Countries with rapidly aging populations will see the shift in demographics increasingly impact their economies in the decades ahead.
The pressures will especially drag on nations with high government debt burdens, including the world’s top two economies, the United States and China, according to a recent analysis by independent global advisory firm Oxford Economics.
Newsweek reached out to the Chinese Embassy in Washington, D.C., and the U.S. Treasury Department via email for comment.
Demographic Headwinds
High debt levels can constrain governments, limiting room for bolder fiscal action—especially in downturns tied to demographic headwinds, which include a shrinking workforce. Oxford Economics forecasts this could slash China’s potential, sustainable economic growth roughly in half by the 2050s.
Over the same horizon, the share of people aged 65 and over is projected to rise by more than 50 percentage points above 2010 levels by 2060 (versus around 10 points in the U.S.).
Meanwhile China’s median age, now 40, is projected to rise to 52—about 16 years above the global average—while the U.S. is expected to stay around 41, according to the 2024 U.N. World Population Prospects
The rising proportion of seniors, along with China’s low birth rate and a lack of significant immigration to offset it, is expected to strain its modest social safety net and shift more of the burden onto a shrinking pool of workers.
“Soaring pension and health care expenses are the biggest policy challenge of the 2020s in all advanced economies and most emerging ones,” Vincent Deluard, director of global macro strategy at financial services firm StoneX Group, told Newsweek.
China’s Toolkit
International Monetary Fund data put the debt-to-GDP ratios at 123 percent for the United States and 84 percent for China. But while China’s demographic outlook is daunting, analysts says Beijing currently has more tools at its disposal than its American rival to limit the damage, analysts say.
Deluard said four major structural differences set China apart: accelerated aging after the one-child policy and rapid urbanization; low statutory retirement ages; “delayed” baby booms in the 1960s and 1980s; and a very high savings rate with little foreign debt.
“All that means that China’s long-term problem is worse due to demography, but that it has more levers to manage it in the short term,” he said. “China can mobilize its large pool of domestic savings, which the U.S. does not have.”
He also observed that this year China began gradually raising statutory retirement ages, which are low by international standards.
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