Thematic Ageing gracefully—a weighty opportunity

Last year marked a major turn in China's demographics, with the first population decline in 60 years. With the working age-to-retiree ratio halving over the last two decades to 2.7x, and set to fall further to 1.1x by 2050, per the UN forecast, market concerns over production and consumption are growing. But we think there is a case for optimism. UBS Evidence Lab conducted its first ever survey on the topic of ageing, which we followed up by interviewing consumers and experts from different backgrounds. The key message is the urban elderly have the purchasing power and are ready to spend. In this report we explore how this may affect financial planning, retirement living, healthcare, technology, leisure and consumer discretionary spending.

UBS Evidence Lab's survey results show more than 90% of respondents aged 55-75 own property, and half of retirees receive a state pension of more than Rmb6,000 a month. The burden is at the fiscal level as a deficit could emerge in the next few years for both state pensions and medical funds—a potential shortfall of trillions of renminbi. The survey also found 90% of respondents engaged in leisure activities such as exercise, online shopping and entertainment. They are getting more active online and more used to consuming in general.

But there is a gap in supply, with the private sector yet to commit enough resources to tap this potential. Just over 60% of respondents think products and services aimed at the elderly are available and affordable. And satisfaction levels among younger consumers (aged 25-45) are lower. This cohort—more used to convenience, comfort and luxury—may continue their spending into old age. By adapting and innovating, businesses could drive and meet new demand.

Less clear is the fate of production, as fewer young people are willing to pursue blue- collar professions. Children's education tops the list of concerns among the 25-45 age group, and child-related spending accounts on average for 20% of household income. Citing costs and pressure, 40% of non-parent respondents would prefer just one child while 29% are happy staying childless.

Healthcare, as the main concern among the elderly, could be a major beneficiary with possibilities from innovative drugs to medical devices, vaccines, hospitals and pharmacies. Financials may all benefit from rise in allocation into long-term financial products. In technology, companies driving automation and intelligent manufacturing should also do well. Travel, as the main post-retirement goal, could further penetrate older age groups, as might internet companies.