China to raise retirement age in 2025

China’s government has announced it will be lifting the retirement age for workers, a change set to take effect from January 1, 2025. This policy shift is seen as an attempt to address the challenges of an ageing society and to manage the pressures on pension funds. About half of all provincial administrative regions across the nation recorded pension fund surpluses that could be turned over to the central government in 2023. Among these, only Guangdong, Beijing, Jiangsu, and Anhui were able to contribute at least 10 billion yuan ($1.4 billion) each. Local residents expressed their reactions to the policy change. “We saw this coming,” remarked one resident, reflecting a common sentiment among those who have been closely observing China’s demographic trends and the strain on social security systems. Another resident noted that while the change was inevitable, it would require significant adjustments for people who had been planning their retirements based on the previous age limits. The government’s decision underscores the urgent need to adapt to demographic realities and ensure the sustainability of public finances. As the policy goes into effect, it remains to be seen how it will impact both the workforce and retirees. For the first time since the 1950s, China is planning to raise its retirement age due to budget shortfalls in its pension system. The retirement age for men will be raised from 60 to 63, while women in blue-collar jobs will see an increase from 50 to 55, and those in white-collar roles from 55 to 58. Authorities say the change will take place gradually over the next 15 years, starting in early 2025. Early retirement will not be permitted, although individuals may choose to delay their retirement by up to three years. China’s current retirement age is one of the lowest in the world. Even with the new policy taking effect next year, it remains below the retirement threshold in most developed countries. Yi Fuxian, a Chinese demographer at the University of Wisconsin-Madison, said that China may face greater challenges than most developed countries. “China has kept the retirement age unchanged until now, and the recent delay is still insufficient,” Yi said. He emphasized that if this policy had been implemented 20 years earlier, current issues might have been avoided. Last year, China’s birth rate hit a record low of 6.39 births per 1,000 people, and the total population dropped by over 2 million.

Raising China’s retirement age

In recent years, Chinese authorities have implemented policies to encourage childbirth, but many young Chinese women remain unconvinced about having children, especially as the economy slows. Eli Friedman, a labor politics expert at Cornell University, said that raising the retirement age would do little to help with workforce contraction. “If anything, it might push in the other direction,” he said, since grandparents often play a crucial role in child-rearing. Additionally, China’s new policy will require employees to contribute more to the social security system to receive pensions starting in 2030. By 2039, workers must have contributed for at least 20 years to be eligible for their pensions. This change comes as Beijing’s pension fund is believed to be running dry. In 2019, the Chinese Academy of Social Sciences warned about a potential pension depletion by 2035 — an estimate made before the economic impact of the COVID pandemic. “The government has little choice because of the significant shortfall in the social security system,” Yi said. Raising the retirement age might ease pension strain in the near future, but “it’s like deferring a ticking time bomb,” he added. Friedman highlighted that structural change in the welfare system is more necessary than just adjusting the retirement age. China’s current pension system is highly decentralized, leading to regional inequities. For local governments facing falling tax revenues, it becomes harder to meet their financial obligations. Friedman suggested that establishing a national pension system could instill greater public confidence. Another impact of the gradually raised retirement age will be felt by those just entering the workforce. The delay in retirement means fewer people will be leaving the labor market, which translates to fewer available jobs for young people. Youth unemployment has been rising steadily, even after the government adjusted its calculation method to exclude those still in school. In September 2024, youth unemployment hit 18.8% — the highest level since the new system of record-keeping began. “This highlights the dilemma faced by the Chinese government,” Yi said. Beijing is avoiding drastic changes due to concerns over potential social unrest. Any sudden significant change in the retirement age could spark protests from younger generations and those currently in their 50s and might even trigger a political crisis.