Chinese legislators endorse plan to push back statutory retirement age by up to 5 years by 2040

Sept. 13 (UPI) -- China's top legislative body adopted a motion Friday to gradually raise the statutory retirement age over the next decade-and-a-half by three years to 63 for men and from 50 to 55 or 55 to 58 for women with blue-collar and white-collar roles respectively.

The decision by the Standing Committee of the National People's Congress in Beijing was a recognition of the need to adapt to the realities of an aging population, the state-run Xinhua news agency reported.

Effective Jan. 1, lawmakers agreed to start pushing back the retirement age for male and female employees simultaneously by one month every four months for men and women with original retirement ages of 60 and 55 respectively and by one month every two months for women with the original retirement age of 50.

The changes are to be made in line with Communist Party Central Committee policy and steps to "gradually delay the statutory retirement age, adapt to the new situation of the country's population development, and fully develop and utilize human resources, in accordance with the Constitution."

Under the plans, the period workers must be employed in order to qualify for a pension will be increased to 20 years, up from 15 years currently.

However, the NPC decision said the changes must be implemented in an incremental, flexible and properly planned way and that it was the duty of national, provincial and local administrations to provide practical assistance to people to help them make the transition.

"People's governments at all levels should actively respond to the aging of the population, encourage and support workers to find employment and start businesses, effectively protect workers' rights and interests, and coordinate and promote related work such as elderly care and childcare," the NPC said.

The pension measures, which will start only in 2030, are subject to change by the State Council, China's cabinet, which may supplement and refine their implementation.

The changes were welcomed by analysts and economists who have been urging a re-think on one of the lowest legal retirement ages in the world as China battles the twin predicaments of an exponential rise in the number of retirees drawing their state pension and a decline in the size of the working-age labor force to fund it.

The demographic crunch, the legacy of an era when most Chinese only lived until their mid-40s, compared to 78.6 years in 2023, posed a looming threat that could render China's economy unsustainable, if not addressed.

"The current retirement policy framework has remained unchanged for 73 years . Especially since the reform and opening up (starting around 1978), the demographic, economic and social landscape has transformed dramatically," demographer Yuan Xin was quoted by state media as saying earlier this week.

Maybank Investment Banking Group macro research director Erica Tay applauded the resolve to encourage older workers back into some form of economic activity.

"This policy change will forestall a sharper drop in China's potential growth, if only marginally," Tay said.

As far back as 2019, the Chinese Academy of Social Sciences think tank warned that the decdline in the proportion of workers paying into China's state pension fund to retirees drawing on it would see it run out of money by 2035.

Three years of economic impacts from COVID-19 lockdowns and restrictions have exacerbated the shortfall with local government finances particularly hard hit.

The problem with the size of the younger workforce is not solely a demographic issue. Youth unemployment rate for 16 to 24-year-olds not in education topped 17% in July and stood at 6.5% for those aged 25 to 29, official figures show.

Bruce Pang, chief economist and head of research for Greater China at JLL, said the compromise approach to tackling the politically sensitive issue with baby steps over time was judicious.

However, it could yet blow up in the face of the Communist Party which has already backed off from previous attempts at reform.

People took to the Internet to express anger over having to work for years longer.

"Delayed retirements just means you can't get your pension until you hit 63, but it doesn't mean everyone will have a job until then!" one person complained in a social media post that touched on fears about a tightening in the job market and difficulties workers face in getting hired as early as their late 30s.