F REIGN TRADE - 中国国际贸易促进委员会

growth has largely been driven byworkforce increases and productivityimprovements. Without furthermajor breakthroughs in productivity,economic growth is expected to slowdown due to a much lower or evennegative workforce growth.Both the mix and profile ofconsumers in China will change substantiallyas the population ages. Inparticular, the silver segment and thelower socioeconomic class possessdistinct needs. Companies seeking tothrive in the coming decades must beprepared to cater to these segments andwin their loyalty.An altered and flatter populationstructure will increase the inter-generationalburden on both a family andnational level, testing the sustainabilityof the current pension system.The current social securitysystem amid challengesAccording to the report, China’saging dynamics will place major pressureson the country’s social securitysystem. In the pension system, themandatory social insurance scheme’sbenefits will not keep pace with therising cost of living, yet the marketfor voluntary pensions is still underdeveloped.In health care, the systemis stymied by limited coverage and alack of adequate resources, particularlyregarding long-term care which willbecome increasingly important as thepopulation ages. Finally, demographicshifts have led to a weakening of thetraditional family support network dueto the mass rural-urban migration andthe 4-2-1 family structure.China’s social security systemfaces pressure on two fronts: the rapidlyaging population and increasedlife expectancy. In the coming decades,the system will be expected tocope with large numbers of retireesdeparting the workforce—people whowill require long-term pension payoutsand health care. Without majorreform, the current social security systemappears unsustainable. But reformwill come. The alternative millionsof Chinese people spending their oldage without adequate pensions, healthcare, or family support — is unthinkablefor government planners.China’s pension system is basedon three pillars: mandatory social insurance, voluntary employer enterpriseannuity and group pension schemesand voluntary personal pensions, includingcommercial pension insurance,supplemented by the government’sminimum-livingstandard guarantee(Dī Băo), personal savings, and familysupport.The report indicated that comparedto mature markets, China’s PillarII and III are largely underdeveloped.As of February 2011, these two pillarscombined were estimated to have USD$80 billion to $100 billion in assetsunder management, equivalent to 1.7percent of China’s total GDP and approximatelythe size of Pillar I individualaccounts. This figure is significantlylower than that of developed countries,such as the Netherlands with (134 percent)and Switzerland (126 percent).The report expected substantialgrowth potential for Pillar II and IIIgoing forward. This expansion will bedriven by inadequate coverage of PillarI, the rise of Chinese middle-class andaffluent consumers, and the weakeningof the family support network. But itexpected changes to be gradual. Concertedaction from both the governmentand insurers will be required todevelop this market.China’s healthcare system hadachieved roughly 95 percent coverageof the population by the end of 2010,up from around 15 percent in 2000.However, this system is still limited interms of the scope of treatments, services,and medicines. Notably, there isno long-term care (LTC) componentin China’s current healthcare system.As the size of the silver segmentincreases in China, so will the demandand costs for health care. This demandwill add to the government’s financialburden and in turn reduce the fundingavailable for seniors and affect thequality of healthcare services.The LTC gap has not gone unnoticed,however. Unless LTC is rolledout in the near future, Chinese peoplewill need to rely on commercial insuranceto provide them with protection.And most LTC products currently sold49