China's Retirement Reform: Raising Ages Amid Demographic Pressure

China plans to gradually increase its statutory retirement age, one of the world's lowest, to address pension budget pressures. With life expectancy rising, the reform is necessary to maintain fiscal sustainability. The change, aiming for 2029 completion, will offer flexibility and accommodate a rapidly ageing population.

China is set to incrementally raise its statutory retirement age, which is currently among the lowest globally, to permit longer working periods amidst soaring pension budget pressures. Many provinces are already grappling with deficits.

The need for reform is pressing, with life expectancy in China having risen to 78 years by 2021 from about 44 years in 1960. Projections indicate it will exceed 80 years by 2050. Sunday's policy document announcement included plans to address the declining birth rate and an ageing population, which has decreased for a second consecutive year in 2023 and is expected to continue declining.

Authorities stated, "In line with the principle of voluntary participation with appropriate flexibility, we will advance reform to gradually raise the statutory retirement age in a prudent and orderly manner." The reforms aim to be fully implemented by 2029, they added.

Currently, the retirement age stands at 60 for men, and ranges from 50 to 55 for women, depending on their occupation. Officials have been discussing raising the retirement age over the last two years, but this will be the first instance that workers can opt to continue working.

Health authorities anticipate the number of those aged 60 and older to rise from 280 million to over 400 million by 2035. This demographic shift represents a substantial pressure comparable to the current populations of Britain and the United States combined. DEMOGRAPHIC PRESSURES

Increasing retirement ages is a common response to demographic pressures to protect pension funds and mitigate workforce shrinkage, according to Michael Herrmann from the United Nations Development Population Fund. He emphasized the importance of gradual implementation and flexibility, suggesting part-time, remote work, or project engagements as viable options.

Currently, each Chinese retiree is supported by five workers, a ratio that has halved over a decade and is trending towards a 4-to-1 ratio by 2030 and 2-to-1 by 2050. Economists argue that the existing pension system, dependent on a dwindling active workforce to support an expanding retiree population, is unsustainable and necessitates reform.

Eleven out of China's 31 provincial-level jurisdictions are already running pension budget deficits, according to finance ministry data. The Chinese Academy of Sciences projects the pension system will deplete its funds by 2035.