Regional Focus: Ageing Asia Pacific
More than half of the world’s population over the age of 65 lived in Asia Pacific in 2009.
Asian advanced and emerging economies, notably China, are ageing rapidly, creating opportunities for marketers of consumer goods and services.
For emerging economies, ageing presents the challenge of upgrading healthcare and pensions systems, while maintaining economic growth with an older workforce.
- The population of Asia Pacific is ageing rapidly. In 2009, 278 million people over the age of 65, more than half of the world’s 65+ population resided in the region. With falling mortality and fertility rates, the share of the elderly in the population is rising;
- Japan is the most aged society, not only in the region but in the world. China, South Korea, Thailand and other East Asian economies have crossed the “aged society” threshold of a 7.0% share of the population aged 65+. Ageing is less advanced in India, Pakistan and the Philippines;
- Asia’s greying consumers present opportunities for marketers of consumer goods and services, in healthcare and other sectors such as leisure products. However, marketers face the challenge of changing consumption patterns as older consumers tend to spend less than younger ones;
- Asia’s emerging economies’ public healthcare and pensions system are inadequate to provide for ageing. Planned public investments in these sectors will increase the fiscal burden of social services but could boost the spending power of the elderly and their families;
- The ageing workforce is a challenge for emerging economies, as older workers are less adaptable to change. Slowing growth of the workforce could lead to more sluggish economic growth.
Asia Pacific is ageing
- The number of people in Asia Pacific aged 65+ has increased from 207 million in 2000 to 278 million in 2009, representing 52.4% of the world’s 65+ population. Falling mortality and fertility rates, together with increasing life expectancies have pushed the share of 65+ year olds in the region’s population up from 6.0% to 7.3% over the same period. The standard definition of an ageing society according to the United Nations is one where at least 7.0% of the population are over the age of 65;
- Japan is the most aged society in the world. 65+ year olds made up 22.7% of Japan’s population in 2009. Due to a low birth rate, Japan’s ageing index – the ratio of 65+ year olds to children under 15 years old – stood in 2009 at 169.8%, compared with 110.6% in the EU;
- A growing number of economies, especially in East Asia, have become ageing societies. These include advanced economies such as South Korea, with 10.7% of the population over the age of 65 in 2009, and Taiwan (10.4%) but also emerging economies such as China (9.6%), Thailand (8.0%) and Sri Lanka (7.5%). China’s rapid ageing is unusual for a developing country and is due to its one-child policy, which since 1979 has discouraged couples in urban and some rural areas from having more than one child;
- The effects of ageing are felt less in India, Pakistan and Bangladesh, as well as Malaysia and the Philippines. In these economies the share of 65+ year olds stood below 5.0% in 2009. Nevertheless, the numbers of the elderly are rising fast. The total number of 80+ year olds in those five countries has risen between 2000 and 2009, from 6.7 million to 10.0 million.
- Older people are sicklier so the most immediate effect of ageing is a rise in consumer expenditure on health related goods and services. Spending on this category grew in China, for example, from US$45.9 billion in 2003 to US$123 billion in 2008. Consumer expenditure on health generally rises with age but also varies considerably with income;
- It is customary in Asia Pacific that children care for their parents, yet with economic development, this is becoming more difficult. Migrants to the cities are unable to look after the older generation in rural areas and social values change to emphasise the nuclear family. In 2009, researchers estimated that only 5.0% of China’s urban elderly and 2.0% of the rural elderly lived in care homes, yet the number of such institutions is rising fast;
- As consumers age, marketers have to adapt to their needs and requirements. With economic growth, more households, including the elderly, can afford to spend on luxuries;
- The spending potential of Asia’s old consumers is enormous because of the tendency of Asian consumers to save, reflected in high saving ratios. Chinese households saved 31.6% of their disposable income in 2008, and households in South Korea saved 15.8%, compared with saving ratios of 13.5% in France and 4.3% in the United Kingdom.
However, ageing presents challenges as it puts pressure on household balance sheets:
- Ageing consumers tend to spend less than younger ones. One reason for older consumers in emerging economies to save more is the weakness of public health systems. With limited or no medical insurance, ageing consumers and their families save in order to ensure they could afford medical bills if necessary. This is one factor explaining the high savings ratio in China at 31.6% of disposable income, compared with only 12.6% in Taiwan in 2008. Taiwan, unlike China, has a national healthcare system with universal coverage;
- In 2009 it was estimated that only 30% of China’s 60+ year olds had any pension. The vast majority relied on intergenerational support from children and grandchildren. The ageing of Asian societies thus stretches the spending power of old consumers but also of their families.
Broader economic implications
- The healthcare and pension system in emerging Asian economies is woefully inadequate. According to a 2009 study by Oxford University, 700 million people in India had no access to health specialists;
- Governments will have to spend more on healthcare. In 2009, researchers estimated that because of ageing, the fiscal burden of health and social services in Thailand, the Philippines, Malaysia and Indonesia, could rise from an average 3-4% of GDP in 2000 to 6-7% of GDP in 2020;
- An ageing workforce is seen as a challenge as older workers are less adaptable to rapid changes and new technologies. This is a concern for China, where in 2009, half the population was older than 38, compared to India, Malaysia, Pakistan and the Philippines, where more than half the population was under the age of 25. However, older workers have more work experience and knowledge which can prove useful in the work place;
- Old-age dependency is rising in most countries in the region. The region’s average ratio of 65+ year olds to the working age population (15-64 year olds), had risen from 10.1% in 2003 to 10.7% in 2008. Japan had the highest old-age dependency in 2008 at 34.3%, compared with China (12.9%) and India (7.5%);
- Yet in most Asian economies, the youth dependency ratio (the ratio of under 15 year olds to the working age population), has fallen faster than the rise of old-age dependency. As fertility rates fell, Asia Pacific’s youth dependency ratio declined from 42.2% in 2003 to 37.6% in 2008, creating a “demographic dividend” of a growing population of working age, which helps to boost economic growth.
Ageing is bringing momentous changes to Asia Pacific:
- By 2020, the number of 65+ year olds in Asia Pacific is set to rise to 396 million, from 278 million in 2009. China will account for 45.8% of the old-age population and India for 22.8%. By 2020, Indonesia and Vietnam are expected to join aged societies, as the share of 65+ year olds in the population rise above 7.0%;
- Governments will be called to take on a bigger role in providing social security and healthcare. Public investment is important not only to improve the quality of life for the elderly but also to reduce the burden of healthcare costs for their families;
- In 2009 China announced a US$123 billion plan to establish universal healthcare by 2011 for rural and urban areas. Care homes for the elderly will also expand with 3 million beds added, most of them in rural areas in 2009 and 2010. Universal healthcare could help to change Chinese consumers saving habits and unleash their spending power, yet changes are likely to be gradual, as consumers learn to trust the new system;
- As the population ages, the region’s “demographic dividend” will be eroded. In China and Thailand, the working-age population’s share in the population is expected to peak in 2010-2015, while in the Philippines, Indonesia and India, they will continue to enjoy the “demographic dividend” of an expanding working-age population beyond 2020. In order to maintain economic growth and to compensate for the falling share of the working age population, countries such as China will have to increase productivity.