Will silver economy be the silver lining of China's aging population?
Chinese economist Ren Zeping predicts that by 2050, consumption by China's elderly will represent 21% of the nation's GDP.
In recent years, the aging population has been increasingly recognized as one of the most pressing and complex challenges facing major economies in the world, such as the United States, Japan, and China.
As life expectancy rises and birth rates decline, China is witnessing an accelerated pace of aging and experiencing a significant demographic shift that is reshaping its labor markets and social structures.
Qiushi, a flagship magazine of the Communist Party of China (CPC) Central Committee, recently published an article by Xi Jinping on the decline of China's population. The article is part of Xi's speech on May 5, 2023, at the first meeting of the commission for financial and economic affairs under the 20th CPC Central Committee.
Patrick Zhang, a Salzburg Global Fellow and a Non-Resident Senior Fellow at the Center for China and Globalization (CCG), introduced the article in his Geopolitechs newsletter.
China's population development has also entered a new phase. Comprehensive analysis shows that with economic and social development and changes in the age structure of the population, our country has generally shifted from a stage of population growth to one of population reduction. Population development exhibits clear trending characteristics such as low birth rates, aging, and regional population increases and decreases.
Xi noted in the article that while population decline may bring certain challenges, it also has positive effects, such as reducing pressure on resources and the environment and fostering a shift in economic development from extensive expansion to intensive growth.
At the same time, we must recognize that our country's low birth rates and aging are occurring before modernization is completed, which will bring new difficulties and challenges that we must actively address.
The article also outlines several key tasks to support Chinese modernization with high-quality population development, including implementing a national strategy to address population aging.
We must promote the construction of a basic elderly care service system. Improve the basic elderly care service catalog system, and establish an elderly care service system that coordinates home, community, and institutions, integrating medical care with health and elderly care.
We must vigorously develop the "silver economy." Support the elderly care industry to develop in scale, standardization, clustering, and branding, and cultivate high-tech products and high-quality service models.
We must enhance the sustainability of the social insurance system. Accelerate the development of a multi-level, multi-pillar pension insurance system, strengthen the second and third pillars of pension insurance, and improve the financing and benefit adjustment mechanisms of basic medical insurance.
"银发经济 Silver economy" has become a popular term in Chinese media and forums in recent years.
"People from my parents' generation were reluctant to spend money; they always saved whatever they could. But now, when I look at retirees from the 1960s generation, it’s a different story. They are traveling, networking, and many are enrolled in senior universities after retirement," said Yang Guowu, founder of 居家通 Jujialink, a Beijing-based data-driven startup specializing in elderly care, during a forum on gerontology and geriatrics held in Beijing last month.
This Monday, Ren Zeping, chief economist at Zhongyuan Bank, published "中国银发经济报告2024 China Silver Economy Report 2024" on the WeChat blog "泽平宏观 Zeping Macro." Ren has previously worked as an economist for 国务院发展研究中心 Development Research Center of the State Council. He also has a large following on Chinese social media.
The report is structured into three key sections: the current aging situation in China, international experiences from developed countries in the silver economy, and the emerging opportunities within this sector. For the readers of this newsletter, the first and third sections may be of particular interest, so today's newsletter will focus on these two parts.
Highlights:
According to the report, China's aging population is growing rapidly and significantly reshaping the demographic landscape. A large and growing portion of this population, particularly those in their 60s, are not simply aging in place but are vibrant and active—ushering in a new era where the elderly are no longer seen as frail or passive, but as engaged and full of life.
Over time, the elderly in China have experienced remarkable improvements in education, health, and life expectancy. Today, more elderly individuals are living independently than ever before, with over half of them now residing alone—an increasing trend that gives rise to the phenomenon of "empty-nest seniors." Furthermore, the generation born in the 1960s, having spent their lives accumulating wealth, is entering its later years with higher economic aspirations, seeking not only a comfortable retirement but a lifestyle that reflects the desires and expectations of a more affluent, modern society.
As China enters this aging era, the silver economy presents immense potential, driven by the growing demand for products and services catering to the elderly. The report said by 2050, it’s projected that the elderly population's consumption will account for 21% of China’s GDP.
Based on observations and analyses, Ren and his team put forward that new opportunities are emerging in six major aspects, including clothing, food, housing, travel, healthcare, and financial services tailored to the elderly, which are expected to experience significant growth as the silver economy continues to expand.
More details:
The silver economy encompasses a range of economic activities aimed at providing products and services for the elderly, as well as preparing for the aging stage of life. It includes both efforts to "serve the elderly" and to "prepare for aging." The concept of the silver economy originated in Japan and was later adopted by Europe, North America, and other Asian countries.
China officially introduced the concept of the silver economy in 2019, and in 2020, it called for its development. In January 2024, the State Council issued the "《关于发展银发经济增进老年人福祉的意见》Opinions of the General Office of the State Council on Developing the Silver Economy and Improving the Well-being of the Elderly," the first policy document specifically named after the silver economy. This document provides a clear definition, describing the silver economy as the total economic activities related to providing products and services to the elderly, as well as preparing for the aging stage of life.
The development of China's silver economy is driven by the deepening aging trend and the country’s position as home to the largest elderly population in the world. This offers vast potential for the silver economy, which not only helps improve the quality of life for individuals but also contributes to economic growth and stimulates domestic demand. According to estimates from 中国老龄科学研究中心 the China Research Center on Aging, the current scale of China's silver economy is approximately 7 trillion yuan, accounting for around 6% of GDP. It is projected that by 2035, the scale of the silver economy will reach 30 trillion yuan (about 4.18 trillion U.S. dollars), offering tremendous growth potential.
The key to the development of the silver economy lies in unlocking the demand of the elderly population, with the core focus on meeting their diverse needs for products and services.
1. By category, there is a shift from addressing the functional needs of the elderly to fulfilling their emotional and spiritual needs. It’s not just about ensuring the elderly are cared for, but also providing opportunities for them to enjoy life and continue contributing, allowing them to remain engaged and purposeful in their later years.
2. By age group, younger seniors (aged 65-74) tend to focus on consumption, socializing, and entertainment, while older seniors (aged 75-89) require more caregiving services, and those in the longevity age group (aged 90 and above) are increasingly concerned with changes in physical health. Traditionally, the elderly population is categorized as those aged 60 and above, or 65 and above. However, if we consider the "pre-elderly" group, the silver population can be expanded to include individuals aged 50 and above. Based on age, the silver population can be divided into four groups: 准老人 pre-elderly (50-64), 低龄老人 younger elderly (65-74), 高龄老人 older elderly (75-89), and 长寿老人 the longevity elderly (90 and above).
New characteristics of the elderly population: large scale, improved overall quality, greater independence, and increased wealth
Currently, the elderly population exhibits the following four key characteristics:
1. Large scale and continuous growth: The elderly population is large and continues to grow, with those in the younger elderly age group (60-69) accounting for more than 50%, and this proportion is steadily increasing. It is projected that by around 2032, the number of elderly people in this group will reach 220 million.
In 2023, China’s population aged 60 and above was nearly 300 million, accounting for 21.1% of the total population. The population aged 65 and above was approximately 220 million, or 15.4% of the total population, representing about a quarter of the world’s elderly population. In other words, for every four elderly individuals worldwide, one is Chinese.
According to the China Population Forecast Report 2023 by the Beijing-based YuWa Population Research Institute, under the “Medium Scenario,” by around 2033, the number of people aged 60 and above in China will surpass 400 million, making up around 30% of the total population. The population aged 65 and above is projected to reach 290 million, accounting for more than 20% of the total population.
In terms of age distribution, in 2020, there were 150 million people aged 60-69, accounting for 55.8% of the elderly population aged 60 and above. According to Yuwa Population’s projections, the number of people aged 60-69 will continue to rise over the next decade, peaking at around 220 million by 2032.
2. Significant improvement in the comprehensive quality of the elderly: This improvement is evident in the areas of education, health, and life expectancy.
In terms of education, from 2010 to 2020, the proportion of people aged 60 and above with at least a high school education increased from 9.1% to 13.9%. As the overall education level of the population rises, the future elderly population will have higher educational attainment, which will contribute to an overall improvement in the educational quality of the elderly group.
In terms of health, from 2010 to 2020, the proportion of people aged 60 and above who considered themselves in good health increased from 43.8% to 54.6%. Meanwhile, the proportion of those in "fair health" decreased from 39.3% to 32.6%, and the proportion of those who were "unhealthy" dropped from 16.8% to 12.3%.
Regarding life expectancy, China’s average life expectancy currently stands at 78.6 years, significantly higher than the global average of 73.3 years and the 77.8 years of upper-middle-income economies. It is approaching the level of high-income economies, which is 81.4 years. With continuous improvements in the healthcare system, there is still room for further increases in life expectancy, and the number of elderly individuals living at an advanced age is expected to rise.
3. Living independently with financial independence: Over 50% of elderly people now live independently, with an increasing proportion of "empty-nest seniors." From 2010 to 2020, the proportion of elderly individuals relying on family support decreased from 40.7% to 32.7%.
As traditional values evolve, combined with shrinking family sizes, fewer children, and increased population mobility, more elderly individuals are choosing not to live with their adult children. According to data from the Seventh National Census, 39.7% of elderly people live with their children, while 55.7% live only with their spouse or independently.
When looking at urban versus rural areas, the proportion of elderly living alone is 52.2% in cities, 53% in towns, and 59.4% in rural areas. In rural regions, where many young people have migrated for work or to more developed areas, a growing number of elderly individuals live alone.
Furthermore, with the gradual improvement of the social security system, more elderly people are relying on pensions and retirement benefits for financial support, leading to greater financial independence. According to census data, from 2010 to 2020, the proportion of people aged 60 and above relying on pensions increased from 24.1% to 34.7%, while those relying on family members' support decreased from 40.7% to 32.7%.
4. Increased wealth: The generation born after the 1960s, which became wealthier over time, is now entering old age. With generational changes and evolving living conditions, the overall consumption willingness of the elderly population is on the rise.
According to sociological theory, individual values are shaped by the social environment. As China's economy and society have developed, elderly people from different eras have been influenced by distinct backgrounds, which in turn have shaped their values and consumer mindsets. The generations born in the 1940s and 1950s were the ones who "stood up" after the founding of New China, growing up in an era of material scarcity and developing habits of hard work, endurance, and frugality. The generations born in the 1960s and 1970s, on the other hand, grew up during the period of economic reform and opening up, when social security systems began to improve, income levels increased, and wealth began to accumulate, while their health status also remained relatively strong. The generations born in the 1980s and 1990s grew up during a time of rapid economic growth, with the widespread use of the internet and the rise of 5G technologies, enjoying relatively more material wealth.
Data shows that between 1978 and 2023, China's Engel coefficient for urban residents decreased from 57.5% to 28.8%, while for rural residents, it dropped from 67.7% to 32.4%. According to the 2023 National Report on the Development of Aging Affairs released by the Ministry of Civil Affairs and the National Working Commission on Aging, the per capita wealth of individuals aged 60 and above in 2023 was approximately 264,000 yuan.
Opportunities:
As China enters the era of population aging, the demand from middle-aged and elderly individuals for products and services in areas like clothing, food, housing, transportation, and healthcare presents huge potential for the silver economy. By 2050, it is expected that elderly consumption will account for 21% of China’s GDP. The new generation of seniors, generally better educated, is placing more value on quality of life and social activities after retirement. They are increasingly willing to spend time on their passions and hobbies, laying a strong foundation for the rapid growth of the silver economy.
According to data from iMedia Research and the China National Institute of Gerontology, between 2018 and 2023, China’s senior care market grew at an annual compound rate of 12.7%. By 2050, the total consumption of the elderly population is projected to reach between 40 and 69 trillion yuan, accounting for 20.7% of the national GDP.
With the dual driving forces of policy support and the rising demand for the elderly's mental and emotional well-being, the core areas of growth in the silver economy are expected to be in the following sectors:
1. Clothing: Apparel for the elderly;
2. Food: Elderly-friendly food products and health supplements;
3. Housing: Home-based care, community services, institutional care, end-of-life care, and senior living real estate;
4. Travel: Silver tourism;
5. Healthcare: Medical aesthetics and healthcare devices;
6. Financial Services: Elderly-focused financial products and services.
Ren's report reminds me that in a recent episode of 十三邀 Thirteen Talks, a highly acclaimed Chinese interview series featuring thought-provoking conversations with a diverse array of heavyweight guests, 许知远 Xu Zhiyuan, host and producer of the show, conversed with 陈东升 Chen Dongsheng, founder and chairman of Taikang Insurance Group as well as its subsidiary 泰康人寿 Taikang Life Insurance, one of China's largest insurers in health and elderly care.
In the episode, Chen Dongsheng, a widely considered pioneer in China's community elderly care industry, shared his views on China's elderly care industry as well as his experiences and insights gained from achieving success in this field.
Chen reflected on his thoughts about the industry's future development 17 years ago and the insights he gained from researching the elderly care sector in the United States In 2008. He recalled that when he decided to focus on investing in the community elderly care sector, many were skeptical due to the industry's heavy reliance on assets, large investments, and low returns on investment. At that time, he purchased a 400,000 square meter plot of land in the suburbs of Beijing for several thousand yuan per square meter -- now the site of Taikang Life's flagship community elderly care project, "燕园 Yan Garden."
Chen shared that the then Party Secretary of Changping District in Beijing had told him, "Everyone comes to me under the guise of elderly care to engage in real estate, but only you, the 'fool,' bought the land at residential land prices to develop the elderly care industry."
According to Chen, although the land's price later soared to tens of thousands of yuan per square meter due to the boom in China's real estate industry, he did not sell it. Instead, he continued to develop the elderly care community, a commitment and foresight that have led to his success in the industry today.
As of June 30, Taikang managed 890 billion yuan in pension funds, making it one of the largest corporate pension investors and managers in the Chinese market.
"I didn’t sell at that time because I wanted people to see that the elderly care sector was a long-term opportunity, a major trend for the future," Chen said.
"Later, we combined elderly care with insurance, creating an innovative model that could be regarded as a global breakthrough—merging virtual insurance with real-world healthcare and senior care, and forming a new business model centered on health and longevity," said Chen during the 20th Summer Annual Conference of Yabuli China Entrepreneurship Forum this August.
I believe Chen Dongsheng's example is a vivid illustration of a "long-termist" seizing opportunities and achieving success through persistence. I recommend this episode and highly suggest watching other in-depth interviews on the "十三邀 Thirteen Talks" series, which is my favorite program for deep conversations in China.
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