to pay the bills. Fortunately, we are in good health.”

The Liangs have a married daughter living in Sichuan province, but they want to live on their own when they stop working. They just don’t know how they will be able to afford it.

When Deng Xiaoping began turning this huge country away from communist orthodoxy in 1978, most Chinese lived in absolute poverty. The World Bank estimates eight out of every nine Chinese lived on less than $1.25 a day. Thirty years later, economic growth has lifted 680 million Chinese out of poverty, and just one in 12 Chinese lives on less than $1.25 a day.

At the same time it turned to reform, China’s government imposed a one-child-per-couple limit to slow the increase in its enormous population. That one-child generation is now entering the workforce.

Cai Fang, an economist who is director of the Institute of Population and Labor Economics with the Chinese Academy of Social Sciences, has calculated that more than a fourth of China’s economic growth in this reform era stemmed from the productivity of a workforce with few dependents younger than 15 or older than 65.

In five years, that advantage will start disappearing, and a rising number of the elderly will slow down China’s economic growth, Dr. Cai said.

China’s government is aware of the problem and has taken steps to prepare.

President Hu Jintao and Premier Wen Jiabao have increased the country’s basic social security plan dramatically. Only 18.6 percent of the population was eligible for benefits in 2000. Today, 90 percent of the population is eligible.

The government also made dramatic coverage extensions in basic government health care insurance, although major medical expenses still fall on the patient and his or her family. The government also began sorting out the pension system five years ago by creating retirement savings accounts similar to a 401(k) .

“These twin pillars of social security and pensions now cover much of the workforce,” said Hu Angang, director of the Center for China Study at Beijing’s Tsinghua University. “It’s a big reason why this government is so popular.”

While these programs are now broad, they are still shallow. Retired Chinese get government help of little more than $50 a month.

China’s National Committee on the Aging has done opinion polls showing the vast majority of China’s elderly say they want to live out their retirement in their own homes rather than with their children or in assisted living centers.

But Dr. Jackson notes that other polls show 87 percent of Chinese now expect the government to take care of retirement income and health care.

“A startling share of Chinese now believe the primary responsibility for caring for the elderly should be with society as a whole — the state,” he said. “And if the state fails to deliver on that expectation, it could be a real social and political crisis.”

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