Managing the Middle-Income Transition
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Managing the Middle-Income Transition

Challenges Facing the People’s Republic of China

Edited by Juhzon Zhuang, Paul Vandenberg and Yiping Huang

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.
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Chapter 18: Old-age support and protection

Xiaoyan Lei, Chuanchuan Zhang and Yaohui Zhao

Extract

The remarkable economic success of the People’s Republic of China (PRC)—which has seen average growth of 10 percent a year over the past three decades—has not been shared equally among older and younger people. Indeed, the reforms that opened up economic opportunities have primarily benefited generations born since the 1960s, who have the energy and skills to grasp new opportunities. The PRC’s population is quickly aging owing to increasing life expectancy and declining fertility. The proportion of the population aged over 60 is projected to rise from 10 percent in 2000 to 30 percent in 2050, and the elderly dependency ratio is likely to increase from 10 percent to 37 percent. As well as declining numbers of those available to support elderly parents, younger people are increasingly mobile, often moving to areas with better economic opportunities. This is greatly challenging the reliability of traditional family support for the elderly. What is more, population aging is most marked at the low-income level. By contrast, the Republic of Korea reached a median age of 32.5 in 2000, but its per capita income was nearly two and a half times that of the PRC in 2005, when the median age of its population was already 34 (Steven and Arora 2007).

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