Greying China Strains Social Safety Net, Healthcare System

Li Bin (李斌), the Chairman of the National Health and Family Planning Commission (NHFPC), argued that by taking steps to mitigate the effects of population aging will help “extend the period of strategic opportunity” (延长重要战略机遇期) for China.

Despite the repeal of the “One Child Policy” and implementation of the “Comprehensive Two-Child Policy” in January 2016, in mid-January, the Chinese National Bureau of Statistics released a report that revealed that China’s population has continued to decline (The Beijing News, January 18; China Brief, November 2, 2015). By the end of 2016, 230 million Chinese citizens will be over the age of 60, and that number is expected to rise to 400 million by 2055 (China Daily, December 13, 2016).

A further breakdown of the data shows that in 2020, 42 million seniors will be unable to take care of themselves and 29 million will be over the age of 80 (People’s Daily, January 17).

Statistics such as this illustrate that China’s population aging problem (laolinghua; 老龄化) is unlikely to be affected by the government’s reversal of population control policies. Chinese senior leaders are now looking for ways to mitigate the demographic shifts’ impact on the labor force, healthcare and social security. Importantly, China’s leaders view demographic decline as the end of the era of “strategic opportunity” that heretofore defined many of the economic and military reform plans.

Moreover, there are indications that the systems already in place are insufficient to address the challenges of the current situation. In late November, the Ministry of Human Resources and Social Security (MoHRSS) released a report on the state of China’s social security system (MoHRSS, November 24, 2017). The report’s publication noted a need to “strengthen collection management” due to the higher-than-expected growth of expenditures versus revenues. A chart showing the budget each region in China had for its respective social security programs put the situation in simpler terms. While the economically prosperous areas such as Guangdong and Beijing posted expected budget surpluses, 13 out of 31 regions: Guangxi, Hainan, Hebei, Heilongjiang, Hubei, Liaoning, Inner Mongolia, Jiangxi, Jilin, Shaanxi, Tianjin, Qinghai, and Xinjiang Production and Construction Corps (a paramilitary and economic organization with authority over parts of Xinjiang) did not have a sufficiently high budget to pay for social security for a year (Zaobao [Singapore], December 11, 2017). One of the worst affected provinces is Heilongjiang, in China’s Northeast, which had a budget deficit of 23.2 billion RMB ($3.6 billion). It is also worth noting that at least two of the affected provinces, Liaoning and Inner Mongolia, have admitted to falsifying key economic indicators since January 2017, suggesting that the situation may, in fact, be worse (Global Times, January 11).

In December, famed Tsinghua University Sociologist Sun Liping (孙立平) visited rural Heilongjiang for vacation. Noting the emptiness of these once vibrant farming areas, he argued that in addition to Heilongjiang’s struggling pension plan, the province also faces demographic decline through migration, both from rural areas to urban areas and from the economically depressed province to other areas in China (Weixin, December 19, 2017). Looking ahead, Professor Sun suggests that Heilongjiang’s problems with pensions and social security may be a “prelude” to a national crisis. “The problems now facing Heilongjiang are ones that [the rest of China] will encounter in a few years.”

Professor Sun is not alone in his concern. People’s Daily quoted Qian Xueming, a delegate to the Chinese People’s Political Consultative Conference (CPPCC) from Guangxi province as saying that China’s comparatively low per-capita GDP will “result in insufficient government public financial support for the elderly, limited capacity for the elderly to purchase pension services, and the development of the pension services face many practical problems and constraints” (People’s Daily, January 17).

Addressing this mounting crisis will require significant action at the national level. In his 19th Party Congress Report, Xi Jinping stated that to address these challenges a “strategy for a healthy China” that includes expanded study of population aging and construction of more robust pension and healthcare systems (Xinhua, October 27, 2017). Echoing Xi, in mid-January Li Bin (李斌), the Chairman of the National Health and Family Planning Commission (NHFPC), argued that by taking steps to mitigate the effects of population aging (particularly by improving older peoples’ participation in the labor force) will help “extend the period of strategic opportunity” (延长重要战略机遇期) for China. In essence, China sees its looming population crisis as the end of the window to accomplish important national goals such as improving the economy, and the military to the point where China’s future can be guaranteed in spite of demographic barriers. Li went even further in linking security with health and social security, stating “This is a prerequisite for safeguarding national security and social stability” (People’s Daily, January 12, 2017).

Chinese officials and public intellectuals are currently debating how best to create a robust system able to cope with population and healthcare issues. A variety of plans have been suggested, ranging from entirely-state-supported systems to a hybrid of public and private insurance. Others have argued that the current system could be made more efficient through Internet-based technologies under the umbrella of “Internet+”, an economic initiative to harness new technologies with existing industries (People’s Daily, January 12, 2017). It is hoped that some combination of these plans will help China transition to more affordable, comprehensive social safety net that is ready to cope with the large elderly population that is likely to dominate China by mid-century.

Adapting to an older population is just one of several important trends that the Chinese Communist Party is working to adapt to. The message at the heart of Xi Jinping’s 19th Party Congress address is a shift in the CCP’s focus from delivery of rapid economic development to more effective governance. While the former will remain important to the CCP’s immediate success, improvement in the latter is vital to its long-term survival. Structural characteristics of the Chinese economy—cheap labor, a need for infrastructure, and untapped potential in household consumption—have thus far been main drivers of growth.

To survive the next two decades of greying and fading, new pillars will have to be erected to continue expanding the economy while ensuring social safety nets and healthcare. Chinese leaders understand population aging as a strategic challenge. Without adequate preparation, China will be a much weaker, poorer state by mid-century.