Last week, it was all legislative meetings, work reports, and policy debates. Some new initiatives, some retreads of old stuff, and a great deal of emphasis on narrowing the income gap, helping out rural folks, and rebuilding China’s social safety net.

The international debate over the value of the RMB is also in the news, with both the usual suspects (e.g. Senator Chuck Schumer from New York) and some new entrants (e.g. economist Paul Krugman) calling for punitive U.S. tariffs on Chinese goods. Don’t hold your breath on that one, but yes, the rhetoric has heated up once again.

Whenever China’s trade surplus with the U.S. is brought up, we end up speaking about general economic imbalances. This includes discussion of China’s too-high savings rate, over-investment in certain export-oriented industries, needed liberalization of the financial system (e.g. interest rate policy), and so on. It would be difficult to fix one of these problems without dealing with a lot of other, related issues.

And these things certainly are related, aren’t they? For example, last week’s talks about building up China’s social safety net also touched upon domestic consumption. This is convenient. Need to save less and spend more? Have people that need support? One solution to two problems.

The aging population presents opportunities for both the private sector (commercial opportunities) as well as the government (boost domestic consumption). China Daily ran this today:

Existing businesses are merely scratching the surface of the vast potential. Healthcare, pharmaceutical, financial services, manufacturing and the retail services industries stand to benefit from the growing number of old people.

Consider this: More than 12 out of every 100 people in China are over 60, CNCA said. By 2050, there will be more senior citizens in China than the entire population in the United States. The United Nations threshold for an aging society is 10 percent; China reached this in 1999.

Adding to the business attraction of the industry is the current shortage of nursing homes and beds including professional nurses and caregivers, and lack of a social safety net. Currently, demand outstrips supply for beds in nursing homes by almost 6 million. Two thirds of China’s 1.3 billion population have no social safety net.

(Caution: the majority of that article is functionally a paid advertisement for a local nursing home chain. Beware. I hope the reporter was well paid for it.)

The numbers are staggering, the problem is huge, but the situation is even worse when you consider that China is still a developing country with an insufficient social safety net:

China’s aging population has four features. The first is the large population of the elderly, as China is the only country in the world with over 100 million elderly aged above 60. The second is the rapidly aging population. The proportion of the population aged over 60 is expected to rise from 11 percent in 2005 to 30 percent in 2045. The third is the low productivity of China, with a per-capita GDP smaller than many Western countries, hence leaving limited financial ability to support its aging programs. The fourth is the heavy burden derived from the country’s transition from a planned economy to a market economy. China therefore has to shoulder the heavy burden left from the planned economy without a pension system. (Beijing Review)

The amount of funding, from both the public and private sector, that will go towards solving this problem will no doubt be staggering. I wonder where it’s all going to come from. Will China sacrifice growth (i.e., jobs for young people) to ensure that older Chinese are taken care of? Is significant deficit spending in the cards for the future? Either way, I think that savings rate/trade deficit problem isn’t going to be as big of an issue in the long term.