‘Better sooner than later’: China treading cautiously in raising retirement age to prevent public unhappiness, analysts say

SINGAPORE: After years of public debate and speculation, China has finally unveiled its much-anticipated plan to raise the retirement age, set to take effect in January 2025. 
Analysts agree that the policy move – a first since 1978 – is a pragmatic response to the country’s demographic challenges, but have also stressed that it is “not a silver bullet”.
Dr Xiujian Peng, senior research fellow with the Centre of Policy Studies at Victoria University in Australia, told CNA she believes the time for action has come. 
“Raising the retirement age has been discussed for many years, and the public is already aware of it,” she says, adding that while the specifics of the plan were unknown, the announcement itself was not unexpected. 
“Now that the detailed plan has been unveiled, I think it’s a good action given the backdrop of a shrinking labour force and an ageing population.”
Effective from Jan 1, 2025, the retirement age for men will be raised to 63. It is currently 60 for men, about six years below that of most developed economies. 
For women in white-collar work, it will be raised from 55 to 58 while those working in factories will have a retirement age of 55, from 50 years old previously.
The issue has been debated for over a decade, said Dr Zhao Litao, a senior research fellow at the National University of Singapore’s (NUS) East Asian Institute, adding that societal resistance has stalled progress. 
“Because of unhappiness and resistance from society, nothing happened,” he says. 
“This year’s government work report, delivered by Premier Li Qiang in March, did not mention it at all.”
However, a significant change came in July during the 20th Third Plenum, when party leadership brought the topic back to the forefront. According to the resolution adopted, China will gradually increase the statutory retirement age based on the principle of “voluntary participation with appropriate flexibility.” But little details were revealed then. 
 
Now, with a proposal in hand, Dr Zhao sees the Chinese government’s move as a cautious but necessary response to mounting economic pressures. 
“The announced proposal reflects a compromise between the need to raise the retirement age and the need to not irritate opponents too much, particularly those lower wage workers.”
“If we read the proposal carefully, it is not just about the retirement age – it also increases the minimum number of years of contribution from 15 to 20 to be eligible for pension,” he told CNA. “This shows one of the motivations behind the proposal: to address the sustainability of China’s pension system.”
Issues like a shrinking workforce and growing number of pensioners have dogged the country and its economy. 
“Many provinces do not have enough current contributions to pay for current expenditures. They have to rely on subsidies or transfers from the central government to make up the shortfall,” Dr Zhao said.
“China’s pension system will be under even greater strain in the coming years if nothing is done.”
The policy change is expected to take place over a period of 15 years. 
According to the document, the statutory retirement age of male employees and female employees will be postponed by one month every four months, and gradually postponed to 63 years old and 58 years old respectively.
The statutory retirement age of female employees whose original statutory retirement age was 50 years old, will be postponed by one month every two months, and gradually postponed to 55 years old.
The increment though, is lower than what analysts projected.
“We all thought the retirement age would be increased to 65 for both males and females,” says Dr Peng.
“Maybe because of the sensitivity of the retirement age, the government has to be very cautious. They can increase it again after several years if this round of the increase goes smoothly.”
Still, she believes the pace is “appropriate”.
“It’s slow and steady. There are many workers who are still against the retirement age extension. A slow pace makes it easier for people to accept and for the labour market to adjust,” she explains. 
On Chinese social media platform Weibo, the newly-released plan has caused an uproar and stirred heated debate among many in the country. 
“At 40, you can no longer find a job. At 60, you still can’t retire. The post-80s generation is bearing it all,” one netizen commented.
Another said: “By the time I’m 60, will the retirement age be pushed to 80? You can never catch up to the retirement age.”
Victoria University’s Dr Peng notes that while raising the retirement age is one solution to China’s demographic challenges, it is not a long-term fix. 
“The Chinese government still needs to increase the country’s fertility rate to solve the problem in the long term,” she said. “Relying on technology improvement and increasing the quality of the labour force is fundamental.”
Extending social security payouts is not a problem that is unique to China. In recent years, similar situations have played out in countries like the US and France, noted Dr Tan Ern Ser, Associate Professor of Sociology at NUS. 
These nations also grapple with the financial sustainability of their social security systems in the face of ageing populations, he said.  
“This has to do with the rapidly ageing population, together with declining numbers of younger people contributing to social security,” Dr Tan added. 
The state-run Chinese Academy of Sciences has said in 2019 that the pension system will run out of money by 2035 if there’s no further reform, with about a third of the country’s provincial-level jurisdictions running pension budget deficits, according to finance ministry data.
“If the retirement age is not extended, funds would run out in the near future, say in a decade, and social security would not be able to meet its commitments. Extending the retirement age would slow down that process.” 
In an interview with People’s Daily, Mr Mo Rong, head of the Chinese Academy of Labor and Social Security was cited as saying the decision was made to promote employment and protect rights and interests at the same time, and strive to create a fairer employment environment.
“This is the first time that our country has made clear regulations on the protection of the labour rights and interests of over-age workers. It will resolve problems such as the inability to implement the protection of the rights and interests of over-age workers in the past,” said Mr Mo. 
According to Dr Peng, the immediate impact will be a modest increase in the labour supply starting in January 2025. This will help counteract the negative effects of a declining workforce due to population ageing, although the increase is “very small”.
In the next 10 years, about 300 million people currently aged 50 to 60 – China’s largest demographic group – are set to leave the workforce at a time when pension budgets are already stretched. 
Even with a record number of 11.7 million college students are set to graduate this year, they may not be guaranteed a job. Data from the country’s statistics bureau in August showed that the jobless rate for 16 to 24-year-olds in China, excluding students, rose to 17.1 per cent in July from 13.2 per cent in the prior month.
Additionally, the policy is expected to ease pressure on China’s overburdened pension system, as it reduces the number of new retirees while increasing contributions from older workers who stay employed longer, she said. 
Despite this urgency, Dr Zhao acknowledges the delicate timing of the policy’s rollout, given the current economic environment. 
Suggesting that in a more favourable job market, there would be less concern about the policy’s impact on employment opportunities, Dr Zhao said: “High youth unemployment makes it difficult to argue for postponement of the retirement age.”
“If youth unemployment is low, then there would be less concern about the proposal. People are (now) worried that the employment situation will get worse if the retirement age is raised”
“But it is something that China has to do, and better to do it sooner than later.”