China's rapidly aging population has limited impact on its economy as future growth will come more from productivity gains rather than population dividend, the World Bank said Wednesday.
China is chief among countries around East Asia and the Pacific found to be aging faster than any other region in history, according to the World Bank's latest report.
The country has already become an aging society by global standards, with people aged over 65 years old accounting for more than 10 percent of the total population, compared with the standard 7 percent used globally to identify an aging society.
Economists at the Washington-based bank argue that countries in the region, including China, are getting old before they get rich and the growing share of elderly people will impact growth and stretch public finances to care for them.
"The days of receiving a big impact on growth from the number of people, or even the quality of those people is going to diminish," said Sudhir Shetty, World Bank's chief economist for the East Asia and Pacific Region. "What you are going to need is to focus on productivity."
Growth for the world's second largest economy during the first three quarters this year dipped to a six-year low of 6.9 percent, partly because China is losing its traditional cost advantage as a result of rising labor wages and a shrinking working population.
China's working population has already begun shrinking and the World Bank estimates that the country's labor force will lose at least another 10 percent, or 90 million people aged between 15 and 64 years old.
Philip O'Keefe, another economist with the World Bank, added that despite a dwindling labor pool, China's workforce is becoming more educated and the consistent increase in savings rates for all ages over the past two decades has helped offset much of the impact its aging population has on the economy.
The real challenge for China, they say, is how to make its pension system more sustainable. The current pension system in China is very fragmented and should bring pension money pooling to a higher level, according to O'Keefe.
Chinese authorities are also finding it challenging to ensure pension delivery, as many current retirees, mostly civil servants, didn't contribute to the pension fund during their working years. A state-backed study estimates that the country's basic pension insurance fund will run a shortage of 1.21 trillion yuan by 2019.
The authorities' 13th Five-year Plan has also vowed to coordinate its pension system on a national level to reduce fragmentation and will transfer more revenues from state-owned firms to alleviate fund shortage.
