China announced plans to discontinue its “one-child policy” in October, relaxing over three decades of controversial family planning policies and changing to a universal two-child policy. This new policy is a step forward, but China’s population aging and gender imbalance will create challenges for decades, according to a leading Stanford health researcher.

“China has reached a certain level of social and economic development where low fertility and population aging have become norms,” said Karen Eggleston, a senior fellow in the Freeman Spogli Institute (FSI) and director of the Asia Health Policy Program. “Similar trends are seen in Japan and South Korea, and governments are struggling to catch up.”

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The policy change comes amid concerns of potential labor shortages and a burgeoning aging population that could pressure the Chinese economy for years to come. 

The country has had record growth – China’s GDP growth rate averaged 8.6 percent over the past five years – which is now slowing. That trend coupled with China’s rising life expectancy reinforces the need for a healthy, economically productive population to support the elderly, experts say.

“Demographers who study China knew a policy change was coming, but not when,” said Eggleston. “The policy was strategically announced with the Five Year Plan – a sort of developmental roadmap for the country.”

A forthcoming book, Policy Challenges from Demographic Change in China and India, edited by Eggleston examines the policy challenges posed by demographic change in China and India, from family planning to social pensions systems that support the elderly. One chapter looks exclusively at population policy, sex ratio and fertility in China.

A spur to action?

A shift to a consistent, nationwide two-child policy is a step in the right direction, Eggleston said, and it is unlikely to translate to a boom in the birthrate.

Some areas of the country and specific couples already enjoyed a two-child policy due to local policy differences and an earlier national policy easing. In 2013, the Chinese government allowed couples with a husband or wife from a single-child family to have a second child.

Chinese cities that never had a one-child policy to begin with, like Hong Kong and Macau, have very low fertility. A recent article in China Journal noted that, despite the ubiquity of the one-child policy campaign, China’s rapid economic development since 1980 deserves the “lion’s share of credit” for reduced births as the country’s total fertility rate has declined.

“The real question is how responsive the Chinese will be,” Eggleston said. “It’s not clear that there will be a noticeable response in the short or medium-term.”

Implementation of the policy will take time, but China will work “quite expeditiously” to apply such policies so that people’s expectations are met. Alongside legal change of China’s varying local policies, it’s expected that China will employ several public education campaigns and its cadre of family planning staff as conduits for disseminating the new national policy, Eggleston said.

Image

A 1986 poster highlights China's one-child policy.

Credit: Flickr/Collection Stefan R. Landsberger, International Institute of Social History (Amsterdam).

But other factors are at play, too, such as urbanization and changes in labor force participation.

“Young and middle-aged couples will be thinking twice about having another child because of education expense, job demands and the need to support aging parents,” Eggleston said.

A paper published by Eggleston and three other scholars in the Journal of Labor & Development analyzed how employment of females from rural areas affected fertility, using data from a survey of 2,355 married women in China. The survey examined “off-farm” employment, which was defined as travel to another village, town or city for work.

The researchers found that off-farm employment for those women reduced the probability of having more than one child by 54.8 percent and the probability of preferring more than one child by 49.6 percent. An earlier blog piece on VoxEU highlighted those research outcomes.

Another aspect of China’s demographic change is gender imbalance. Male preference has long been a cultural factor in China and, with the pressures of the one-child policy, a cause behind its skewed population.

That reality will not dramatically change soon, Eggleston said. Even if the end to the one-child policy brought the sex ratio at birth back to normal levels, the existing imbalance of the younger population will create millions of “forced bachelors” among poorer men who cannot find brides, as well as a whole set of related issues.

Choice restored

What the policy assuredly does, though, is remove a barrier. Many Chinese women who before did not have the opportunity to give birth to a second child, now have that opportunity.

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“This is a crucial arena of choice restored to the Chinese,” Eggleston wrote of the 2013 policy relaxation in a brief presented at the Federal Reserve Bank of Kansas City.

Previously, the absence of such a freedom led some couples to face substantial fines from the government, depending on the local variation of the one-child policy.

“Regardless of the new policy, demographic trends point to the importance of investing in child education, nutrition and skill development,” Eggleston said.

A similar message is carried in a chapter in Policy Challenges, co-authored by Sanghyop Lee and Qiulin Chen, who suggest that putting resources toward human capital development – education and health – can offset the destabilizing effects of demographic transition.

Research being done by FSI’s Rural Education Action Program led by Stanford professor Scott Rozelle works to directly inform education, health and nutrition policy in China.

Spending more on education – particularly for women and girls – is win-win. It complements pro-employment policies, and boosts productivity for women and the economy as a whole, Eggleston said.

Demographic change is fast becoming one of the most globally significant trends of the 21st century. Declining fertility rates and rising life expectancy -- two of the patterns triggering demographic change -- will cause vast socioeconomic strains, especially in the Asia-Pacific region, which has some of the world's most populous countries. Stanford health researcher Karen Eggleston says comparison and cross-collaboration are needed to induce creative solutions.

In an interview with the Office of International Affairs, Eggleston discusses her research approaches and partnerships in the study of healthcare systems and health policy in the Asia-Pacific region. She leads a multiyear research initative that examines comparative policy responses to demographic change in East Asia. Eggleston says the goal is to help move global health policy to a place where everyone has an "equal opportunity for a healthier and longer life."

The Q&A may be viewed in full by clicking here.

Analyzing demographic change in China, Japan and South Korea is the focus of the book Aging Asia, an outcome of a conference between the Walter H. Shorenstein Asia-Pacific Research Center and the Stanford Center on Longevity.

Eggleston also coedited a special issue of the Journal of the Economics of Ageing with David Bloom, a professor at Harvard University, looking at a range of economic issues related to population change in China and India.

A rapidly aging population poses serious challenges for many countries around the world, particularly in Asia, home to the most populous countries. China and India account for nearly 36% of the world’s population, and are expected to face social and economic complications from demographic change in the next decades.

A special issue of the Journal of the Economics of Ageing explores these trends in a comparative perspective, “The Economic Implications of Population Ageing in China and India” (December 2014), co-edited by David Bloom, a professor at Harvard University’s School of Public Health, and Karen Eggleston, a Center Fellow at the Shorenstein Asia-Pacific Research Center.

“Population ageing represents uncharted waters for China and India,” Bloom and Eggleston write in their coauthored introduction.

The special issue is a collection of 10 articles that examine the economic benefits and potential dilemmas arising from decreased fertility and increased life expectancy, two trends that will impact the development and future trajectories of China and India at the micro- and macroeconomic levels.

Dropping or continued low birth rates imply fewer young people to refresh the labor market. But will this cause the workforce to shrink to an unsustainable level? Demand will increase for health care, long term care, and other social services that support the elderly. What must the government do to ensure adequate access to care?

Empirical data and commentary presented in the special issue seek to inform stakeholders about emerging patterns, and to provide insight on how to best address related policy challenges going forward.

“By adopting responsive behaviors and consultative institutions that address the challenges of population ageing in ways that are appropriate to their unique circumstances, China and India could reap the full economic and social benefits of longer, healthier lives,” they write.

The special issue includes an introduction by Bloom and Eggleston, a feature interview with Richard Suzman, and additional analysis by noted global health experts following each article. The titles and authors of the 10 original research articles are listed below:

• Intergenerational co-residence and schooling (Anjini Kochar)
• Regional disparities in adult height, educational attainment, and late-life cognition: Findings from the Longitudinal Aging Study in India (LASI) (Jinkook Lee, James P. Smith)
• Healthy aging in China (James P. Smith, John Strauss, Yaohui Zhao)
• Gender differences in cognition in China and reasons for change over time: Evidence from CHARLS (Xiaoyan Lei, James P. Smith, Xiaoting Sun, Yaohui Zhao)
• Reprint of: Health outcomes and socio-economic status among the mid-aged and elderly in China: Evidence from the CHARLS national baseline data (Xiaoyan Lei, Xiaoting Sun, John Strauss, Yaohui Zhao, Gonghuan Yang, Perry Hu, Yisong Hu, Xiangjun Yin)
• Should China introduce a social pension? (Bei Lu, Wenjiong He, John Piggott)
• China’s age of abundance: When might it run out? (Yong Cai, Feng Wang, Ding Li, Xiwei Wu, Ke Shen)
• The macroeconomic impact of non-communicable diseases in China and India: Estimates, projections, and comparisons (David E. Bloom, Elizabeth T. Cafiero-Fonseca, Mark E. McGovern, Klaus Prettner, Anderson Stanciole, Jonathan Weiss, Samuel Bakkila, Larry Rosenberg)
• Economic development and gender inequality in cognition: A comparison of China and India, and of SAGE and the HRS sister studies (David Weir, Margaret Lay, Kenneth Langa)
• Comparing the relationship between stature and later life health in six low and middle income countries (Mark E. McGovern)

The special issue of the Journal of the Economics of Ageing, vol. 4, pages 1-154 (December 2014) is available through Elsevier’s online platform ScienceDirect.

China’s State Council has put forth draft legislation that would ban smoking in public spaces, part of the government’s larger advocacy efforts to help curb tobacco use nationwide. Matthew Kohrman, a professor of anthropology at Stanford University, said it’s a step forward but the ban’s long-term success would depend on local enforcement.

Despite popular belief, global cigarette production has tripled worldwide since the 1960s. Leading the surge has been China.

“China has become the world’s cigarette superpower,” said Kohrman, in an interview on National Public Radio’s program, Marketplace.

Moreover, local governments in China have become dependent on tax revenues generated from tobacco sales, thus reinforcing the cigarette’s ubiquity and ease of access.

China has implemented smoking bans in the past, but with varied success. Now rising healthcare costs caused by tobacco-related diseases are creating urgency for new regulations.

“Whether or not these new regulations will be enforced will, in the end, come down to local politics,” he said.

Matthew Kohrman is part of the Asia Health Policy Program at the Shorenstein Asia-Pacific Research Center, and leads the project, Cigarette Citadels, a peer-sourced mapping project that compiles more than 480 cigarette factories globally.

The full audioclip is available on the Marketplace website.

A middle class is emerging in China, and simultaneously, its population is rapidly aging. These two phenomena are impacting the country’s traditional consumer habits, including spending on healthcare. Experts say private-sector services are one important part of the future of China’s healthcare system, and perhaps also a sign of what’s to come for other countries in the region. Entrepreneurs can provide innovative services that cater widely to consumers and support a shift toward integrated care for health promotion and long-term management of chronic disease, also supplementing resources available in traditional public facilities.

Three experts visited the Walter H. Shorenstein Asia-Pacific Research Center and shared perspectives on those trends at the panel discussion, “Healthcare Entrepreneurs in East Asia: Innovations in Primary Care and Beyond,” hosted by the Asia Health Policy Program.

Historically, healthcare services in China have been almost entirely government-run. A patient would go to a public clinic, stand in a queue, and receive treatment within a few hours – being referred elsewhere if additional treatment was required.

Now, the private sector is growing, based on the promise of improved care and an enhanced experience, both removing the waiting line and ushering in new technologies. The government has also issued several policies encouraging “social capital” investment in health and fitness services.

The private sector for preventative care services now holds around fifteen percent of the entire marketplace in China, and “is expected to get much bigger over the next five years,” said Lee Ligang Zhang, the founding chairman and chief executive officer of iKang, a healthcare group based in Beijing.

Zhang oversees the company’s operation of 50 self-owned healthcare centers and an extended network of 300 affiliates. iKang is one of many groups catering to a growing consumer base of corporate workers and senior managers seeking care outside of the public system.

Comparative view

Increased development of premium healthcare facilities is not only emerging in China, but also in neighboring Taiwan. Since 1995, Taiwan implemented a national health insurance system, and has been lauded for its success in service provision.

Taiwan transitioned its healthcare market to universal coverage. Under this system, a patient can essentially “shop around” and select where to go for services, most of which are covered under the country’s insurance collective system at public or private providers.

“On average, every Taiwanese goes to see a doctor 14 times a year, compared to five times a year in the United States, and two times [a year] in China,” said Dr. Fred Hun-Jean Yang, a physician and chairman of MissionCare, Inc.

Such numbers reflect the higher availability of services compared to China, he said. Even as a small island, Taiwan has over 15,000 clinics and the price for services is generally affordable for the average citizen. Despite this availability of public and private services, Taiwan’s newer healthcare entrepreneurs seek to fill a market demand shaped by similar factors as in China. Yang says technology and the efficiency of the private sector healthcare system is attracting new consumers.

Missioncare is headquartered in northern Taiwan’s Taoyuan City and consists of four community hospitals with a larger network of clinics across the country as well as coordinated long-term care services for the elderly and those with chronic disease. The group has already expanded into China, and plans to integrate healthcare innovations, such as wearable monitoring and mobile payment.

Patient-centric service

Chinese citizens, particularly those with greater expendable income, are more willing to pay out-of-pocket for an improved patient experience, the panelists said.

“The consumer psyche is important,” said Dr. Wei Siang Yu, the founder of the Borderless Healthcare Group (BHG), a group of companies based in Singapore that focuses largely on health telecommunications.

One perspective is that consumers desire a “high-end” environment made possible by tailored design aesthetics and effective branding. Guided by this trend, Yu, a business executive and physician by training, started the “smart cities, smart homes” initiative at BHG.

BHG is now launching an incubator model in Shanghai, which combines intelligent design aesthetics with patient care, and is planning to localize such centers across China. The model is referred to as an “experience center,” rather than a hospital or clinic, and healthcare services – examinations, operations and value-added activities like wellness and education activities – are all centralized in one location.

Looking ahead, Yu said healthcare is likely to move even further away from the traditional hospital setting, and more toward experiential and home-based care models.

Economic and demographic transition pose major challenges for countries worldwide, particularly in large developing countries like China; however, strengthening social welfare programs can offset negative effects and help promote a sustainable future, according to Karen Eggleston, a scholar of Asia health policy at Stanford University.

“Unprecedented economic growth in China spanning the last three decades has lifted hundreds of millions out of poverty and restored China to the prominence in the world economy that it once enjoyed centuries ago,” said Eggleston, who is a Center Fellow at the Walter H. Shorenstein Asia-Pacific Research Center.

“Demographic change not only shapes the trajectory of [its] development, but interacts with macroeconomic and microeconomic forces” in numerous ways.

Eggleston, who presented “China’s Demographic Change in Comparative Perspective: Implications for Labor Markets and Sustainable Development” at the Jackson Hole 2014 Economic Symposium “Re-evaluating Labor Market Dynamics,” says a combination of societal changes makes China distinctive, and that the country can offer insights in comparative perspective. She joined two other experts for a panel discussion on demographics during the three-day conference led by the Federal Reserve Bank of Kansas City, which draws dozens of central bankers, policymakers, academics, and economists from around the world.

The research stems from a project that Eggleston heads on policy responses to demographic change in Asia. The initiative, which is a part of the Asia Health Policy Program, grew out of a 2009 conference cosponsored by the Global Aging Program at the Stanford Center on Longevity. Its outcomes have included the publication, Aging Asia, a special issue of the Journal of the Economics of Aging focused on China and India co-edited with David Bloom of Harvard University, and two forthcoming books on urbanization and demographic change in Asia.

China in flux

China is the most populous country in the world with more than 1.3 billion people. Its sheer size alone creates heavy demands as demographics change, and the economy continues its shift from a centrally-planned system to a market-based system.

China’s population age 60 and older is projected to increase from one-tenth of the population in year 2000 to a staggering one-third by year 2060. Simultaneously, the population age 14 and under is projected to decrease by one-third between years 2010­ and 2055 (Figure 2).

Eggleston, and others who closely watch the situation, say these demographic changes will bring a myriad of challenges to the labor market and to cultural norms related to intergenerational support, work and retirement.

China’s low birth rates have largely been influenced by family planning campaigns that begun in the early 1970s, and later, the “one child policy,” a population control policy that allowed for the birth of only a single child in many families. Recently, the government has relaxed that policy, and analysts believe the change will eventually help to balance the population age structure and infuse the workforce with new employees, filling the void caused by retiring workers in the coming years.

In the meantime, preparing support structures for the older generations’ departure from the labor market is essential. Social welfare programs, including health insurance and retirement and childcare services, will see significant demand, and require restructuring to handle the influx.

China’s aging population experience is similar to other countries in Asia. Japan, South Korea and India are also projected to see significant increase in median age over the next 30 years (Figure 1). 

Eggleston says China has made positive steps toward restructuring its institutions, including establishing government-subsidized health insurance programs and reforming pension systems. Most notably since 2002, China took a large step towards universal health care by implementing the New Rural Cooperative Medical Scheme for rural residents. Now, nearly all citizens have access to basic medical care, which can support healthy aging as well as mitigate large “precautionary savings” and help those struck by medical conditions requiring significant services.

A pension system for people in China’s rural areas, developed by the government in 2009, also set up a supportive system by providing increased transfers for seniors, and, interestingly, supporting labor markets by easing the worries of adult children who migrate to urban areas for work.

China has been forward thinking with its related public policies, but it certainly can do more, Eggleston says. Integrating technology into its health systems, and making its services more fiscally responsible could improve efficiency, and expand access to care.

The full paper and handout from Eggleston’s presentation at the conference are available on the Federal Reserve of Kansas City website.