Amid demographic crisis, China converts kindergartens into senior care homes, fueling 'silver economy' boom.

• Due to declining birth rates and an aging population, thousands of Chinese kindergartens have reduced their operations, shut down completely or shifted their focus to remain viable.
• The Chinese government has intensified its policy measures to strengthen its "silver economy," which offers goods and services to the elderly, in an attempt to address the country's aging population.
• According to Tianchen Xu, an economist at Economist Intelligence Unit, the elderly population represents a "high-certainty market opportunity" with significant financial potential, as seniors tend to be more financially savvy due to their wealth accumulation during China's economic growth.

Due to declining birth rates and an aging population, thousands of Chinese kindergartens have reduced their operations, shut down completely or shifted their focus to remain viable.

In Zhejiang's eastern province, a daycare center now serves senior citizens instead of children.

Zhuang Yanfang, 56, transformed her kindergarten in Jinhua, Zhejiang, into a senior nursing center last year. She revealed to local media that she conceived the plan after facing challenges in attracting enough babies and toddlers to her classroom.

The renovated quadrangle-shaped building had barely any remnants of a kindergarten. Its once-colorful walls were repainted milky white, and the chalkboard was replaced with a bulletin board, filled with information about health care and nutritional meals for the elderly.

Since the implementation of the "one-child policy" in 1980, births in China have been steadily declining. Despite the policy being relaxed in 2016, the birth rate has not improved.

The number of children in preschool education decreased by almost 15% between 2021 and 2023, leaving just under 41 million children.

The closure of preschools, including public and private, resulted in a decrease of 20,000 across the country, according to CNBC's analysis of data from China's Ministry of Education. This coincided with the government's effort to shut down private-owned kindergartens while opening more state-backed ones to lower costs for families.

As the number of preschools declines, the senior care industry experiences growth in China's aging population crisis. The number of elderly care service institutions and facilities has doubled from 2019 to more than 410,000 this month, according to China's Communist Party.

The Chinese government has intensified its policy measures to strengthen its "silver economy," which provides goods and services for people over 50, in an effort to address the country's aging population. The General Office of the State Council has issued guidelines calling for the acceleration of the development of elderly care institutions and the promotion of senior citizen consumption.

Harry Murphy Cruise, an economist at Moody's Analytics, stated that China's aging population will continue to increase. By 2040, he predicted that approximately 30% of the total population would be over 65 years old, up from 15% today, while the percentage of people under 15 years old would decrease from 17% to just over 10%.

The potential market size for goods and services targeting seniors will increase due to aging, as Cruise stated.

A bright spot in the economy: the elderly

According to Tianchen Xu, an economist at Economist Intelligence Unit, the elderly population represents a "high-certainty market opportunity" for businesses. Xu explained that senior citizens are typically more financially savvy, having amassed their wealth over time as China's economy has grown.

The retired population has "money to spend" and is looking for a "high-quality post-retirement life," according to Lynn Song, chief China economist at ING.

Some Chinese dairy companies have introduced a new product aimed at the middle-aged and elderly, emphasizing its benefits for sleep quality, bone density, and immune system.

In Shanxi province, a major sheep-farming area in China, Zhenmu Dairy, a producer of specialized sheep-milk, has been promoting its products by holding events at senior care centers, where its top management would speak and give out free samples, as stated by the company.

In Shanghai, gyms are targeting older fitness enthusiasts with specialized equipment, real-time health monitoring devices, and physiotherapeutic sessions for chronic diseases.

Xu stated that China has the manufacturing capacity to become a leading producer of elderly-specific goods, including robot carers, smart home products for seniors, and AI-enabled pillboxes.

Raising the retirement age

Although its "silver economy" is expanding, Beijing continues to struggle with the negative consequences of its aging population on the long-term health of its economy.

The legislative body approved a plan to gradually increase the retirement age in September, in an effort to address the shrinking workforce by utilizing the growing pool of older workers.

Although the move was met with controversy and opposition from younger people on Chinese social media, economists argue that it was a "necessary" action to take.

According to EIU's Xu, China's relatively lower retirement age and rapidly aging population have resulted in a growing number of "under-utilized labor," commonly referred to as "young olds."

By 2040, China plans to increase the retirement age for men from 60 to 63 and for female white-collar workers from 55 to 58. Female blue-collar workers, who currently retire at 50, will have to wait until they are 55 to retire.

The statutory retirement age in the U.S. is 67 for all workers born in 1960 or later, and in Japan, it is 65 for both men and women. However, those ages are still notably lower than the U.S. and Japan.

China aims to alleviate the financial strain of pension payments and boost tax revenue by keeping seniors in the workforce for longer, according to Moody's Analytics' Cruise.

The Chinese government's civil affairs ministry recently issued a directive on the "Silver Age Action," a program that motivates retired professionals with expertise in education, science, and agriculture to volunteer for initiatives aimed at promoting economic development in underprivileged areas.

— CNBC's Sonia Heng contributed to this story.