China’s ‘silver economy’ is thriving as other sectors wither amid plunging birthrate

SEOUL, SOUTH KOREA – For more than a decade, Li Dongmei operated a series of kindergartens and schools for young children, withstanding the realities of China’s declining birthrate. She finally faced the music in 2020.

The shrinking number of children meant ever smaller enrollments of babies and toddlers at her schools. The social and economic ruptures of the COVID-19 pandemic were the breaking point, and she shifted her focus to a different and more abundant set of pupils: the elderly.

At her education center in Jinan, a city in eastern China, she now offers singing, dancing, music and art classes for seniors. She organizes activities and educational trips for her students. Unlike schoolchildren who have summer and winter holidays, Li said, older people take classes all year round. And the classes are full.

“The biggest economy is the silver economy,” said Li, 36. “It is bigger than the children’s market.”

China’s aging society is expected to deplete the vigor and vitality of the world’s second-largest economy in the coming decades. But the adverse effects of demographic change are already apparent for Chinese businesses that cater to children. Many are scaling back operations or changing course.

Dairy companies that produced formula for China’s infants are now developing powdered milks for seniors. Proprietors of preschools and kindergartens are closing those facilities to start senior care centers. A technology firm that made devices for parents to track their young children is now designing products allowing grown children to keep tabs on their aging mothers and fathers.

In 2022, China’s population shrank for the first time since 1961. Deaths outnumbered births again last year, and the number of 60-year-olds topped 290 million, or one in every five Chinese people. China’s National Health Commission estimates that the country’s elderly population will grow to more than 400 million by around 2035.

To address its aging population, China announced Friday that it had approved a plan to raise the country’s statutory retirement age for the first time since the 1950s.

China has tried for years to stave off its demographic crisis. It fully lifted its one-child policy in 2016 and offered a range of incentives to encourage people to have more children. But the country’s recent economic troubles have given young people more reason to question whether they can afford bigger families.

One concern is that fewer babies will lead to a smaller labor force that will whittle away at tax revenue and add stress to health care and pensions.

In a 2021 directive, China’s State Council, or Cabinet, called for “actively fostering the silver economy” and developing “elderly-friendly industries.”

Li, the education executive who has shut her schools for children, now offers a variety of classes for senior, including one on how to strut like fashion models on the catwalk. Li said she teaches her students how to become online influencers with lessons on creating short videos.

Also eyeing older customers, Xinjiang Tianrun Dairy, a state-owned company, acquired a smaller rival last year to focus on creating powdered milk for middle-aged and elderly consumers.

Nestlé, the Swiss food and beverage maker, cited the sharp decline in births in China last year when it announced plans to close its infant formula factory in Ireland. It and Chinese dairy firms have introduced special powdered milk products with health benefits for seniors including preventing muscle atrophy, improving sleep and helping digestion.

A leading Chinese dairy company, Yili Group, is promoting its products for seniors through television commercials. In one, a young couple buys specialized powdered milk — without cane sugar — as a gift for relatives at Chinese New Year.

It’s not just milk. The Chinese cybersecurity firm 360 Security Technology since 2013 has been making smartwatches for kids that allow parents to contact their children and monitor their whereabouts and internet use.

In 2019, citing “the advent of an aging society,” the company introduced smartwatches for seniors with features such as blood pressure and heart rate monitors, location tracking for concerned family members and one-click emergency calling.

The size of the growing seniors market is forcing the hand of Chinese companies that once targeted children and their parents, said He-Ling Shi, an associate economics professor at Monash University in Melbourne, Australia.

“They have no choice,” he said.

Births in China fell to 9 million in 2023, down about 6% from the previous year. And the number of preschool children plummeted nearly 12%, according to China’s Ministry of Education.

Last year Zhang Youlan responded to a job posting for a kindergarten teacher in Xi’an, a city in central China. When she showed up for an interview, the facility was not a kindergarten. It was a nursing home.

Zhang, a former kindergarten teacher, said she was told that the position had been advertised that way because many of the responsibilities are the same. She said her new job is similar to her old one: She leads a class in singing and dancing and teaches arts and crafts. She sends pictures of her students eating lunch to their guardians, usually their grown children.

Zhang said she had noticed that kindergartens were shutting down. More than 20,000 closed in China in 2022 and 2023, according to China’s Ministry of Education, with the ranks of kindergarten teachers declining 5% last year.

By contrast, the senior care sector is booming. The number of elderly care facilities in China has doubled since 2018.

“It has a better future than kindergarten,” Zhang said. “There are more and more elderly people and fewer and fewer children.”

Cai Hao opened a maternity and baby goods store in 2018 in Shijiazhuang, a city in China’s northern Hebei province. His store initially carried clothes and footwear, for infants and toddlers.

A surge of newborns in the years after China adopted a two-child policy soon fizzled out, and the pandemic hurt foot traffic into the store.

“There were no customers,” Cai said. “Without children, customers had no reason to shop here.”

Then a few years ago, customers started to ask whether his store carried powdered milk for older people. Figuring he didn’t have much to lose, Cai began to stock it. Sales grew so he added different varieties including one for diabetics and another for people with hypertension.

Cai said that he never made a strategic decision to start targeting older customers, but that about 10% of his sales now come from dairy products for seniors.

He added, “Who wouldn’t be willing to sell more if they could?”