China is witnessing a demographic shift towards an ageing society with far-reaching consequences on various aspects of its society and economy, earning it the moniker "world's largest nursing home."

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Per Statista, the bulk of China's population in 2021 was between the ages 25 years old and 59 years old. Around 62.5 percent of Chinese nationals fall under the working age between 16 and 59 years.

However, one major concern is the shrinking labor force as a significant portion of the population reaches retirement age - 60 years old for men, 55 for white-collar women, and 50 for women. This could potentially lead to productivity declines and shortages of skilled workers in certain industries.

The dependency ratio, which compares the working-age population to the non-working-age population, has also been affected, reaching about 38 percent in 2015 as China's population continues to age rapidly. The increasing number of elderly citizens creates an economic burden and necessitates adjustments to social security and pension systems.

In an interview with CNBC-TV18, Ed Yardeni, President of Yardeni Research, highlighted two major issues in China's economic landscape: the bursting of the real estate bubble and the challenge posed by an ageing population. These factors present significant obstacles to stimulating China's economy.

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Yardeni said, “They have a horrible demographic situation. I have often been saying recently that China has become the world’s largest nursing home; the demographic situation is dire. It’s a very rapidly ageing population and older people do not spend so much money, they do not buy additional apartments and so it is going to be hard for the Chinese government to come up with a policy that stimulates."

China's real estate boom, which drove economic growth for years, has eventually resulted in an unsustainable bubble. As it deflates, concerns about a real estate bust and potential economic crisis have arisen. The Chinese government faces difficulty in countering this problem, given the longstanding reliance on credit-fueled economic stimulation.

Talking about the impact of the real estate slowdown, Yardeni said, “The Chinese government has a serious problem because they have been stimulating their economy for many years with ample supply of credit. It has created a real estate boom and now that boom is turning into a burst, and it is not going to be very easy that with policies make that problem go away.”

For more details, watch the accompanying video. Also, catch all LIVE updates on markets with CNBC-TV18.com's blog.

First Published:Jul 24, 2023 12:20 PM IST