China’s pension reform a ‘milestone’, but will it fix funding woes?

Beijing has ‘no choice’ but to raise retirement age as working population shrinks, but more is needed to fill fiscal gaps, analysts say

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For the first time since the 1950s, China is raising its retirement age, increasing it by up to five years. Photo: AFP

Jane Caiin BeijingandMandy Zuoin Shanghai

Published: 6:00pm, 15 Sep 2024Updated: 6:05pm, 15 Sep 2024

Beijing’s quick endorsement of a scheme to raise the retirement age shows it is determined to address the problem of dwindling pension funds amid faltering economic growth and an ageing population, analysts say.

But, they add, the changes are unlikely to be a silver bullet for fiscal shortfalls and could come with “political pain”.

For the first time since the 1950s, China has raised its retirement age, increasing it by up to five years. It also increased the amount of time people must pay into pension funds before becoming eligible to withdraw, pushing it to 20 years from 15.

The decision was made on Friday by the National People’s Congress (NPC) Standing Committee, the country’s top legislative body.

Chinese authorities had been contemplating the change since 2008. However, little action was taken until the Communist Party’s third plenum in July when the leadership agreed to raise the country’s retirement age “gradually” in a “voluntary and flexible” manner.

The legislature announced earlier this week that it was reviewing the draft law and there would be no public comment period.

“The retirement age postponement is long-delayed as Beijing was concerned about political backlash,” said Yi Fuxian, a senior scientist at the University of Wisconsin-Madison and author of Big Country with an Empty Nest, a book on China’s family planning policy.