China to raise retirement age for first time since 1978

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China is set to increase the retirement age for the first time since 1978, as the nation grapples with an aging population that is leading to a significant decrease in the workforce.

According to a report from the state-owned news agency Xinhua on Friday, the nation will slowly increase the retirement age for all men from 60 to 63. For women in office jobs, the retirement age will rise from 55 to 58, while for women in manual labor, it will change from 50 to 55.

The standing committee of China's parliament, which is often seen as just a formality, gave its approval to the new measures on Friday. These new rules are set to begin in January and will be implemented gradually over a period of 15 years, following the approach of making gradual changes, according to Xinhua.

Experts suggest that China must take measures to address the situation, as its younger retirement age and decreasing birth rate are increasing the ratio of elderly dependents to the working population.

In 2023, the nation's population fell for the second year in a row, reaching 1.4 billion, with deaths exceeding births by 2 million.

For years, China's leaders have been dealing with this challenge, and adjustments to retirement ages were hinted at during a Communist Party policy meeting held in July, which occurs every five years.

This decision comes as families are feeling the strain from a downturn in economic growth, an extended decline in the real estate market, and a struggling job market, all of which are affecting consumer spending.

Zhang Jin, who leads the Research Institute at the China Health and Elderly Care Group, stated that this initiative would have a positive impact on the economy.

From 2023 to 2035, more than 20 million individuals in the country will hit retirement age annually, he stated.

"If you extend their working years, they can not only generate more value but also increase spending," he noted, mentioning that once individuals retire, their expenditures typically drop significantly.

However, this change has stirred anger among the younger generation, who express frustration over having to extend their working years to support the older population.

"I came across some news today that has me questioning if I'll even make it to retirement," Zhao, a white-collar worker from Beijing, remarked with a hint of humor. "Am I really expected to work for the rest of my life?"

Many older employees voiced their dissatisfaction as well. Chen, a 52-year-old civil servant from Zhejiang, shared his feelings by stating, “Ultimately, they are robbing me of my retirement period and effectively stealing my funds.” He mentioned that he would be losing “two and a half years’ worth of pension payments.”

A significant number of young people in China don't have brothers or sisters, a situation that stems from the old “one-child policy.” This policy restricted the country's birth rate for many years until it was relaxed in 2016.

Experts suggest that China must extend the working years of its population to alleviate the strain on its financially strained pension systems.

With the new updates, the ages for retirement and the duration of pension contributions will be progressively increased.

Beginning in January 2030, the required minimum time of contributions to qualify for the basic monthly pension will gradually increase from 15 years to 20 years, adding six months each year.

Individuals who have completed the required minimum contribution period can choose to retire early, subject to specific conditions. Additionally, those who attain the official retirement age have the option to continue working for an extra three years.

By applying a more expansive definition of the working-age population than what is defined by China's existing retirement ages, the Center for Strategic and International Studies calculated that China's old-age dependency ratio was 21% last year, compared to 27% in the United States.

The think-tank applied a wider definition than the one defined by the existing retirement age, examining individuals who are 65 and older in comparison to those between the ages of 15 and 64.

According to CSIS, this percentage is projected to increase to 52 percent by 2050, while the US is expected to reach only 39 percent. By 2100, this figure will soar to 83 percent, in contrast to the US, which will have a ratio of 55 percent.

The OECD reports that in its 38 member nations, men typically retire at an average age of about 64, while women tend to retire around 63.

In certain countries like Iceland, Norway, and Denmark, people cannot receive complete pension benefits until they turn 67.

On the opposite side, Turkey holds the record for the youngest retirement age among OECD countries, allowing women to retire at just 49 and men at 52.

Further contributions by Mary McDougall from London.