China recently announced a groundbreaking decision—to raise its retirement age—finally, after years of debate and near-universal unpopularity. For the first time in the 1950s, China adjusts its retirement policy in light of the nation’s aging population and shrinking workforce. The actual adjustment will take place gradually over a period of 15 years, starting from January 1, 2025. As a result, the retirement age increases. Why is this happening now, and what implications does this have for China’s future? Let’s look at the details.
The Current Retirement System: A Glimpse into the Past
For decades, China has kept one of the lowest retirement ages in the world. Generally, men retire at 60, white-collar women at 55, and blue-collar females may even retire at 50. In the 1950s, China’s life expectancy was significantly lower, its population was younger, and it was still growing. Over the last few decades, however, the Chinese demographic landscape has radically changed.
Today, life expectancy in China has risen to almost 78 years, while the birth rate has gone through the floor. Despite the reversal of the one-child policy in 2016, China’s birth rate in 2023 reached a record low since 1949. With fewer numbers entering the workforce and more elderly citizens, China sits on a demographic time bomb.
What’s Changing?
A new policy would raise the retirement age for men in 2040 to 63, while it would raise the retirement age for women in white-collar jobs to 58. Women in blue-collar jobs who retire at the age of 50 will have to work until they reach the age of 55.
In addition to raising the retirement age, the government has also increased the minimum period of work required to receive a pension. The government has extended the minimum period of work required to receive a pension from 15 years to 20 years, effective from the year 2030.
The government, however, has managed to offer a slight leeway in the system. If they wish to, workers who have met their 20-year contribution requirement can retire up to three years ahead of the new statutory age. This would provide a small amount of comfort to those who are dissatisfied with the prospect of working longer than anticipated.
Why Now?
This decision has deep roots in China’s current demographic and economic pressures. Its population began to decline in 2012; more than 21% were above the age of 60 years by 2023. That is nearly 297 million people, and the number is expected to rise very sharply in the coming decades. We expect one-third of China’s population to be elderly by 2035.
This ageing population has been a huge burden on the country’s pension system. In 2019, the Chinese Academy of Social Sciences estimated that China’s pension funds would deplete by 2035 if nothing changed. While fewer young people enter the workforce, there is growing stress on the system due to the increasing elderly population.
Experts had warned that delaying the retirement age was overdue, and without action, the pressure on pension funds would not be sustainable. The Chinese government probably came to the realization that it could no longer delay what was inevitable.
Public reaction: mixed feelings and widespread concerns
Yet, despite the urgent need for such reform, that decision has brought widespread backlash, mostly on Chinese social media. Many worry that they’ll have to work longer before they can claim their pensions. The pension payments themselves have raised concerns.
Many blue-collar workers are afraid they could hardly find any job in their old age, considering the high level of age discrimination in the Chinese labor market. Some fear that the rapidly ageing population will deplete the pension funds before most people can access the benefits.
Government’s Response: A Balancing Act
Along with increasing the retirement age, the government promised various other initiatives in order to take care of all the concerns: improving the system of paid annual leave, combating age discrimination in workplaces, and early retirements for workers doing jobs with physically demanding work profiles.
Not only that, but China also wants to introduce universal childcare that would help relieve the burden on retirees who often have to take care of their grandchildren. The purpose of this initiative is to encourage young couples to have more children, thereby improving the declining birth rate and providing care for the elderly population.
The government has also exercised strict control over the sentiment surrounding this decision. Major state media outlets have tightly controlled the online discussions.
