China is unprepared for population ageing

Population ageing is now very rapid in China. The problem in our view is that China is unprepared for it: China’s pension and public health systems are very small: this leads households to save a lot with a view to their retirement, which weakens consumption; The shrinking of the labour force is not being offset by faster productivity gains, which can be attributed to weakened investment, leading to a decline in potential growth, reducing China’s attractiveness for foreign investment and exacerbating the debt problem; Population ageing is therefore leading to weak domestic demand and making China’s growth increasingly dependent on exports, which poses challenges in an environment of tensions between China and many countries.