China Raises Retirement Age: Navigating an Aging Workforce Crisis

China has approved a plan to raise the retirement age to address the economic challenges posed by a shrinking workforce. The new policy, effective January 2025, will be gradually implemented over 15 years. The decision aims to alleviate pension budget pressures and ensure stable long-term productivity.

China's top legislative body has approved a proposal to raise the country's retirement age, according to the official Xinhua news agency on Friday. The move is part of a comprehensive overhaul of decades-old laws to combat the economic pressures brought on by a shrinking workforce. Currently, China's retirement ages are among the lowest globally.

The urgency for this reform is underscored by China's rising life expectancy, which increased to 78 years in 2021 from about 44 years in 1960 and is projected to surpass 80 years by 2050. Concurrently, the working population required to support the elderly is dwindling. The retirement age will be raised for men to 63 from 60, for women in white-collar jobs to 58 from 55, and for women in blue-collar positions to 55 from 50.

These changes will come into effect on January 1, 2025, and be implemented over a 15-year period. Extending the working age is expected to ease pressure on pension budgets. Many Chinese provinces already face substantial deficits. However, delaying pension payouts and requiring older employees to work longer may not be well-received by everyone.

Following the report by Xinhua, hundreds of thousands took to social media, expressing concerns about increased job competition. Xiujian Peng, a senior research fellow at Victoria University's Centre of Policy Studies in Australia, stated that raising the retirement age could mitigate the adverse effects of population aging by boosting labor force participation.

Xing Zhaopeng, a senior China strategist at ANZ, noted the decision would have minimal short-term impact but is critical for maintaining stable productivity growth in the long term.

Wang Xiaoping, the Minister of Human Resources and Social Security, said the adjustment would be gradual, flexible, and voluntary, allowing employees to choose early retirement or extend their working period by up to three years.

Bruce Pang, chief economist China at Jones Lang LaSalle, highlighted that outdated retirement ages have led to a growing number of retirees and a smaller active workforce. Authorities anticipate that the number of people aged 60 and older will increase from 280 million to over 400 million by 2035, equivalent to the combined populations of Britain and the United States.

Eleven of China's 31 provincial jurisdictions are already running pension deficits, according to finance ministry data. The Chinese Academy of Sciences warned that the pension system could run out of money by 2035 without reform. By raising the retirement age, China aligns more closely with regional peers Japan and South Korea, where retirees receive pensions at 65 and 63 years, respectively.

(With inputs from agencies.)