By 2050, the UN forecasts that 35.1 per cent of the South Korean population will be aged 65-plus, up from 13.1 per cent in 2015, ahead of the 33.9 per cent of Singapore. Thailand’s share of the elderly is projected to have surged from 10.5 per cent to 30.1 per cent by then, and that of China from 9.6 per cent to 27.6 per cent.
By 2050, all four of these countries are expected to have a higher share of over-65s than in developed countries such as Canada, France, the United Kingdom, Australia and the US. In terms of absolute numbers, the impact could be greater still: Even in 2015, China had 131 million seniors, more than the combined tally in Japan, Italy and Germany, the world’s three oldest major countries.
It took France 115 years to double the share of its population aged 65-plus from 7 to 14 per cent, Sweden 85 years, Australia 73 years and the United States 69 years. In contrast, South Korea is expected to see the same transformation in just 18 years, Thailand in 21 years and China in 23.
This dramatic transition is partly driven by falling fertility rates, which will fall to two children per woman across Asia by 2025-30, compared with 5.1 children as recently as 1970-75.
Fertility rates have fallen to below 1.4 in Hong Kong, South Korea, Japan and Singapore, 1.5 in Thailand and 1.6 in China — all below the replacement rate — while even in India they are down to 2.3
Life expectancy in Asia has also been rising rapidly, from 42 in the 1950s to 72 now, a faster rate than in either the developed world or the rest of the developing world.
These factors are likely to mean that the proportion of pensioners in the population of several Asian countries will outstrip that of many developed countries in the coming decades. The rapid ageing of several Asian countries is also likely to be reflected in their labour forces, with the working-age population starting to decline in China, Hong Kong and Taiwan before 2020, South Korea and Thailand following suit between 2020 and 2025, and Singapore soon after.
The Chinese official pension age in urban areas is just 50 for blue-collar women, 55 for white-collar women and 60 for men, significantly lower than in most Western countries. This is despite China’s life expectancy of 76 (74.8 for men, 77.3 for women) only being about three years lower than the Western average.
StanChart says that China is likely to announce plans to reform its pension system later this year. It calculates that if Beijing raises the retirement age by a few months a year, so that it reaches 70 by 2025, then its demographics would be as strong as in 2010 for several decades to come. In July, Singapore is due to raise its re-employment age. Although the retirement age is 62, companies must offer re-employment to eligible workers up to 65. This is due to be increased to 67.
Without reform, StanChart estimates that, in China, pension contributions would eventually have to rise to 50 per cent of earnings to ensure the long-term viability of the public pension system, with comparable figures of 40 per cent for Vietnam and almost 30 per cent in Thailand. Hong Kong and Singapore could counter the effects of ageing by importing labour. This is more difficult for larger economies, most notably China, given that it has the world’s largest population. Immigration is also a sensitive issue in the region, as in other parts of the world.
Other policy options include measures to raise the female employment rate, although this is already higher in China and Thailand than in most Western countries, and to raise the fertility rate, although such schemes in Japan and South Korea have had “very little success”