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China’s policy choices have ultimately resulted in the situation that the nation currently faces: a nation with a rapidly aging demographic with an increasing dependency ratio that can eventually cripple the country economically if measures are not taken to stem their breakneck pace. Compounding the issue is that China’s traditional social welfare has held long in history the untold responsibility that the younger generation will be caring for their elders. However, the ramifications of their current status, of the aging population outpacing the younger working population, indicate that change needs to occur because the old methods of addressing the social and economic problems of their rapidly aging demographics will not suffice. In order to address some of these issues, it’s necessary to first identify a couple of key policies and issues that helped usher China into its current predicament.
Historically, China had been reaping the rewards of its low dependency ratio for many years. According to a June 2009 article of the, the 1980’s brought a decade of success and expected good pension due to the implementation of the one child policy and the Iron Rice Bowl care system that provided cradle to grave benefits.
The one child policy implemented in 1978 to ease some of the social and economic burdens during that time led to, currently, one of the lowest fertility ratios in the world. What does this mean? The low dependency ratio, currently 3:1 economically active adult to 1 dependent, helped thrust China into prosperity (The Economist, 2011). However, between 2000-2010, the percentage of future providers decreased from 23 percent to 17percent. Experts anticipate that by 2050, the dependency ratio will drop to 2.2:1, being one of the lowest in the world. Japan currently has a ratio of 2.6:1 (The Economist, 2011). This trend in dependency ratio can’t be sustained with the current model of policies and has already brought a slew of different issues today as a result. Fiscal pressures as well as future healthcare and pension complicates the problems China faces.
In the past, China has always turned to their immediate family or extended family for support as they age. However, with decreasing family size, urbanization, worker migration, unemployment have led to the weakening family system as a social security for long-term care. With the increased life expectancy, the 4-2-1 problem, as it has been known to be called, refers to the social paradigm that the younger generation has with relation to their elders (i.e. 4 grandparents + 2 parents will rely on one offspring for future care). The current funnel demography that has come to play also started a new small category of elderly: Three No’s – no children so they lack social support, no income and no ability to work” (The Economist, 2011). Thus, the shrinking family system has become a social and societal welfare issue as well, not just a family issue.
When China was enjoying its decade of prosperity, it had not anticipated the changes that the 1990’s brought. Enterprise changes ground the prosperity to a halt when state enterprises shut down or privatized (Viswanath, 2012). Urban workers, which used to comprise 80percent of civil servants/employees drastically decreased to 20percent. The Iron Rice Bowl pension scheme ended. Instead, a new 3-pillar pension scheme was introduced where the following paradigm was...
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