China is likely to become a deeply aging society by 2035. By the end of 2023, China had nearly 300 million people aged 60 or above, accounting for more than 21 percent of the total population. This proportion is expected to rise to nearly 30 percent by 2035.

In response to this rapid demographic shift, China is working out a comprehensive institutional framework that spans finance, insurance, government policy, and market participation. The framework is designed to not only mitigate the risks associated with an aging population but also to turn this transformation into a source of social and economic progress.

One key component of China's policy is the rollout of long-term care insurance. As an institutional innovation-oriented plan in the social security system, the insurance program is designed to support elderly individuals with disabilities or partial disability by covering their basic care services' costs. This reduces the economic burden on their families and helps prevent vulnerable elderly people from falling into poverty. Although still in the pilot stage, the plan is expanding, with efforts underway to refine funding mechanisms, benefit standards and service models.

Another crucial element is the growing ecosystem of retirement-focused financial services. Financial institutions such as banks, insurance companies, and asset management firms are introducing a wide array of products tailored to elderly people.

Retirement-targeted wealth management plans, for example, allow individuals to build retirement funds in phases and compensate for gaps in basic pension coverage. Insurance companies, on the other hand, are offering innovative products such as long-term care policies and annuities to ensure long-range financial protection.

The government, on its part, is promoting age-friendly products and services to unlock the vast potential of the "silver economy". From accessible home renovation to smart health devices, elder education programs and cultural tourism for seniors, a growing range of products and services is being subsidized or incentivized through public policy. These efforts help reduce costs for consumers and promote innovation among businesses targeting elderly people.

China's response to population aging is part of its unique governance model which combines top-level, innovative design, State support with market mechanisms, and institutional frameworks with digital transformation.

At the national level, the government provides overarching policy direction through plans such as the 14th Five-Year Plan (2021-25) for elderly services. Local governments, in turn, have the flexibility to experiment with and adopt such policies to meet regional and local needs. Some regions have developed distinctive service models. For example, Zhejiang province has adopted a "happy aging" approach and Shandong province has implemented a coordinated community-based care system for the elderly.

Looking ahead, the 15th Five-Year Plan (2026-30) is expected to build on these efforts by further expanding long-term care coverage, enhancing community-based services, and promoting innovative finance and technology solutions for the elderly. This plan emphasizes integrating eldercare with health, housing, and digital infrastructure, reflecting China's forward-looking strategy to address aging comprehensively.

The interaction between central guidance and grassroots experimentation has become an effective way of implementing policies that are both consistent and adaptable to changing situations.

The integration of public resources with market mechanisms has also become a hallmark of China's approach to improving eldercare. While basic services such as pensions and long-term care insurance provide universal coverage, governments also engage private players by outsourcing services and encouraging investment. For example, many cities have developed public-owned, privately operated eldercare facilities, which combine the reliability of public infrastructure with the efficiency of market operations.

Technology is another essential driver of reform. China is promoting a "smart aging" policy, under whose framework digital tools are embedded into every aspect of eldercare. Big data platforms, AI-powered monitoring systems, and telemedicine networks are being integrated into the delivery and supervision of eldercare. This fusion of digital innovation and institutional reform is helping make services more accessible, targeted, and efficient.

China's institutional response to population aging offers valuable insights into its governance model. For example, its policy is forward-looking and holistic. By elevating the population aging issue to a national strategic priority, China has developed a multidimensional response system that encompasses social security, financial innovation, industrial development, and spatial planning. This comprehensive approach provides a reference for countries seeking to tackle aging in a systematic and sustainable way.

Another important insight comes from China's ability to use innovative means to address the "growing old before getting rich" problem. With per capita GDP still about $12,000, China has shown that it is possible to deal with the aging population challenge through creative institutional design. China's long-term care insurance fund pooling system, risk-controlled financial products, and integrated community care models show how to make the most of limited resources.

Moreover, China's leadership in tech-enabled eldercare has facilitated the application of next-generation technologies such as 5G, artificial intelligence and digital payments to reshape the methods of providing elderly services.

The author is director of the Shanghai Institution For Finance & Development.

The views don't necessarily represent those of China Daily.