Beijing takes steps to address shrinking workforce and pension pressures
China has announced plans to gradually raise its retirement age starting next year, marking the first change to the policy since the 1950s. The move comes as the nation grapples with a rapidly aging population, declining birth rates, and increasing pressure on its pension system.
Why it matters: China’s current retirement ages are among the lowest in major economies – 60 for men, 50 for women in blue-collar jobs, and 55 for white-collar jobs. Adjusting these ages is critical to mitigating economic challenges posed by a shrinking workforce and a surge in retirees.
Details:
- Gradual Implementation: Starting in January, the retirement age will increase incrementally over 15 years.
- Men: Retirement age will rise from 60 to 63.
- Women in blue-collar jobs: From 50 to 55.
- Women in white-collar jobs: From 55 to 58.
- Life Expectancy Rise: When the retirement ages were set in the 1950s, China’s life expectancy was around 40 years. Today, it exceeds 78 years.
- Demographic Pressures: By 2035, the number of Chinese citizens aged 60 and above is projected to surpass 400 million, exceeding the current population of the United States.
The big picture: China’s aging population is straining its pension system. The Chinese Academy of Social Sciences has warned that the public pension fund could deplete its reserves by 2035 without significant reforms.
- Dependency Ratio: Fewer workers support more retirees, increasing the burden on the younger workforce.
- Economic Impact: Extending working years can help alleviate pension fund pressures and sustain economic growth by employing more people.
Yes, but The policy may face public resistance and exacerbate youth unemployment as older workers remain in their positions longer.
- Public Reaction: Previous attempts to raise the retirement age were met with social backlash and concerns over job competition.
- Youth Unemployment: With high unemployment rates among young people, the policy could make it harder for new entrants to find jobs.
What they’re saying:
- Experts: “This reform is overdue and very much welcome,” said Erica Tay, director of macro research at Maybank Investment Banking Group. “It will help mitigate the adverse effects of population aging.”
- Government Officials: Authorities emphasize that the adjustment will be gradual to manage expectations and minimize immediate impacts on the job market.
Between the lines: The policy aligns China more closely with regional peers like Japan and South Korea, with higher retirement ages.
- Global Context: Many countries face similar challenges with aging populations and are considering or have implemented higher retirement ages.
What’s next: The government plans to implement the changes progressively based on individuals’ birthdates and may offer exemptions for certain groups.
- Implementation Tools: The Ministry of Human Resources and Social Security will provide citizens with tools to check their adjusted retirement age.
- Future Adjustments: Analysts caution that further increases in the retirement age may be necessary in the coming decades.