Li Bengong, executive deputy director of the China National Committee on Aging, speaking at a press conference on the white paper outlining programs for senior citizens in Beijing on December 12, 2006. [CIIC]

China is already home to more than half of the old people in Asia, and by 2050 its elderly will exceed 400 million, accounting for more than 30 percent of the population.

"The burden of old-age security is getting heavier," Li Bengong, the vice-director of China's National Working Commission on Ageing, told a news conference in Beijing on Tuesday.

"With the rapid growth of the ageing population, the pressure on rural areas in terms of pension and medical care will be even more acute than in urban areas, especially in western and poverty-stricken regions."

China's pension system does not cover rural areas and the system in place is underfunded -- a serious problem for a country whose working population is expected to peak in 2010 and whose ratio of workers to retirees is three to one, compared to 10 to one in 1990.

The central government is probing Shanghai, where money has reportedly been drained from the city's 10 billion yuan social security fund for illicit loans and investments, a scandal that prompted a national audit of funds which revealed some other abuses.

The problem of caring for the elderly is also compounded by China's "one-child policy", in place for more than 25 years, a reversal of the traditional practice of having several children to ensure parents are looked after in their old age.

Now, only children face the prospect of supporting two parents and four grandparents.

"With the urbanisation of rural areas and with the shrinking of the size of rural families, it is no longer realistic to solely rely on land to provide for the elderly there," Li said.

Instead, coverage should be expanded. Local governments should increase budgetary input into social security funds and a proportion of lottery proceeds should be dedicated to services for the elderly.

"We have to actively encourage and attract private capital and foreign capital into this undertaking so as to gradually form a diversified investment mechanism," Li said.

Family planning policies and the ageing population are also contributing to labour shortages, a serious concern in a country whose competitive strength has been its cheap and plentiful supply of workers.

The government says China is in the unenviable and unique position of ageing before it becomes affluent.

Although it has rapidly grown into the world's fourth-largest economy, poverty is still widespread in the vast countryside, and social services which the elderly rely on, including medical care and pension funds, are often non-existent.

Li said the next 25 years were a crucial period for shoring up social security systems before China's population of old people grows ever larger.

"The impact of the ageing society is extensive, long-term and complicated," he said.