Overview

Abstract

One of the lessons that could be drawn from past experiences of countries suffering from the ‘middle-income trap’ is the failure to take advantage of ‘demographic profit’ and ‘demographic dividend’ brought by age-structure transformation at the early phase of population aging. In 2010, China’s elderly dependency ratio dropped to a historical low of 34.2%, but around 2030, the rate might return to over 50%, adding up to ‘demographic deficit’ and ‘demographic debt’. Therefore, the period between 2010 and 2030 is vital for steady and fast economic development and breaking out of the ‘middle-income trap’. Projections show that by 2025–2030, the amount required for pensions will take up over 10% of national income or 29% of total wages, which is the ‘warning line’. Therefore, China should start reform on pensions, improve the management of the pension system and maintain and increase the value of pensions. Meanwhile, as the working-age population is also aging, vocational training and on-the-job training are necessary to improve the quality and activeness of the employees. With regard to labour market transformation and rising wage rates, it is important to curb the rising cost of production factors and reverse the trend of decreasing marginal investment returns; highlight the role of consumption in driving economic growth and increase the income of the aged population and make the social security system benefit all; vigorously promote social transformation to meet the challenges brought by an aging society and pay attention to social problems such as old age marriage, family changes and the special needs of ‘empty nest’ elderly people; and promote the development of the senior care industry for the aged population and unleash their potential for consumption.