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China's Silver Economy - a Way Out of the Unemployment Crisis?
With the combination of low birth rates and an ageing population in China, many experts forecast that the development of the silver economy will be a way out.
Wei Liqun, a professor of management at Hong Kong Baptist University, said the low birth rate has been an issue for a long time in a unique social context in China. This became more evident because the Chinese people became rich later than people in Western countries.
The Chinese birth rate reached a ten-year low of 0.68‰ in 2024, according to the National Bureau of Statistics. As estimated by the United Nations, the crude birth rate in China will be as low as 0.62‰ in 2025, followed by Japan and South Korea among Asian countries.
At the same time, government data shows that there are 220.23 million people over 65 years old in 2024, which is an increase of 1.6% from a year earlier, signalling China is stepping into an aging society over the past decade.
Liu Wanting, 30, a teacher who got married last year, said she didn’t want to have a child for at least the next five years.
“I need more free time and money in the golden hour of my life,” said Liu. “It’s really common for the peers around me not to have a baby, whether it is because of the economic pressure or other factors.”
Liu’s experience coincides with research from Yuwa Population Research last year, which found that the cost of raising a child to the age of 18 as a multiple of GDP per capita is 6.3 in China, which is the highest around the world, and the time and opportunity cost of raising a kid is critical for families in China.
These compounding pressures are triggering demographic tremors across China's economic foundations.
“We have already lost our labour dividends with the ageing society in the past decade,” said Thoms Yuen Wai-kee, an assistant economics professor at Hong Kong Shue Yan University.
“The situation pushed us to industrial upgrading and machinery so that we won’t need low-end workers in the future,” Yuen explained.
In the same vein, Gary Ng, the senior economist, said there would be fewer choices for companies in the future, and they have to rely more on technologies.“China will have a shrinking labour force, which will speed up automation in manufacturing, as we have already seen,” Ng said.
“China will also need to spend more on social welfare to maintain social stability, such as healthcare, which also adds to the government's budget."
Besides manufacturing and the private sector, the demographic shockwaves are now reaching China's bedrock public institutions. With primary school enrollment projected to drop by 30 million in 2035, according to the China Institute of Education and Social Development.
In Xiamen, a coastal city where the number of kindergarten students decreased by 12.5% from 2023 to 2024, the municipal government recently tried to turn teachers’ “iron rice bowls” into contracts.
In the recruitment plan for teachers in Xiamen last year, the government turned the traditional lifelong tenure into contract-based employment, marking the first wave of pilot reforms in China to adjust the low birth rate.
Li Qiang, the premier of China, tried to tackle the issue in two sessions, the annual meeting of the Chinese legislature, in which he would provide more subsidies to families who are willing to have babies in his latest government report.
However, Liu Wanting felt the subsidies would be too few to raise a kid.
“Compared with other developed countries, the fertility subsidies in China were not enough to encourage the youth,” said Liu. “We’d better rely on ourselves to make more money instead of the government’s subsidies.”
Research reflected that the result of subsidies showed a mixed impact on having babies in other developed countries.
Fertility welfare accounted for 1.95% of the GDP in Japan in 2023, which was lower than the average of 2.29% among the Organisation for Economic Cooperation and Development countries, and it was still hard to boost the birth rate.
The OECD countries with higher subsidies, such as France, were enough to encourage more births, according to Yuwa Population Research in 2023.
“Providing fertility subsidies can only solve the problem in the short term,” said professor Wei. “China is good at educating its people; it could be systematically solved by education that Western countries can’t do.”
Besides, the “involuntionary competition” or “nei juan” in China also leads to a low birth rate and shapes the labour market, according to Wei.
“It has been a long process, and few young people are willing to give birth. One of the reasons was involutionary competition, just like in South Korea,” Wei said. “Leading IT companies and civil servants seem to be the only way out for them in career choices, which will make them live under pressure.”
In Tide of Ageing Society: Is the silver economy enough to save the economy?
With the decreasing labour force in China, many experts see the silver economy as a great trigger to turn older people’s savings into consumption. However, some scholars doubt whether market is big enough to boost the economy and absorb employment.
Thomas Yuen Wai-kee the professor, said the silver economy would be limited to helping the Chinese economy.
“From cases in other countries, I am concerned that the market cap of the silver economy is too small to rally the economy,” said Yuen. “Meanwhile, the industry needs professional people to join, so there would be few positions for ordinary people.”
The government's latest data, however, suggests a different trajectory.
The market of the silver economy in China reached seven trillion yuan (around HK$ 6.5 trillion) in 2023, accounting for 6% of the Chinese GDP, and it would be around 30 trillion yuan (around HK$ 28 trillion) in 2035, as estimated, according to the government.
Zhang Nan, 51, a senior wealth planner at Taikang Pension, has served more than 50 people in the past three years to make their retired lives more manageable for rich clients.
“We are promoting high-end institutional old people’s homes for high-value individuals who are over 65 years old,” said Zhang. “The clients at least have an equivalent of 2 million yuan (around HK$ 2.13 million) as disposable assets to join our old people’s homes around China.”
The total wealth of Zhang’s clients is more than 11 million yuan (around HK$ 11.8 million) as of January. (Photo Courtesy: Zhang Nan)
According to a Taikang Insurance and Nielsen Research survey, around 48.7% of high or middle-valued people in first-tier cities chose high-end institutional old people’s homes. More than half of those from third-tier cities decided to stay home in 2024.
Tai Kang Pension operates many different high-end institutional old people’s homes around China.
“For youth, I don’t think it’s the case to reach this level of wealth, but it’s really an inspiration for them to work harder”, Zhang explained. “The silver economy is not a rich man's game but could turn the elderly’s savings into investments and consumption.”
It’s also promising for youth employment as we also lack labour forces, such as nursing professionals, in the industry to serve the many elderly in the future, Zhang added.
Zhang’s opinion reflects the government’s policies.
There were 5.63 million registered nurses in China at the end of 2023, which increased by around 19.8% from 2020. Meanwhile, around 90% of geriatric nurses will participate in training by this year, according to the government.“
Whether the industry is promising depends on whether it could be in a healthy business circle,” said Wei Liqun a professor.“It would definitely be an enormous industry, as we can see that around 60% of the elderly’s savings are controlled by the silver economy in Western countries,” Wei explained.
However, Gary Ng the economist, identified that it would be beneficial for specific industries, but it may not be able to revive the Chinese economy to the previous level.
“We can see there are certain demands with more people getting old, but it may not be the same as what we see,” Ng said. “The thing is whether they would spend the same amount of money on the macro level as the era when China had labour dividends.”
What can be done to survive the labour headwinds?
Regarding the economic headwinds caused by unemployment and an aging society, experts see the education system, working culture, private sector, and social networking as ways to ride out the economic and psychological downturn.
“The education system should be changed in universities to fit the future job market,” said Professor Yuen.
“We are experiencing the AI revolution, and technologies are changing every day. We should manage the latest technologies to get a job,” Yuen explained.
Professor Wei Liqun also stressed that vocational education is important for youth to get a job.
“There are many vacancies for technical workers in factories, and China is building vocational universities,” said Wei. “With more students graduating from this kind of school, it would be more convincing to attract labour forces to be technical workers.”
Gary Ng of Natixis said the private sector and working culture in China could be ways to tackle the issue.
“Having a more open approach and increasing supply, especially for the private sector, would be able to eventually bring down the cost of educating people,” Ng explained. “On the other hand, whether the companies can provide more benefits for hardworking people and improve the work-life balance is also important.”
Moreover, Julian Pfrombeck, the assistant psychology professor at the Chinese University of Hong Kong, highlighted that a social support system would be psychologically effective in addressing unemployment issues.
“A social support system is very important to help with unemployment as it not only mitigates adverse outcomes but also helps with the job search process,” Pfrombeck said.
For the youth themselves, Danna Zhang, the general manager of a tech industry headhunting firm, Dolphin Leap Recruitment, said the practical experience could make them more competitive.“
It would be better if the youth could approach practical projects, industrial competition, and related internships,” said Zhang. “We could see that companies from developed countries all preferred candidates with practical skills, and it also applied to some founders of the technology companies.”