China's retirement reform reflects voluntariness and flexibility

Editor's note: Xin Ge, a special commentator on current affairs for CGTN, is a research fellow at the Institute of Public Policy and Governance, Shanghai University of Finance and Economics (SUFE), and an associate professor at the School of Public Economics and Administration, SUFE. The article reflects the author's opinions and not necessarily the views of CGTN.

On September 13, the Standing Committee of the National People's Congress of China adopted a resolution to increase the retirement age, prudently and in phases, on the principles of voluntary participation and flexibility.

The provision, initially presented in a resolution of the Central Committee of the Communist Party of China, was passed on July 18, during the third plenary session of the 20th CPC Central Committee.

Marking China's first retirement age adjustment since the establishment of the current system in the 1950s, the policy shift will take place over a 15-year period. The raised retirement age for men is 63 years, while for women, it will be contingently raised to either 55 or 58. Presently, the retirement age is 60 for men. For women, it is 50 if they are blue-collar workers, and 55 in white-collar positions. This is among the lowest retirement ages in the world's major economies.

The policy respects individual choices and fits the increasingly diverse fabric of contemporary society.

Statistics indicate that by the end of 2023, the elderly population in China, aged 60 and above, was 297 million, accounting for 21.1 percent of the total population. From 2000 to 2023, their proportion spiked from around 10 percent to over 20 percent, a transition that was remarkably swift compared to that experienced by most developed countries in a span of seven to eight decades, or more.

United Nations projections suggest that by 2054, China's elderly demographic will reach a zenith of approximately 520 million, exceeding 40 percent of the total population. This situation is unparalleled globally, necessitating proactive planning to prepare for the intensifying trend of an aging population.

Although life expectancy has significantly increased and the pace of population aging has accelerated, China's statutory retirement age has remained unchanged for almost 70 years. With advancements in medical technology and improvements in living conditions, life expectancy in China rose from approximately 33 years in 1960 to around 79 years in 2022, according to World Bank data. Against this backdrop, maintaining the status quo of the retirement age is evidently disconnected from the current economic realities and the trend of population aging.

Concurrently, the average years of education per capita in China have increased significantly, implying that individuals are entering the labor market at a later age. If the retirement age remains unchanged, the timeframe within which individuals can generate wealth would be considerably curtailed compared to previous eras. This would be detrimental to both personal asset accumulation and the comprehensive harnessing of societal human capital.

Raising the retirement age will also avert potential pension crises. In China, the second fertility peak occurred between 1962 and 1975, with 25.8 million births in this period. This substantial demographic cohort is reaching or will reach the age of 60 and above between 2022 and 2035. Projections warn that if the current paradigm persists, China's pension funds may be exhausted by 2035. Raising the retirement age will conserve pension expenditure and augment pension accumulation, fundamentally alleviating the pension crisis and laying a solid foundation for a virtuous cycle in pension management.

Considering this socio-economic development, the principles of voluntariness and flexibility in raising the retirement age are commendable. Voluntariness is reflected in the willingness of individuals to continue doing work that is within their capabilities even after reaching the age of 60. According to the National School of Development at Peking University, a significant number of people reaching the current statutory retirement age are willing to continue working, which ensures a substantial labor pool.

Flexibility means individuals can choose to retire up to three years earlier or later than the statutory retirement age once it has been increased. This not only allows individual voluntary selection but also transforms the previously fixed retirement age into a range, offering the option to select within a three-year span before or after the statutory retirement age.

The prudent and orderly increase in the retirement age is a reform that is both people-oriented and fully respecting the will of the people, better satisfying the diverse demands regarding retirement timing. It also optimizes the institutional design in harmony with exigencies, enhancing labor force potential and quality, and catalyzing the transmutation of China's demographic dividend into human resource dividend.

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