Cover Story: China Moves to Raise Retirement Age to Bolster Workforce, Ease Pension Pressure

China is on the brink of a significant overhaul in its retirement policy, a change that has been a tea-time conversation for over a decade and is set to impact more than 500 million workers. This initiative is underlined by the new five-year [para. 1] reform blueprint released after a major Communist Party meeting, which proposes a gradual increase in the statutory retirement age, following the principle of "voluntary participation with appropriate flexibility" [para. 2][para. 3].

Historically, China's retirement age has remained unchanged since 1951, with men retiring at 60 and women between 50 and 55, depending on their occupation. However, this is among the lowest globally, in contrast to the United States where it is 62 for both genders, and Germany where it is 66 [para. 4]. Alongside this, China’s average life expectancy has risen significantly from 67.9 years in 1981 to 78.2 years in 2021, while the elderly population has surged from 126 million in 2000 to 297 million in 2023 [para. 5].

These demographic shifts, compounded by a declining birth rate which saw the number of newborns fall continuously since 2017, have further stressed China’s economy and social security system. The elderly dependency ratio soared from 12.7% in 2012 to 20.8% in 2021 [para. 6], pushing concerns about the sustainability of China’s pension funds, estimated to become exhausted within a decade [para. 7].

Addressing these challenges involves delaying retirement to ease pension pressures, enhance labor force participation, and optimize human resource allocation [para. 8]. Such a shift requires synchronizing industrial, fertility support, and healthcare policies to comprehensively support the increasingly aging and low birthrate population [para. 9]. Although policymakers proposed progressive steps to raise the retirement age as early as 2013, tangible progress was sluggish, and the first significant steps emerged only in 2020 within China’s 14th Five-Year Plan [para. 10][para. 11][para. 12].

A primary concern is the youth unemployment rate, which stood at 13.2% for 16- to 24-year-olds as of June, despite a gradual decline earlier in the year [para. 13]. Analysts caution that extending the retirement age could exacerbate employment difficulties for the younger workforce. Nonetheless, as the working-age population decreased from 1.006 billion in 2012 to 949 million in 2021, reform remains critical [para. 14].

Experts urge prompt announcement of specific reform plans as delays make adjustments harder, particularly given the principles of "voluntary" and "flexible" retirement, allowing individuals to choose their retirement timing and potentially incentivizing extended work [para. 15][para. 16]. The reforms should balance gradual increments, with suggestions like extending retirement by three or four months annually to hasten progress [para. 17].

In parallel, China faces challenges of pension disparity and varying benefits among worker groups, necessitating holistic reforms to ensure fairness across diverse occupational groups [para. 18][para. 19]. Concurrently, systemic barriers such as employment protection gaps, lack of job training, income disparities, and employment discrimination must be addressed to support older workers and ensure employment equity [para. 20][para. 21][para. 22].

A key to bolstering China's demographic structure lies in promoting a “childbirth-friendly society," reducing the costs associated with childbirth, parenting, and education. Since 2021, numerous policies have aimed to ease these financial burdens, including housing benefits for multi-child families, access to childcare institutions, parental leave, and tax deductions [para. 24][para. 25]. Set against rising child-rearing costs, these initiatives underscore a collective societal and governmental role in fostering an environment conducive to family growth [para. 26].