In a long-awaited but broadly unpopular effort to address the challenge of its rapidly aging population, the Chinese government on Friday, September 13, 2024, approved a plan to raise the country’s statutory retirement age, currently among the lowest in the world.
This is the first time China has raised its retirement age since the 1950s. It will be phased in gradually, starting on January 1, 2025.
The retirement age for men, previously 60, will increase in increments of several months before finally reaching 63 by 2040.
The retirement age for women in white-collar jobs, previously 55, will rise to 58. Women in blue-collar jobs, who previously could retire at 50, will have to work until 55.
The retirement age will begin to be gradually raised over 15 years from 2025, state media said.
“Starting 2030, the minimum year of basic pension contributions required to receive monthly benefits will be gradually raised from 15 years to 20 years at the pace of an increase of six months annually,” the state media added.
It also disclosed that the new rules will also allow Chinese people “to postpone retirement to an even later date if they reach an agreement with employers.”
Wang Xiaoping, China’s Minister of Human Resources and Social Security, said at a news conference that the decision would “maintain the momentum and vitality of economic and social development.”
Policymakers and experts have for decades been calling for a change to the retirement age, noting that the previous rules dated from a time when life expectancy in China was much shorter, and fertility rates higher.
They warned that maintaining the status quo would severely strain the country’s work force and pension funds, with large numbers of older Chinese retiring but fewer young people replacing them.
China’s working-age population has been falling since 2012, according to official statistics, with an average annual decrease of more than 3 million people. Last year, China had 297 million people over 60 years old, or about 21 percent of its population.
“Governments at all levels should actively respond to the ageing of the population, encourage and support the employment and entrepreneurship of workers,” according to the decision by the Standing Committee of the National People’s Congress.
The country’s top legislative body also called on officials to protect workers’ rights and improve eldercare, and it empowered the State Council, China’s Cabinet, to adjust the measures if necessary.
Allowing more people to work longer will counter demographic headwinds weighing on the world’s second-largest economy, although it risks adding to public discontent amid an economic slowdown.
The announcement has drawn some scepticism and discontent on the Chinese internet. Others said that they had anticipated the announcement.
The document added that starting from 2030, China’s workers will also have to pay longer into their pension accounts before they’re eligible to receive their retirement payout.
A bigger tax base and delayed access to benefits will relieve the pressure on the government to fund pensions as the population rapidly ages, with birth rate falling to a record in 2023.
Sustainability of Pension System Behind Move
“The sustainability of the pension system may be the main consideration behind the move,” said Mr Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered.
He added, “The impact on the economy in the short term should be limited as the hike is gradual.”
Also, Ms Michelle Lam, Greater China economist at Societe Generale, stated, “The timeline of raising the retirement age is pretty gradual.”
“Policymakers probably have taken into account the potential negative impact and calibrated that carefully,” she added.
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