Every month, Matthieu David-Experton (E10), founder of Daxue Consulting, gives us an update on the China market. Today, he says senior consumers are the key to anticipate and understand Chinese economy’s evolutions.
China in the 1950s represented a time of recovery from the devastation of World War 2 and came with a spike in new births. This trend continued into the late 1970s, prompting the government to introduce its ‘One Child’ policy. The effects of this policy took full force in the 2000s and have continued to the present day with low birth rates.
Source: Population Pyramid
China’s working population is now aging, and there are not enough young people to take over. There are over 290 million over 55s, and this is estimated to increase to over 400 million by 2050. China’s future seniors are now set to become a significant and important group in 10 to 20 years time.
Looking to the New Generation of the Older Generation: The two Ts
The retirement age in China is 60 years old for men, 55 for female civil servants, and 50 for female workers, making the female retirement age one of the lowest in the world. Due to rapid changes in China’s social, economic, and cultural climates in the last 30 years, the divide between young and elderly remains stark.
However, we can look to two areas for key insights into the elderly. Firstly, the current trends in elderly, which show current attitudes. Secondly, trends in younger people, the future elderly. These will form part of the important group that will emerge due to an aging populace.
Within both of these areas, there seem to be two noticeable trends, The two Ts: Technology and Tourism.
Despite little more than 4% of Chinese people holding a passport, China still holds the world’s largest outbound tourist market with expenditures in the sector reaching over USD 155 billion (1.05 trillion RMB). This says a lot about where the industry is going if more people gain passports.
In this sector with a huge future potential, despite forming a modest section of the market, the travel bug has taken hold of many seniors in China with 87% of over 50s saying they definitely plan to travel.
It is no surprise that by 2030, the elderly tourist market is expected to be seven times larger than present with 12.6 million annual elderly passengers.
Chinese Tourism Market by Age. Source: EU SME Centre
The boom in the Chinese tourist industry indicates the shifts of the mindset for Chinese people to a more globalised and curious mindset into older age – something they will sure bring into old age.
However, currently face barriers in the tourism market as consumers. The travel industry has been said to not actively seek business from seniors as they pose too much risk for little profit. Seniors tend to be very sensitive to price, preferring only the most essentials as long as they can visit their desired tourist sites. Despite this growing demand is going to start to give senior travels more power. Ctrip estimates that seniors, not younger people will be the main force behind group travel in the future.
Still, economic slowdown, which correlates with the slow growth of passport possession, remains a risk to seniors becoming the tourist consumer force that everyone hopes for. Additionally, Chinese passports rank 87th on the Visa restrictions index (tied with Cambodia) with visa-free or visa on arrival to 50 countries. This makes travel options somewhat limited than their western counterparts. Performance of the economy and Chinese foreign policy may be big factors in just how much the elderly tourist market booms.
Technology usage in daily life tends to correlate with the level of development in an economy. In the United States and Europe, penetration of technology (such as smart phones and the internet) is high. However, this tends to remain significantly lower in older age groups.
For China, despite an enormous and buzzing technology sector, it still lags behind the U.S. and Europe in internet penetration. For the over 55 age group in China, this drops to just 5% - compared to 28% in the United States.
Internet Users as a % of the population. Source: World Bank, produced using Google Public Data
Regardless, China’s tech industry has enormous future potential. Especially when you consider that despite lagging internet penetration, Chinese companies such as Tencent and Alibaba, operating domestically have almost grown as large as their global behemoth counterparts of Facebook and Amazon. And, China has become the biggest player in technology mergers and acquisitionsChina has become the biggest player in technology mergers and acquisitions mergers and acquisitions.
Such a state of the industry with a lagging internet penetration is telling of the upwards direction for the sector. When the majority of people continue gaining access to the internet and technology, they will carry their tech-mindset into older age. Technology will become a big part of senior’s lives.
For current seniors, this could not be further from the case. The elderly of China struggle to how smart phones can add benefit to their lives. They believe them too difficult to learn, and buying a smart phone followed by choosing a data plan adds further complications. Some even think a smart phone will be detrimental to their health.
However, the benefits to the elderly are quite clear. Smart phones can help alleviate loneliness in seniors. Additionally, it breaks social barriers by enabling seniors to communicate over vast distances. For this reason, the government has been launching weekly classes for seniors to learn technology with many converted after seeing the benefits.
Like tourism, the government can drive policy change and continue economic prosperity to help engage the elderly with the sector. This should prove lucrative as internet connectivity, in addition to improving the quality of life, will also be the gateway for many elderly people to start online shopping. While seniors do not make up an important group of technology users, catering and engaging this group now will mean companies can be prepared in 10 to 20 years’ time when the current tech-savvy young people become older.
It will be during this time when the elderly really become a gold mine.
Read our previous Chinese Chronicle here.
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