In a new Super-Sector Analysis from Citi Research, a team led by insurance analyst Michelle Ma looks at China’s significant demographic shift toward an aging population and how it’s reshaping the country’s economic landscape. In the first of a series of notes from Citi Research, we examine industries that could benefit from this shift to a “silver economy,” starting with tourism and private pensions.

The demographic wave remaking China has its origins in the country’s 1950–1970 baby booms and the declining birth rate since the implementation of the 1979–2015 “one-child policy.” The percentage of the population aged 65 or older stood at 15.4% in 2023. China became an “aged society” (defined by the United Nations as a country where 14% of the population is 65 or older) in 2021; it’s expected to become a “super-aged society” (defined as a country with an elderly population mix above 21%) within 10 years.  

The “silver economy” offers untapped opportunities, while phenomena such as longer life expectancies and changing consumer behaviors are creating new and increasing demand underpinned by the unprecedented wealth accumulation of the Baby Boomers. The demographic known as the “young elderly” (typically defined as between 50 and 64) account for approximately 11% of the population. This cohort has amassed significant wealth and exhibit a mindset that’s distinct from China’s traditional elderly; its members are now actively planning for retirement and displaying a greater willingness to spend. Meanwhile, China’s Generation Z and millennials are still struggling with a rising unemployment rate amid a slowdown in economic growth.

Among industries poised to benefit, we note the private pension and elderly tourism sectors. Seasoned travelers are seeking enriching experiences and also want financial products tailored for the unique needs of an aging population. In looking at these two sectors, we draw experience from Japan’s similar demographic journey; in upcoming installments of the Silver Economy series, we’ll look at high-end elderly communities promoted by insurers, elderly healthcare management services, and the elderly health supplement industry.

Private pensions

China’s pension system has been evolving since the 1990s and has three pillars. The pay-as-you-go public pension system (the first pillar) is the basic pension insurance system, and faces mounting funding pressure due to the aging population and declining birth rate. The employer-sponsored enterprise pension system (the second pillar) has suffered from a low participation rate, due in part to private companies’ low profitability. Given these challenges, China has been actively and urgently promoting development of the third pillar, the private pension system controlled by individuals. Such efforts have included attractive tax incentives capped at Rmb 12,000. After a two-year pilot of this system, more than 70 million people have set up personal accounts. But building the third pillar remains a work in progress: Only 22% of account holders made contributions in 2023, with the average annual contribution a mere Rmb 2,000, far below the cap. 

We estimate that annual contributions to the private pension system should rise to Rmb 1.8 trillion over the next decade. As a result, Rmb 533 billion in new funds could be flowing into the insurance industry annually, assuming 30% allocation to insurance products. That’s equivalent to 13% of the life insurance premium in 2024, making life insurers key beneficiaries as the private pension system expands.

Japan’s experiences

Japan’s experience could shed light on what’s ahead for China. Japan also faces significant demographic challenges due to its low fertility rate and aging population, and became the world’s first “super-aged” society in 2006. 
According to a January Mizuho Bank report, demographics in Japan are expected to boost “silver economy” industries to a market value of ¥114 trillion by 2040, up from ¥96.4 trillion in 2023. As with China, we also see significant opportunities for Japan’s commercial insurers in the long-term-care space, as Japan’s mandatory public long-term system is pressured by an increase in insurance premiums, out-of-pocket expenses amid medical inflation, and concerns about the availability and quality of nursing services. That’s creating an opportunity for private players that can offer tailored solutions such as flexible payout structures, preventative care incentives and digital health integration.
Looking ahead, we see three key development strategies that private insurers could adopt: direct involvement in facility management; expansion of long-term care and dementia insurance products; and leveraging synergies with related long-term care services.

Unlike Japan, China’s long-term-care system is still emerging. China’s system was only launched in 2016 and covered some 180 million people at the end of 2024. In the private sector, commercial long-term-care insurance accounted for 3.5% of total commercial health insurance premiums in 2022. Many long-term-care products sold are still structured as ordinary savings products and remain sensitive to interest rates. In the long term, we see big opportunities for China insurers in the long-term-care space.

Silver-economy tourism

We also see changing consumer behavior in China’s silver economy. Elderly tourism is gaining traction, with relatively younger and healthier elderly prioritizing leisure and cultural experiences above other activities, a change from patterns seen with older generations.

Market research consultancy Frost & Sullivan estimates the silver tourism market will grow to Rmb 2.7 trillion in 2028 from Rmb 1.4 trillion in 2023 at a compound annual growth rate (CAGR) of 13.6%, above the overall silver-economy CAGR of 11.6%. According to Frost & Sullivan, tourists older than 60 represented 20.6% of total domestic tourists in 2023, followed by 17.2% for travelers aged 50 to 59. According to Trip.com, tourism order volume rose 58% year over year for those aged 61 to 65 in the first nine months of 2024.

Silver tourists generally prefer high-quality accommodations focusing on safety, hygiene, wellness facilities and convenient locations as well as value for money. This leads us to expect high opportunities for mid-to-upscale hotel chains with strong brand recognition.