China is set to raise its pension age in the next five years, as the country’s leaders grapple with fears that the State pension fund could run out of cash because of the country’s ageing population.
For years, the country’s workers have enjoyed the benefit of a statutory retirement age which is one of the lowest in the world – at 60 for men, 66 for women in office jobs, and 50 for women in blue-collar jobs. However, that is set to change under a plan to raise retirement ages as part of a series of government proposals contained in a 20-page policy document from Communist party leaders.
The resolutions were adopted last week at a five-yearly Communist party meeting, the Third Plenum, with leaders unveiling plans to keep people working for longer, initially on a voluntary basis.
The policy document outlines: “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.”
It comes after a China Pension Development Report, released at the end of last year, wrote that “65 years old may be the final result after adjustment.”
It also follows studies from the state-run Chinese Academy of Social Sciences, published in 2019, which predicted that China’s main State pension fund could run out of money by as early as 2035. While the government has been toying with implementing such proposals for several years, the urgency surrounding the issue has accelerated.
Some 300 million people are expected to retire from the Chinese workforce over the next decade, exerting huge pressure on the country’s declining employment-age cohort. Whilst China’s population peaked at 1.4 billion people, the first population fall was recorded in 2022. The generation of children born under the country’s one-child policy currently dominate the workforce – however the number of taxpayers in the country will see a sharp decline even as the number of pensioners increases.
Keeping people working for longer will increase the amount of people paying taxes for longer, with one estimate predicting that raising the pension age by two years could make an additional 30-40 million people available for work – such is the scale of the ageing population.
Meanwhile, even with the country enacting a three-child policy in an attempt to boost birth rates, not enough people are reproducing. The country;s fertility rate, which has been in steady decline from 1.5 births per woman in the late 1990s to 1.5 in 2021, is now approaching 1.0 – significantly below the replacement level of 2.1 needed to maintain current population levels.
The problem of less births and a rapidly ageing population is one not unique to China, but a problem which is set to wreak havoc on the West.
Statistics show that the pace of population ageing is much faster than in the past – globally, the number of people aged 60 and over outnumbered children younger than five years old in 2020. Between 2015 and 2050, the proportion of the world’s population aged 60 and over is expected to almost double, from 12 per cent to 22 per cent.
In January, the Department of Finance, in a report on population ageing and public finances, warned that the age-profile of the Irish population will shift substantially over the coming decades.
The report outlined how given recent demographic trends, Ireland will experience one of the largest proportional increases in the ratio of people over the age of 65 to those of working age between now and 2050.
“To put this another way, while there are currently around 4 persons of working age to those over the age of 65 in Ireland, by 2050 the equivalent figure will be around 2,” the government report outlined.
An ageing population is set to have significant implications for public finances, dampening economic growth as labour supply expands at a slower pace, with growth in output set to be increasingly reliant on labour productivity gains.
“While a range of reforms have been introduced, on their own these will not be sufficient to offset the fiscal pressures associated with an ageing population,” the Department report cautioned.