Old China hands: ageing in the Middle Kingdom

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. This weekend, Uzbekistan holds parliamentary elections. Criticism of the government is muted, of the president, unthinkable. There's not even an opposition party to see why this is still real progress, you have to consider how bad things used to be. And at about this time of year, cubicle dwellers can expect to get the boss's end of year memo. The language can be interesting. But first, China has experienced enormous development since its market reforms of the late 1970s. More than 850 million people have been lifted out of poverty. GDP growth has averaged nearly 10% a year. But the world's second biggest economy is slowing down. Its challenges are many cronyism, bad debt, the trade war. The biggest pressure of all, though, might be demographic. China is getting old before it gets rich.

Two years ago, for the Chinese New Year's gala, they had a skit in which an old man visits his old wife in a nursing home.

Simon Rabinovich is our Asia Economics editor and is based in Shanghai.

He's been suffering from Alzheimer's and has not recognized him for one year. And in a very sappy, somewhat heartrending.

Moment.

She finally recognizes him. The audience loves it. But for the government, really, it's a message that they were trying to deliver, which is that the country is getting old quickly and people need to be aware of that.

Well, why is that? Why does the Chinese government need to draw attention to aging?

It's a dramatic shift for China. For a long time, it's been thought of as a young country, a country of young workers. The demographic trends have been clear for some time. Nevertheless, for a lot of people who are living here, it's almost catching them unawares. Next year is something of a gloomy milestone in that the median age in China will actually be older than in America. So China's fast approaching a median age of 40 years old, and the line just moves up sharply thereafter. Over the next 25 years, the percentage of China's population over the age of 65 will more than double. It'll go from 12% of the population to 25%. And just to give you some perspective on that, America will make that shift, but it will take nearly a century. For Europe, it's more than 60 years. So it's one of the most rapidly aging countries in the world. And that's putting lots of strains on society and on the economy as well.

How do you mean? How does this demographic shift put pressure on the economy?

The starting point is that China is still a relatively poor country. The median income is about a quarter that of America's. So that means that at every level in the country, from the government on down to individual households, there isn't the same financial cushion to deal with the aging. As people get older, it means that more money then has to be spent on things like health care and pensions as well. As the country gets older, there's going to be fewer people of working age. Growth is at some level a function of the number of people that you have working. You know, you add it all up and it is something that weighs on the growth outlook long term for China. And frankly, even if you look at the shorter term trajectory, there's been a debate for some time about why exactly China is slowing right now. When demographers look at it, they say that actually the growth rate that you see now, about 6%, is very consistent with demographic change.

But I mean, the flip side of the same coin is that if people are living longer, if there is an aging population, that's in a sense a sign of development.

Yeah, absolutely. So it's not all negative. The average life expectancy in China for a baby born today is about 76 years. That's just two or three years shy of America. Fifty years ago, the average life expectancy was a good two decades shorter. The bad news is it's not just about longevity. It's also about the number of people being born. And fertility rates in China have plummeted. And partly that's because the government got policy horribly wrong. For many decades, it was implementing the notorious one child policy. Now it's finally relaxed that, but the damage is really already done. As countries get wealthier, they tend to have lower fertility rates. The one child policy exacerbated that. And now China is at a point where, because the cost of Raising children is so high, the cost of housing is so high. Even with moving away from the one child policy, they're not getting the rebound in the fertility rate that the government had wanted.

But if reversing that policy, the one child policy in particular, isn't going to reverse this trend, what can? What should the government do to counteract all these impacts?

It's very unlikely that they'll be able to substantially boost the fertility rate. That said, they can adopt a range of social policies that make it easier for families to have children. They can also do more to boost the labor force participation rate. The retirement ages in China are absurdly low by international standards. For many jobs, it's still 50 years old for women and 60 for men. So there's a lot more that could be done to get older people into the workforce, staying in the workforce. And by the same token, every country that's facing aging, and most acutely those tend to be countries in Asia, are looking for ways that they can lift productivity so effectively getting more out of your existing workers, so better adoption of technology, of automation, these are all things that can mitigate the aging trend, but is very clearly seen in countries like Japan, which are wealthier and more technologically advanced than China. Once the demographic trend is in place, it's very difficult to, to reverse it.

And in the meantime, those people need care, need paying, I mean in particular with pension pots.

That's right. And there is a lot of concern about the viability of China's pension system. So according to Chinese government researchers, the national pension fund could be out of money as soon as 2035. And you see the government now scrambling around to try to reinforce the system. So they've just recently in fact been transferring Fairly large stakes, 10% stakes and big giant state owned financial firms to the fund. But a lot more is needed for individual savers themselves. China is a high saving society. But the young generation has been encouraged in part to spend a lot more money as China tries to rev up its consumer led growth. And there's concern that in fact they've been going a little bit too far. They're not going to be able to rely on the same backstop from the government that their parents generation is able to.

And they may have to spend more of their money looking after their parents than they expected.

That's right. So societally the traditional way of doing things in China is that parents live with their children as they got older. That's become a lot more difficult for a couple of reasons. I mean, one, if you're living in a big Chinese city, apartments, by and large are quite pokey. So it's very uncomfortable to have many generations under one roof. But also people don't necessarily live in the city or the village of their birth where their parents might still be. Now, there's been incredible growth in the old age home industry, the nursing home industry, but there's still quite a lot of stigma attached to it. And there's not enough in the way of capacity for the old generation. As it gets bigger and bigger. The way the government is looking at it, they're aware that on the financial side, they have a lot of stresses. So they're also putting a lot of pressure on society to try to make sure that young people do look after their par in whatever way they can. So about five years ago, China passed a very controversial law known as the Filial Piety Law, where it makes it incumbent on young people to visit their parents every now and again. And parents have the right to effectively sue their children if they don't come and see them often enough. And there have been a few high profile cases of that happening. And you also see a lot of public service messaging effectively trying to guilt children into seeing their parents. There was an ad campaign running for a while in the Shanghai subway system where they had old people sitting alone and looking very somber and basically telling the young folk on the subway that it's time for you to visit your parents to make sure that everybody is doing well at home. So it's a sign, I'd say, of some of the desperation that's beginning to seep into government thinking about this problem, because they really are woefully behind the curve. And it's coming up very, very quickly.

Simon, thank you very much for joining us.

Thank you, Jason.

Voters in Uzbekistan will head to the polls on Sunday, but for them, this is no ordinary election. Just about everything is changing in the country. Even a few years ago, it was perhaps the worst post Soviet dictatorship. Islam Karamov, the leader since before independence, was brutally repressive. He forced the elderly and children to harvest cotton in the fields. Corrupt civil servants visited businesses in shakedowns for bribes. Security services choked off protests by simply shooting the protesters in a prison camp. Dissidents were allegedly boiled Alive. But after Mr. Karimov died in 2016, his prime minister, Shavkat Mirzayev, took over and shocked many by undertaking broad and meaningful reforms. He's closed the gulag, he's opened the borders, and to a degree, the economy. Now it's time for voters to elect members of parliament. And it's clear how much is changing in the country's politics and how far it still has to go.

Uzbeks have never in the past been given effectively any choice in elections.

Joanna Lillis reports from Central Asia for the Economist.

They were first under communism and then under a very vicious dictatorship for its first 25 years of independence. So we're talking about 100 years of elections where voters were really affected, given no choice, and were just asked to rubber stamp the choices of various regimes. And as Uzbeks go to the polls on December 22, the election is looking a little bit different from in the past. Now, choice also remains a problem in this election, but it's a little bit livelier and a little bit more competitive than anything we've ever seen before in Uzbekistan.

So what do you mean by a little bit more competitive? I mean, I mean, what choice do voters really have this time around?

Uzbek voters are being given a little bit of choice among the candidates. Now, we must make clear here one thing about this election that is the same as the past is that there is absolutely no opposition in this election, no opposition whatsoever, because opposition parties do not exist in Uzbekistan. So voters are still choosing between government approved choices. We've also seen debates, the first time any Uzbek election has featured live TV debates. And we've also seen something new as well. We've seen quite a lot of lampooning of public figures of some of the candidates on social media. Now that's very new for Uzbekistan because that kind of thing could land you in jail until recently.

So among the admittedly limited choices that voters have, what are they? What, what sort of ideological spread is there in what's available?

Well, there are five parties standing in this election. Now you've got a party called the Uzbekistan Liberal Democratic Party, which is the closest thing Uzbekistan has to ruling party because it's the largest in parliament. Mr. Mezhiv doesn't actually back any candidate because he's supposed to be above the political fray. The Uzbekistan Liberal Democratic Party is pretty much a center ride, business friendly party. You've got the People's Democratic Party, which positions itself as more left wing. And you've got the Justice Social Democratic Party, which advocates judicial reform. And the National Revival Democratic Party also values. But all of these parties, all of those four parties talk about social welfare and their programmes are almost identical, really. And then you've got the Ecological Party, whose name speaks for itself. But that's a newly created party, but it's not an opposition party. And in fact, so pro government is it, that it actually backs government plans to build a nuclear power plant in Uzbekistan, which is really unusual for a Green Party anywhere in the world.

But you say the current leader, Mr. Mirzo Zoev, is above the political fray. What do you mean by that?

Well, he is supposed to represent the entire Uzbek people, so he doesn't come out and favor any party. But of course, cynics might say that he doesn't actually need to come out in favor of any party, given that all five parties standing in the election are pro government and pro president, and they really have not subjected him or his government to any kind of substantive criticism, certainly during the campaign.

And what about voters? What do they make of this slate of notionally wider characters to choose from?

Well, on the streets of Tashkent, Uzbekistan's capital, voters certainly don't seem to be very engaged, although the government is depicting this election as the liveliest and most competitive ever in Uzbekistan. Now, I talk to a lot of voters, most of them do actually say they will go out and vote, which is really perhaps also a legacy of the government always encouraging people to vote in order to legitimize elections. But they're certainly not engaged with the parties. Very few can actually name all five parties. And, you know, they don't seem to think their vote makes a great deal of difference. I mean, one health worker told me that that parties do nothing for us. And in a sign of how actually disengaged people are, I spoke to a market trader who said he was going to tick the People's Democratic Party on ballot paper, but only because he likes the word people in the name.

As much as this election is still constrained, this still represents, I mean, it's all relative, but this still represents real progress. Right?

It certainly is more competitive because candidates do feel that it's not preordained, as elections tended to be in the past. You know, which parties were going to get in how many seats they were going to get. So candidates are actually trying to compete for votes because if they want to get a seat, that's what they need to do. So on a local level, because this is a constituency based system, candidates are trying to woo the voters somewhat. The fact of there being some kind of competition among the candidates has led to some sort of political debate. It has even led on occasion to candidates timidly criticising officialdom a little bit. Another area of progress, the election is taking place under a new electoral code which monitors from the Organization for Security and Cooperation in Europe say has taken account of some of their recommendations in the past, although not all of them. They still talk about restrictions on fundamental freedoms in Uzbekistan.

But for elections to eventually be really fair, really free, and really representative, the country is going to need a plausible opposition party. Do you see that changing anytime soon?

No. I think it's very, very striking that actually no one has even tried to set up an opposition party during the three that Mr. Mirziov has been in power and has been embracing a reform agenda. And I think that tells us that people feel it's risky, that the political space is not perhaps open enough for that to happen now. Whether that will happen in the coming years is debatable. There are people who believe that the freer media environment, the greater freedom of expression that Uzbeks now enjoy will create the space for an opposition party to emerge. The government itself indicates that the democratization process is taking place, and they say it's irreversible. They also seem to embrace a rather evolutionary style, rather than revolutionary. They believe that this will evolve of itself. But it is hard to see this happening in the years ahead. I think that given that Uzbekistan is facing a real litmus test of its commitment to democracy in this parliamentary election, I do think that the absence of opposition is very clearly a glaring flaw. There are very clear red lines, and one of those is criticizing the president. Nobody really risks that, not in any substantive form. That does suggest that the environment for genuine opposition that would really prove that Uzbekistan is truly democratizing is not there at present.

Joanna, thank you very much for joining us.

Thank you very much.

At work, the festive period isn't just Christmas parties and cubicle decorating competitions. Fortunately or otherwise, it also brings the end of year Management Memo one out. Outstanding example has been unearthed by Philip Coggin, who writes the Economist's Bartleby column on the world of work.

Dear partners, colleagues, and dare I say it, close personal friends. As a new boss of Multinational United Subsidiary holdings, or mush, I'm proud to look back on another year of success at our great company. That's largely down to you and your efforts. And we hope that next year those efforts may be reflected by the end of our long running pay freeze. Under my tenure, CEO does not stand for chief executive officer, but for cheerleader extraordinaire. I feel passionate about reaching out to as many of you as possible, though not quite as passionately as our finance director, who is still on suspension until the employment Tribunal makes its decision. The door to my office is always open, especially now that we're in an open plan building. When it comes to 360 degree feedback, I have unlimited bandwidth. What was my highlight of the year? It has to be the arrival of cultural facilitator and part time rapper Monica Lucas AKA the Monster. We all remember how we felt when we heard her first freestyle slam. Use your energy to create more synergy. Our transformation will be a corporate sensation. All your learnings will boost our earnings. Inspirational at the meta level, I'm also excited about the reorganisation that saw the appointment of our first Head of Diversity who ticks all the boxes as should you when the 32 page employee satisfaction survey hits your inbox. The revamp also saw the creation of two new senior Corporate Responsibility Advance Principal and Pushing the Envelope are thinking outside the silohead. I expect plenty of both crap and tosh Next year they will be cascading memos down the corporate waterfall as they try to define their roles. Admittedly, there were some painful experiences in 2019. The last chief Executive's decision to centralise all group services did not work, resulting in some exceptional and extraordinary losses for the fifth year running. But on the plus side, we planned to return power to the remaining staff by delegating control to the individual business units. Going forward we will be going backwards and closing all those factories means that our carbon emissions fell considerably as a result. Just doing our bit for the planet. This means that now more than ever we need your input and inspiration for 2020. Please ideate 24. 7 We need greater granularity and more thought leadership. Let's create a snowstorm and see what lands. If we architect successfully and get our ducks in a row, we can blitz, scale, mush and impact the market via paradigm shift. Business is getting a bad press at the moment for prioritizing shareholders above all else. As our results make clear, we've managed to avoid this. What's more, our company has a purpose and next year we intend to find out precisely what it is. Those of us in the C suite have been kicking around some ideas, starting with the creation of a cross disciplinary task force. Does becoming part of that winning team fit into your wheelhouse? If so, let our HR department know and someone from the staff interface community will circle back to you. Where will our corporate journey take us in 2020? Hopefully to the sun lit uplands where a thousand flowers bloom amid blue sky thinking. But for that to happen we will have to join the dots and create a toolkit that will do the heavy lifting to allow us to leverage our collective skill set. Forget the doomsters and the naysayers and the investment bank analysts with their tricky questions about balance sheet strength and cash flow, many observers give off a much more positive vibe. Our management consultant says we're one of the best clients his firm has ever had, and he looks forward to seeing us all again next year as well. As a cheerleader, a chief executive needs to be a great chef in this company. We have wonderful ingredients and with the right mixing, we can create a soup to nuts banquet that will have consumers and investors salivating. Does that vision speak to you? Then speak to me when I get back from Davos in January. So have a great holiday season. If you're entitled to annual leave. I'd like to think we're all members of the mush community, even those of you on zero hours contracts. Remember that in 2020, all your hard work can pay dividends to our shareholders. All the best to anyone in the group's employment space. Yours ever still cheering Buck Parse.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and you can subscribe to the economist@examiner.com radioffer 12 issues for $12 or 12 pounds. See you back here on.