On March 30, the 4th First General Meeting of the New Shanghai Business Association and the Forum on “The Centennial of the Party and New Opportunities for China’s Economy in the Next Decade” were held in Shanghai. Zhu Min, President of National Finance Research Institute of Tsinghua University, delivered a speech at the conference.
The 2020 epidemic has accelerated and advanced a series of structural economic changes, which will profoundly affect the future development of China’s economy. One of the driving forces is aging and longevity.
“The aging of the population is coming far more than we thought and will fundamentally change demand, change supply and change finance. The share of the population over 65 today is almost at about 12 percent, and the share of young people and the labor force is gradually declining.”
Based on projections of changes in the population in 2050 compared to today’s population, Zhu Min said that by 2050, China’s net population will decrease by 33 million, because China has a large population and decreasing that percentage is still very low. But the net increase in population will grow by 80 million in the 60-year-old age group, 100 million in the 70-year-old age group, and 80 million in the 80-year-old age group. 80 million will be the net decrease in population in all age groups above 40 years old, and 100 million in the 20-year-old age group.
Zhu Min said the demographic structure is changing dramatically. 30 years from now, the net increase in population is all over 60 years old, while the main age group growing in 2035 is in the 60s. 2050 growth is all in the 70s and 80s, while at the same time, all in the under-50 age group is negative growth.
“Demographic change creates a host of problems. By 2050, the whole age is concentrated in the 60s and above, and young people become very small. Aging creates a big problem, who will feed the elderly?” Zhu Min said that today 3.6 employed people can support 1 retired elderly person, but after 2050 it will be the concept of 1 to 1, 1 employed person has to support 1 retired elderly person, the economic structure will be profoundly changed.
Zhu Min took a typical case Japan as an example, Japan is the first country to experience aging. From 1994 to 2016, Japan’s industrial structure has undergone fundamental changes, manufacturing, construction and finance are shrinking, and the net growth is in health and social activities, professional and technology, information and communication. Because when you get older you don’t need as many material goods, you don’t need as much housing space. Older people need services and more communication. The whole production structure will change radically.
“From 1996 until now, other expenditures in Japan have remained largely unchanged, and the only thing that has gone up is health care. Because the population is getting older, the need for health care is growing. Finance and real estate are again huge changes. The number of new real estate openings in Japan went up from low prices in the 1950s and dropped sharply all the way in the 1990s because of the bursting of the bubble in Japan. But we all know that where the bubble burst will definitely rebound and will definitely rise. And why didn’t Japan’s real estate rebound once it fell? Because of aging. The elderly are moving from large houses to small houses, apartments, nursing homes, and the construction industry has been in decline ever since. Tokyo’s house is still cheaper than Shanghai, but after buying it has fallen continuously until now.” Zhu Min said.
Zhu Min pointed out that today China’s social security fund only accounts for 10% of GDP, a large number of elderly people are coming, social security fund is far from enough. Commercial retirement assets so far only account for 0.025% of GDP, far from meeting future needs. There will be fundamental changes in the financial sector. At the same time, changes in the industrial structure will lead to changes in the investment of the financial industry, and the third pillar of commercial pension insurance will grow very rapidly, while bringing long-term investments and very significant changes in the financial structure.
“This reasoning will continue to advance and affect us for the next 30 or 40 years, and it is a particularly profound change…” Zhu Min said.
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