變富前變老 (from The Economist.June 27th 2009)

變富前變老 (from The Economist.June 27th 2009)

2009-07-04 07:33:13

China’s predicament (From The Economist Jun 27th 2009) Getting old before getting rich THE Beijing Ren Ai Geracomium is set in a drab, dusty village just outside the Chinese capital. Grouped round a pleasant garden, this old people’s home for about 80 residents, aged from 50 to 96, is unusual in several respects. Its private owner is a Christian, and the home has a small chapel where the handful of Christian residents, along with other people of that faith living in the area, gather for Sunday services. The home is run as a commercial enterprise, but Hu Wenru, its deputy director, says that since it opened three years ago it has been only gradually building up business and is not yet making a profit. Still, the owner is already preparing to launch a second one with 300 beds in the next village, so he must be confident of success. The main thing that makes Ren Ai unusual is that it exists at all. Old people’s homes are a rarity in China, catering for only about 1% of the over-65s, far less than in most Western countries. The vast majority of older Chinese live with their families. Care for the old within the family is not only a cultural expectation, based on the Confucian tradition of respect for age and experience; under a law passed in 1996 it is also a legal obligation. Elderly people have been known to sue their families for maintenance if they fail to comply. At present, institutional care is the last resort for those who have no family or who need so much help that their relatives cannot cope. Many of the residents at Ren Ai, for example, have serious physical or mental problems, and the home has two full-time doctors on the staff. The place is clean and seems well-run, but it is spartan: some of the rooms sleep six people, with one basic bathroom between them. Even so, the fees are much higher than most ordinary people can afford, averaging 1,300 yuan ($190) a month for the reasonably fit but with extra charges for those who want a single room or need lots of nursing. Some of the residents are subsidised by the government, which seems happy to let private initiative flourish. There will be a lot more need for institutional care for elderly people in future, says Du Peng, director of the Institute of Gerontology at Beijing’s Renmin University. For the past three decades China has been operating a strict population-control policy, so there are now far fewer young people around to take care of the elderly. This state of affairs is usually referred to by the nifty formula “4-2-1”, meaning that the typical only child today will have two parents and four grandparents to look after—a bit of an exaggeration, but not that far off. It has also become harder for families to live together because people move around a lot more than they used to. An estimated 150m migrant workers have left their rural homes for jobs in the big cities, though many of them might return home eventually. Most importantly, because of the low birth rate and rising life expectancy, the number of over-60s is expected to go up very rapidly, from about 166m now to 342m in only 20 years’ time. All this means, says Mr Du, that many more older folk will be living in institutions. China is still a relatively young country, with a median age of around 30. But, uniquely among developing countries, it is ageing extraordinarily fast, so by 2050 its median age will have risen to about 45. Over the next few decades the ratio of elderly dependants to people of working age will rise steeply, from 10% now to 40% by 2050. From about 2030 the country will have more elderly dependants than children (see chart 8), whereas in most other developing countries the opposite will remain true for the next few decades. China’s pattern of ageing is very similar to that in Japan, Hong Kong, Singapore, South Korea and Taiwan. The difference is that in China this is happening at a time when the country is still relatively poor. The man who lays claim to having invented the phrase “getting old before getting rich”, in the early 1980s, is Wu Cangping, an academic at the Population and Development Research Centre at Renmin University. At that time population ageing was receiving little attention, and he wanted to shock the government into preparing for it. Since then China has become a lot richer (with an income per person of about $6,000 at PPP)—though not nearly as rich as most developed countries when they were starting to age. Some Chinese demographers are now arguing that the phrase should be amended to “getting old while getting rich”. In search of a new rice bowl Whether poor, rich or somewhere in-between, China will certainly need to spend some money to provide a basic social safety net for its people, not just the old but everyone. Until about 20 years ago the vast majority of urban workers were covered by a system known as the “iron rice bowl”. People who worked for the state, in state-owned companies or in state-approved collectives, enjoyed cradle-to-grave benefits ranging from housing, education and health care to a generous pension scheme, with an official retirement age of 55 for men and 50 for women for manual workers (but five years more for white-collar workers) and a replacement rate of about 80% of final salary. Most people retired about five years before the official age. It was too good to last, and it didn’t. In the early 1990s huge number of state-owned enterprises were shut down and jobs in those that survived were savagely cut. Many state firms passed into private hands and new private companies grew up alongside them. Whereas civil servants and employees in state-owned firms used to make up nearly 80% of all urban workers, their share is now down to 20%. The government is committed to honouring the pension promises left over from the old system, but the iron rice bowl has gone. That has left a huge gap in urban workers’ social-security provision. Workers in rural areas, who still make up about half the total labour force, never had much coverage of any kind anyway. Since then the government has launched a series of initiatives to put a new welfare system in place. The main concerns are health care and pensions. Since the demise of the old system, health-insurance coverage has been patchy and in rural areas mostly non-existent. Health insurance is generally not portable, so if people move from one part of the country to another they may lose their coverage. But even if covered, people have to make large co-payments, which for the elderly and those with serious health problems can be crippling. A survey carried out in 2000 by the China Research Centre on Ageing, a think-tank, found that more than half the over-60s’ medical expenses came out of their own pockets and a big chunk of the rest was paid for by their families. In April the government set out its plan for a comprehensive reform to build a “safe, effective, convenient and affordable” health-care system by 2020. Over the next three years it intends to spend 850 billion yuan. By 2011 more than 90% of the population is meant to be covered by the system. In rural areas that figure has already been reached, but the scheme usually covers only in-patient treatment and the reimbursement rate remains very low. The pensions system too is in flux. In the early 1990s the government announced a three-pillar scheme along the lines of those in many developed countries: a basic pay-as-you go pension to which both employers and employees make mandatory contributions; funded individual accounts, also with contributions from employers and workers; and individuals’ private savings. This is a work in progress. Reforms are being announced “almost annually”, says Wang Yanzhong, who heads the Centre of Labour and Social Security Studies at the Chinese Academy of Social Sciences (CASS). So far only about a third of the population is covered by any kind of pension scheme. The funded individual accounts envisaged under the government’s plans have been set up, but so far there is little money in them. Because of restrictions on investment abroad and a dearth of high-yielding instruments at home, such money as has accumulated has been invested mainly in the domestic banking system, where it earns a rate of return far too low to meet the government’s pension promises. Jonathan Anderson, a China specialist at UBS, calculates that under the current pension system the government could face unfunded liabilities of up to 6% of GDP annually a few decades hence. But it could head them off by a variety of means: raising contributions or increasing coverage to bring more money into the system; increasing the retirement age; securing better returns on the accumulated funds; or reducing future pay-outs. By far the most effective way, though, would be to raise the retirement age. In early spring the government hinted that it was considering such a move, but Chen Chuanshu, vice-director of the government’s high-powered National Committee on Ageing, says there are “diverse views” on the matter. In principle it seems a good idea. Average life expectancy at birth, at 74, is now 25 years higher than it was 50 years ago, yet the retirement age has remained at the same low level. Unless it goes up, any comprehensive pension system that China might eventually introduce will be hideously expensive. In practice, though, both workers and employers are strongly opposed to a change. Workers have got used to the idea of retiring in their 50s and planned their lives accordingly. Employers have had the luxury of being able to pick from a seemingly inexhaustible supply of vigorous people in their 20s and 30s. Workers in their 40s are already considered old, and many of those in their 50s may indeed lack the skills needed in a modern economy. But given the low birth rate over the past 30 years, the supply of young workers is not, in fact, endless. Cai Fang, director of the Institute of Population and Labour Economics at CASS, points out that there is already a shortage of young migrant workers; it started in the coastal areas in 2004 and has now spread everywhere. The worldwide economic downturn has temporarily eased the pressure, but employers in China’s coastal boom belt continue to complain of shortages (although 20m people are said to have lost their jobs since the downturn hit late last year). So there is now an economic, as well as a human-rights, case for relaxing the country’s “one-child policy”. Many Chinese academics think it can be only a matter of a few years, but the government seems in no hurry. “Family planning”, as it likes to call the policy, is seen as a success, easing pressures on the environment and resources of all kinds. There is no explicit population target, but the latest forecasts suggest that numbers will keep growing from about 1.3 billion now to a peak of around 1.46 billion by 2030 and then start declining gently. In fact, even if the restrictions were loosened immediately the birth rate might not tick up by very much. In the big cities many people are already leading the sort of lives that have brought down fertility in richer countries. China’s government is well aware of the problems of an ageing population, and “is doing all the right things but not always fast enough”, says Vanessa Wang, an Asia specialist and actuary with Mercer, a consultancy. So far the government’s main priority has been to keep up the prodigious economic growth rates of recent years, but the prime minister, Wen Jiabao, has said that the government is attaching growing importance to social welfare. Of the 4 trillion yuan economic-stimulus package announced last November, 300 billion has now been reallocated from infrastructure projects to welfare schemes. Critics say China could afford to do much better. Its public finances are in good shape, with its public debt at less than 20% of GDP and its fiscal balance improving rapidly. Saving, at over 40% of GDP, is high by international standards. Given the prospect of 440m pensioners by 2050, perhaps it should invest more in creating its much-advertised “harmonious society”.