A World Bank report has revealed that China is facing a problem with its aging population, which presents several pressing challenges, as reported by the Global Times.
The number of adults of working age in China may have fallen by 10 percent by 2014, which translates to a net loss of around 90 million workers, according to the World Bank's report on aging in East Asia and Pacific region.
China has also witnessed a decreasing fertility rate as well as an increase in life expectancy. Both pose serious challenges under its current economic environment, according to experts.
The direct effect of China's aging population will be a decrease in its workforce, which will have a limited effect on the growth of the country's economy because future growth will be derived more from productivity gains than population dividend, said Chen Qiulin, research fellow at the Institution of Population and Labor Economics of the Chinese Academy of Social Sciences.
However, Chen noted how the rapid pace of aging in China brings economic and fiscal pressures. He said that there will need to be greater access to social insurance funds, which may require increased tax rates or less investment in other sectors.
The aging population might also put increased pressure on families, which could possibly "change the domestic consumption structure," said Chen.
According to the report, there needs to be reforms that are carried out immediately, like removing incentives in pension systems that encourage early retirement.
"This year the Chinese government faces pension deficits, meaning that contributions will be insufficient to meet the pensions that are to be paid out," said Ma Li, director of the China Population and Development Research Center. "Canceling the early retirement incentives could help ease the burden on pension systems and make better use of the domestic labor force."
Ma recommends raising the retirement age to provide China with more workers.
On Nov. 20, the Ministry of Human Resources and Social Security announced a plan to progressively lift the retirement age.
Recently, China allowed all families to have two children instead of one. However, the World Bank does not see this drastically affecting the fertility rate of the country.
According to Philip O'Keefe, lead author of the World Bank report, the policy "will not significantly raise the fertility rate in China because, according to our research, only one-fourth of the interviewees we spoke to were willing to have a second child due to the high costs involved."