China Raises Retirement Age to Address Aging Population

China’s top legislative body has approved a proposal to gradually increase the country’s retirement age, marking a significant step in addressing the economic challenges posed by a shrinking workforce. The official Xinhua news agency reported on Friday that the changes, which aim to alleviate pressure on pension budgets and maintain stable productivity growth, will take effect on January 1, 2025 and be implemented over a 15-year period.

The current retirement ages in China are among the lowest globally, with men retiring at 60 and women in white-collar jobs retiring at 55. The new measures will raise the retirement age for men to 63 and for women in white-collar work to 58. Women in blue-collar jobs will see their retirement age increase to 55 from 50.

The decision to raise the retirement age comes amid concerns about the country’s aging population and the declining working-age population. Life expectancy in China has risen significantly from 44 years in 1960 to 78 years in 2021, and is projected to exceed 80 years by 2050. This, coupled with a shrinking workforce, has put a strain on pension systems.

While the government believes that raising the retirement age will help alleviate pressure on pension budgets, some individuals may express concerns about the potential impact on job opportunities. Many Chinese citizens took to social media to voice their concerns after the proposal was discussed by lawmakers on September 10.

Xiujian Peng, a senior research fellow at Victoria University, emphasized the importance of government action to address the declining population and its adverse effects on economic growth. He noted that raising the retirement age can increase labor force participation and mitigate the challenges posed by population aging.

Xing Zhaopeng, ANZ’s senior China strategist, suggested that the move would have limited short-term impact but could contribute to maintaining stable productivity growth in the long run.

The Minister of Human Resources and Social Security, Wang Xiaoping, announced that the implementation of the retirement age increase would be gradual, starting from next year and taking 15 years to fully complete. She also emphasized that the changes would be flexible and voluntary, allowing employees to choose to retire earlier or extend their retirement by up to three years.

Bruce Pang, chief economist China at Jones Lang LaSalle, highlighted the outdated retirement ages as a contributing factor to the growing number of retirees and the declining pool of active workers. In China, the population aged 60 and older is expected to rise from 280 million to over 400 million by 2035, surpassing the combined populations of Britain and the United States.

The financial burden of supporting an aging population is evident in the pension budget deficits faced by eleven of China’s 31 provincial-level jurisdictions. The Chinese Academy of Sciences has warned that the pension system could run out of money by 2035 without further reforms.

China’s decision to raise the retirement age aligns it more closely with its regional peers, Japan and South Korea, where people can only receive pensions at 65 and 63 years old, respectively.