China’s graying population and opportunities for businesses

For a long time now, brands and media in China have been obsessed with the post ’90’s and post ’00’s generation. Is it time to start looking at the other end of the age spectrum for opportunities?

For a while now, we’ve all been reading about China’s slowing birth rate and the stabilization and eventual de-growth of its population. Sometime in the last few weeks, a milestone of sorts was reached when India’s population was estimated to overtake that of China. However, what hasn’t received a lot of exposure is the fact that, due to the many decades of a single-child policy in China, there has been a steady shift in the age-profile of the population and falling birthrates will exacerbate this shift. National Bureau of Statistics data shows the elderly population over 65 years old has been increasing by an average of 2.76% annually from 2000 to 2019. This steady increase against a backdrop of a stagnant / decreasing population will take the percentage of elderly people in China to 35% by 2050.

The aging population is gradually becoming more prosperous, making this an attractive market to focus on. National Statistics Bureau data shows that the number of elderly people with incomes of over ¥100,000 ($15,200) per year has tripled from 19 million in 2003 to 60 million in 2018. This group accounts for 43.9% of elderly consumers, and it is expected to grow at an annual rate of around 8% in the coming years. In addition, the per capita disposable income of the elderly population has increased steadily over the past few years, and it is currently standing at ¥28,341 ($4,313) in 2020. While those numbers lag those of the rest of the population, they are steadily rising, and unlike younger consumers, the elderly have less demands on their income (children’s education, housing, daily transport and so forth).

Future Opportunities and Threats

Today’s middle-aged working population will be in the elderly age-group in the next decade. Given what we’re seeing of the current 65+ population, here are some predictions on what the current middle-aged (45-54 age group) will be focusing on over the next decade:

  1. Greater demand for Investment Products and Pension Funds

Looking at sources of income for current 65+ seniors it is apparent that future income after retirement will be a source of concern both for current and future seniors. China pension funds as a percentage of GDP are not growing in pace with the changing population profile.

There will be increasing demand for financial services and investment products from this age group as they hasten to create an ongoing source of income that reduces their dependence on their children.

2. Real Estate Oversupply

One characteristic of families today, as a result of the one-child policy that was in place for several decades, is the 6:1 ratio of parents/grandparents to each child/young adult. While that policy has now been relaxed, it leaves a situation where every young person has typically 3 pieces (at least) of residential property to inherit over time (home ownership in China is estimated at nearly 90%). One area of investment that is likely to see less interest (pun intended) in years to come is real estate.

3. Healthcare

As one of the previous charts showed, medical and health related expenses are already 22% of the senior group. Additionally, China’s health expenditure has shown a steady growth since 2001 and apart from very recent times, average household expenditure on health has also grown steadily.

4. Elder-care and elder-friendly services

While there isn’t enough data yet to estimate market-size or spending in this area, the last few years have seen the beginnings of new services focused on the elderly, many of which recognize their lower level of comfort with technology.

Opportunities in the gray market

As China’s population ages, the nature of market opportunities that arise will be different than what we’ve seen in the last 20-25 years, which were focused more on the post ’90’s and post ’00’s. The 55+ age group has not been a focus for most companies in the past, but will become increasingly important over the next 10-30 years. Apart from products and services specifically aimed at this group, redesigning or rethinking broader based products with the specific needs of an older group in mind represent a growing opportunity for the future.

At Searchlight, we begin every project with a thorough market diagnosis to understand what has happened before and where the opportunities of the future will come from. This is a vital step in helping companies thinking about their business and marketing strategy.

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