China, an aging population threatens economic growth

According to the Ministry for Labour and Social Security, by 2030 23% of the population will be over 60 years. This means 351 million new pensioners, which will weigh on state coffers. Consequently, an increase in the percentage of citizens not working to be carried by those in work.   Currently, the ratio is about 3 workers per 1 retiree, in 20 years, it will arrive at 2 to 1.

Zhuang Jiang, an economist of the Asian Development Bank, explains: "While the  number of older people is growing we are not seeing major changes in the national pension system. This will not provide adequate funds to meet the need: in this way future economic development is at risk and a truly harmonious society will be impossible." The reference is the favourite slogan of President Hu Jintao, who motivates his policies (even repression) with the need to bring harmony to the country.  

The phenomenon will threaten even the system of private savings, a pillar of investment that has created the economic boom in China. Estimates of the One World Bank speak of a decline in savings by 6 percentage points of gross domestic product by 2025. Another study on demographic change also forecasts that even salaries will fall. Wage growth (linked to GDP) was 5.3% per year in 2000; by 2020 it is expected to grow by 2.9 max.

These consequences on the domestic economy are directly linked to the lack of an adequate pension system. The planned economy, the linchpin of the communist regimes, grants Chinese workers a pension provided and guaranteed by the state and not connected to contributions paid by the worker. In practice, the policy of the "handful of rice in a bowl of iron", launched in 1978, has established a pension fund: year by year, Beijing devotes one part (steadily increasing) of their budget for the elderly.   

Only 31% of the population has access to these funds, however: migrants are not taken into account, and farmer’s income is so low as to be practically nonexistent. According to the Ministry for Human Resources, it would require an investment of 2500 billion Yuan to set up a pension system. But the World Bank has refuted this data: on the basis of the average national level, it would take at least 915 thousand. An amount equal to 150% of the national budget last year.

This lack of planning added to the scandals related to corruption.  The case of the Shanghai municipality, whose mayor pocketed million destined for pensioners, crippling the domestic budget until the intervention of central government. According to Zhuang, this issue also highlights a contradiction: "Unlike other economies in the developing world, China has no human capital on which to invest. This causes huge imbalances".