"Finance" Annual Conference 2025: Forecast and Strategy and 2024 Global Wealth Management Forum will be held in Beijing from December 13th to December 15th. Cai Fang, member of the Standing Committee of the 13th National People's Congress, former vice president of the Chinese Academy of Social Sciences, and chief expert of the national high-end think tank of the Chinese Academy of Social Sciences, attended and delivered a speech.
Cai Fang emphasized the demand potential contained in the population structure.
He pointed out that the real structural phenomenon in China is that the elderly have insufficient consumption power, "but we cannot say that we are aging, we have to consume less."
If residents’ consumption is insufficient, it will not be able to support our potential growth rate. Therefore, it must be said that young people who had consumption ability in the past and workers who still have a certain consumption ability will become elderly people in the future. We must let them continue to maintain their proper consumption level. This means that if you ignore the function of the elderly as consumers, the consumption ability of future residents will be insufficient. It will not be able to guarantee the reorganization of total social demand, and it will not be able to support your economic growth rate.
Therefore, Cai Fang emphasized that we must increase residents' willingness to consume and improve people's spending power from the perspectives of increasing income and improving social security levels.
The conclusion is that it is necessary to continue to expand employment in the primary distribution field, continue to increase people's wage income, and continue to maintain the proportion of Zhengjia's labor remuneration in GDP.
But at the same time, Cai Fang said that what the government can do more effectively, and what is in line with the requirements of our development stage, is to expand the supply of public goods and use them to ensure residents' consumption and the formation of human capital.
From a regular phenomenon, as the per capita income level increases, the proportion of government expenditures in GDP, especially the proportion of government social expenditures in GDP, tends to increase, and the period of fastest improvement is between US$12,000 and US$23,000 in per capita GDP. We call it the "Wagner Acceleration Period", and China will be in this period in 2035. Therefore, the supply of our public goods must be significantly expanded.
But he also pointed out the constraints we face now:
1. Social security is still insufficient, and this deficiency has led to the “pay-as-you-go paradox.” Because aging has already occurred, our pension insurance system is a pay-as-you-go model. This pay-as-you-go model leads to not only insufficient consumption of the elderly, but also insufficient coverage and insufficient equalization, and their consumption ability is suppressed.
2. Among the employed people, their spending power is insufficient and their willingness to consume is not high.
"Because he faces triple burdens. First, he is a payer of social pension insurance. Second, he is a caregiver for the elderly in the family. Third, they know that the population dependency ratio and dependency ratio will change when they retire. They may encounter problems with pension payment, so they have to make precautionary savings." He said.
Therefore, the triple burden makes their consumption power weak. Cai Fang said that our current population age distribution and consumption expenditure distribution are inconsistent. Starting from about 35 to 40 years old, the consumption of this group of people has dropped significantly. This is a huge dilemma. I call it the "pay-as-you-go paradox." As you can see, breaking this paradox is not only to increase their income, but more importantly, to expand basic public security, whether it is pension insurance or other insurance systems, so that they can have no worries and increase their willingness to consume.
also,Cai Fang also emphasized that it is feasible to increase the supply of public goods and expand the boundaries of public goods at this stage.
He pointed out that although we are accelerating aging, the structural changes in the age of the population also create a window of opportunity for us. We have an indicator "total dependency ratio", which is the ratio of teenagers, children and elderly people who have withdrawn from the labor market to the working-age population. This ratio is increasing, which is our burden.
But it is mainly caused by the increase in the old-age dependency ratio, but without the decrease in the juvenile and child dependency ratio, the increase would be even greater. Therefore, this change in population structure has an offsetting effect from two aspects, which means that we are actually saving some public resources now, and we need to be able to better coordinate the use of these resources.
For example, we are now talking about the coordinated use of child care resources, which means that nurseries and kindergartens must be used in a coordinated manner. If we look at the Statistical Yearbook, we can see that the number of primary schools has been significantly reduced over the years, and the number of kindergartens has also been significantly reduced. This means "fewer births". There are not so many children, and there is no need for so many kindergartens and primary schools.
"If these resources can be used as a whole, part of them can be used for the use of nurseries, (absorbing) younger children, reducing everyone's family burden, and making everyone more willing to have children and raise children. The other part of the resources can be used in other aspects of education, including preschool education as compulsory education, high school education as compulsory education, and even the resources saved for teenagers can be used on the elderly." He said.
"Therefore, when we use this method of cutting peaks and filling valleys, there is still room for public resources, not to mention that GDP is still growing. The proportion of public expenditures in GDP should be increased, and naturally the scale of public expenditures can continue to expand." Cai Fang said.