The issue of an aging population is a global challenge, but in China it is particularly acute due to the consequences of the country’s three-decade-old one-child policy, which has caused a sharp decline in the birth rate, with just 9 million babies born last year.
According to United Nations forecasts, China's working-age population will decline by nearly 40% by 2050 compared to 2010. This puts great pressure on the country's pension system and labor resources.
Both young and older workers have expressed concerns about changes to pension policies. China is struggling with disparities in its pension system between rural and urban areas, while also trying to maintain social stability amid high youth unemployment.
China's economic growth has slowed, while life expectancy has increased from 44 years in 1960 to 78 years in 2021 and is expected to surpass 80 years by 2050, meaning a growing elderly population is placing additional strain on an already struggling pension system.
In September, Chinese lawmakers swiftly approved a plan to raise the retirement age, a “major step” toward improving the social security system and raising people’s living standards. But China’s pension system is under severe financial strain. About a third of China’s provincial-level regions are currently running pension deficits, and the Chinese Academy of Social Sciences estimates that without reform, the system will run out of money by 2035.
Pensions in big cities like Beijing and Shanghai range from 3,000 to 6,000 yuan a month, while in rural areas they are very low. The number of people over 60 in China is expected to increase by at least 40% to more than 400 million by 2035, equivalent to the combined populations of the UK and US.
To qualify for a pension, the minimum contribution period will increase from 15 years to 20 years, starting from 2030. According to Professor Stuart Gietel-Basten from the Hong Kong University of Science and Technology (China), the extension of the contribution period could make it difficult for many unskilled workers, especially in the sharing and informal economy, to qualify for a pension.
According to analysis by Ernan Cui of Gavekal Dragonomics, the financial impact of raising the retirement age is likely to be small initially as late retirement remains largely voluntary. However, increasing the minimum contribution period to receive a pension would not be optional, and this could put significant pressure on the workforce.
