China's Demographic Crisis Forces Retirement Age Increase

China faces an unprecedented demographic crisis that has forced the country to revise its pension policy and raise the retirement age for the first time since the 1950s. This change, driven by the decline in the working population and the accelerated aging of Chinese society, marks a turning point in the labor policy of the Asian giant.

Starting in 2025, the retirement age will be gradually increased, a measure that seeks to alleviate the pressure on pension funds and ensure the country’s long-term economic sustainability.

Context of China’s Demographic Crisis

China’s population has begun to decline for the second year in a row, something unthinkable just a few decades ago. For years, the one-child policy, which was in effect until 2016, drastically curbed population growth. Although the measure was reversed, the demographic effects continue to impact the country. Today, the birth rate continues to decline, while life expectancy has reached 78.2 years. According to the World Health Organization (WHO), it is expected that by 2040 nearly a third of the Chinese population will be over 60 years old.

This aging population is putting enormous pressure on the pension system, which is estimated to run out of funds by 2035, according to the Chinese Academy of Social Sciences. Chinese authorities face a double challenge: a growing population of retirees and a shrinking workforce that can support the pension system. Faced with this situation, the only viable option for the authorities was to raise the retirement age.

Changes in Retirement Age

The change approved by the highest Chinese legislative body will begin to be implemented on January 1, 2025. For men, the retirement age will gradually increase from the current 60 years to 63 years, while for women it will be from 50 to 55 years in the case of manual jobs, and from 55 to 58 years for those in administrative jobs. The transition will be slow, with staggered increases every few months over the next 15 years, with the aim of minimizing the immediate impact on the working population.

This measure is part of a broader plan that seeks to stabilize the pension system. Starting in 2030, employees will have to make higher contributions to social security, and by 2039, they must accumulate at least 20 years of contributions to access their pensions. This represents a substantial change from the current system, in which the requirements are less demanding.

Despite the economic and demographic arguments behind this decision, the measure has generated a wave of social discontent. On platforms like Weibo, China’s most popular social network, thousands of users have expressed their discontent with the increase in the retirement age. Many people see this change as an additional burden at a time when the labor market already faces serious challenges, such as a high youth unemployment rate, which reached 17.1% in July 2024.

Middle-aged workers have also expressed concern about the prolongation of their working lives. Some users have called the measure “moderate,” considering that many European countries already have retirement ages higher than 65 years.

However, others point out that China’s demographic crisis cannot be directly compared to the situation in Europe, given the social and economic pressure faced by young Chinese people. The combination of a saturated labor market, stagnant wages, and growing economic uncertainty has exacerbated discontent among the population.

Long-term Economic Implications

The increase in the retirement age is just one of the many reforms that China needs to implement to address its demographic crisis. However, this measure is crucial to ensure the viability of the pension system. Over time, prolonging working life will ease the financial pressure on public coffers, especially in provinces where deficits in pension funds are more pronounced.

The reform also seeks to align China with other developed Asian countries, such as Japan and South Korea, where retirement ages are higher and longer contributions to the social security system are required. These nations, which also face the challenge of population aging, have successfully implemented policies that allow workers to retire later, ensuring long-term economic sustainability.

However, China’s situation is unique. The demographic transition has been accelerated by government policies such as the one-child policy, which drastically limited population growth. Now, with a slowing economy and an aging population, authorities must act quickly to avoid a deeper economic crisis. The challenge will be to ensure that the reforms are well received by society and that future generations find a balanced labor market that offers opportunities to young people and guarantees a dignified old age for retirees.

An Uncertain Future for the Country

The gradual implementation of the increase in the retirement age in China is a direct response to a demographic and economic problem that threatens to overwhelm the country in the coming decades. Although this measure is considered inevitable, its social acceptance will be key to its long-term success. As China continues to face a decline in its working population and an increase in its elderly population, the country will need to continue adopting innovative policies that promote economic and social sustainability.

The aging of the population not only affects public finances, but also has profound implications for the social structure of the country. Future generations will have to face a greater economic burden to support an ever-growing population of retirees, while the government will seek to balance the demands of a competitive labor market and an economy that requires new forms of growth. China’s response to this demographic crisis will define its economic and social future in the coming decades.