# China’s aging population and its economic impact

- Link: https://www.thailand-business-news.com/china/160011-investigating-chinas-aging-population-and-its-economic-impact
- Published: 2024-09-06T09:37:00+07:00
- Author: News Desk

Analyzing the economic impact of China’s aging population through a global model
predicts a reduction in growth and per capita income. While raising retirement ages
could help, the effect is likely to be marginal.

## Key Takeaways

 * China’s population aging is projected to reduce its annual GDP growth rate by
   1.1-1.4 percentage points over the next five decades due to a shrinking workforce
   relative to the population.
 * Raising the retirement age is expected to mitigate the negative economic impact
   of population aging, leading to increased labor supply and GDP growth in the 
   short term, and improved sustainability of the pension system in the long run.
 * Population aging in China will significantly increase pension expenditure as 
   a percentage of GDP and lead to higher current account balances, resulting in
   capital outflows that could affect global interest rates.

The paper investigates the macroeconomic impacts of China’s demographic changes 
using a general equilibrium model. The study projects a significant decline in China’s
economic growth over the next five decades due to population aging, estimating a
1.1-1.4 percentage point decrease in the average annual growth rate. Per capita 
income growth is also expected to slow, and the fiscal position to deteriorate due
to increased pension burden. Additionally, the study simulates the effects of raising
the retirement age, showing that it can mitigate the negative effects to a limited
extent, leading to a modest increase in labor supply and economic growth in the 
short term.

ADVERTISEMENT

## Projected decline in workforce and income growth

With a faster decline in the workforce compared to the overall population, per capita
income growth in China is anticipated to slow down significantly. This demographic
shift could have profound implications for the country’s economic dynamics, affecting
everything from labor markets to social welfare systems, as the aging population
increases.

Over the past four decades, China’s reforms and opening-up, coupled with favorable
demographic trends, have driven rapid economic growth and established it as a significant
global economic force. However, China’s demographic dynamics have shifted negatively.
The working-age population (ages 15–64) peaked in 2013, and in 2023, China’s total
population decreased by 850,000 to 1.41 billion, the first decline since 1961. In
2023, the population dropped for the second year in a row, by 2.08 million or 0.15
percent. Declining birth rates and increasing life expectancy have resulted in a
swiftly aging population. By the end of 2022, the elderly population aged 65 and
over reached 209.78 million, representing 14.9 percent of the total population, 
categorizing China as an “aged society” according to UN criteria.

The significant demographic shift is expected to continue in the coming decades,
with important economic and social consequences. An aging population will lead to
a decrease in the labor supply and may initially reduce labor productivity. Additionally,
investment is likely to be hindered by a rising capital-labor ratio and a lower 
return to capital compared to the return to labor. As the proportion of elderly 
citizens increases, pension and healthcare expenditures will also rise, posing long-
term financial challenges to the social security system. This calls for structural
reform in the labor market and public finance.

### Related**Posts**

###  󠀁[Thailand to Raise Imported EV Taxes to 35% in Push to protect Local Production](https://www.thailand-business-news.com/trade/338353-thailand-to-raise-imported-ev-taxes-to-35-in-push-to-protect-local-production)󠁿

###  󠀁[Thailand Business News — Morning Briefing | Tuesday, 3 November 2026 | Thailand, ASEAN and Global Markets](https://www.thailand-business-news.com/news/338217-thailand-business-news-morning-briefing-tuesday-3-november-2026-thailand-asean-and-global-markets)󠁿

###  󠀁[Thailand Business News — Morning Briefing](https://www.thailand-business-news.com/banking/337929-thailand-business-news-morning-briefing-5)󠁿

###  󠀁[Building ASEAN+3 Resilience Amid Converging Economic, Climate and Cyber Risks](https://www.thailand-business-news.com/opinion/335385-building-asean3-resilience-amid-converging-economic-climate-and-cyber-risks)󠁿

## Limited impact of raising retirement ages

While raising the retirement age is proposed as a solution to mitigate the economic
impact of an aging population, the study finds its effect to be limited. Although
it may offer some relief, such measures alone will not be sufficient to counteract
the substantial economic slowdown projected over the coming decades.

Source: [ASEAN+3 Macroeconomic Research Office ](https://amro-asia.org/macroeconomic-implications-of-chinas-population-aging-a-dynamic-olg-general-equilibrium-analysis)