China is back in news, this time not for its border dispute with India, but for its policy decision to raise retirement age from 60 to 63 from 1st January 2025. Last week China’s top legislative body has approved a proposal to raise the country’s retirement age. This is to overhaul decades-old laws to tackle the economic pressure of a shrinking workforce. This is the first time China has raised its retirement since the 1950s. This is regarded as long-awaited but broadly unpopular policy to address the challenge of its rapidly aging population.
The change will put in place progressively based on a person’s birthdate. For example, a man born in January 1971 could retire at the age of 61 years, 7 months in August 2032. And a man born in May 1971 could retire at the age of 61 years and 8 months in January of 2033!
It also to be noted that ‘pressure on social benefits such as pensions and social security is not unique to China. Even the mighty US faces the same problem as data shows that currently the Social Security Fund won’t be able to pay out full benefits to people by 2033. However, the great melting pot that the US is, it continues to attract young population from all over the world. In case of China that has large elderly population, the challenge is acute.
The proposal, though not new, has faced tough opposition both from older workers as well as younger ones. The younger ones worry that an expanded work force would mean even tougher competition for jobs. Add to this, China’s-not-so-strong-social safety-net and one has a unique socio-economic problem. This decision will also increase the time people must pay into pension funds before they become eligible to get a monthly pension. Chinese employers are infamous for age discrimination. This leaves tens and thousands of Chinese workers blue-collar workers to worry that they would be left without work but unable to draw on pensions. Hence the tough resistance to this policy.
As on today, China’s retirement ages are among the lowest globally. Thanks to improved life expectancy in China, urgent reforms are called for. The life expectancy was 44 years in 1960 and by 2021 it reached 78 years. It was projected to reach 80 by the year 2050. On the other side, the working population needed to support the elderly is shrinking. China’s new retirement policy is gender-biased as the male worker will now retire at 63 whereas females at 58. Not only this, the new rules will allow Chinese people to postpone retirement to even later date if they reach an agreement with employers. Though the new policy has been announced now, it has been in discussion since 2013.
According to official statistics, China’s working age population has been falling since 2012, with an annual decrease of more than 3 million people. In 2023, China had 300 million people over 60 years old which means nearly 22% of its population. There are some other economic issues which need to be under scanner. For example, in the old system, a worker needed to make a minimum 15 years basic pension contribution. Now this has been raised to 20 years. Then comes the pressure on pension budgets. Having people work for longer would ease this pressure. As it is, many Chinese provinces are reeling under large deficits. It can be seen that here China is in the company of its neighbours like Japan and South Korea where the retirement age has been raised to 65 and 63 respectively.
Historically, in the middle of 20th century, two Asian giants started a new journey towards better tomorrow. India [1947] and China [1949] are the two giants who are separated by the Himalayas. As a result, historically they had little, though meaningful contacts with each other. When they stared their journeys, the world of climbing out of the destruction of the World War II. India chose the path of Republican, multi-party democracy whereas China opted for People’s Democracy based on Marxist principles.
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But both initially had and have too many similarities. Huge and burgeoning population, poverty, illiteracy, industrial backwardness, low domestic saving rates….In a strange way both were competing with each other about increasing population. Here too, China was ahead of India. In 1951 India’s population was 360.08 million and China had 564.9 million. In terms of economic growth, China started leaving India behind after the Deng era of 1980s onwards. Now China is not only the super power no. two, it has managed to reduce its population! According to the latest estimates by Worldometer, China’s population in 2024 is 1419. 32 million whereas India’s is 1450.93 million!
On one hand, Chinese state will ruthlessly put down any dissent to its new policy, on the other hand, in the age of vibrant social media, it has to reckon with criticism. On Chinese social media, where several hashtags about the decision led the trending topics, users complained that they would have to wait even longer to receive benefits that they decried as too low. Then there are others who are worried that the pension funds would be even more depleted by the time they finally retire. Let us not forget that the Chinese Academy of Social Sciences has previously projected that China’s pension funds would run out of money by 2035!
Chinese policy-planners and administrators have a tough time ahead!
(The author is a Mumbai-based retired professor of Political Science.)
