China's Retirement Age Delay Plan: What It Means for Investors and the Economy
By Farah Master
In a move to address its shrinking working population, China's policymakers are considering delaying the country's retirement age, currently one of the lowest in the world. This discussion took place during the 11th meeting of China's Standing Committee in Beijing, as reported by Xinhua on Tuesday.
China announced in July its intention to gradually raise the retirement age to alleviate pressure on pension budgets, which are already facing deficits in many provinces. Currently, the retirement age is 60 for men, significantly lower than in most developed economies. For women in white-collar jobs, it is 55, and for those in factory work, it is 50.
With life expectancy in China on the rise, expected to reach 78 years by 2021 and over 80 years by 2050, reforming the retirement age is seen as crucial. Mo Rong, Director of the Chinese Academy of Labour and Social Sciences, emphasized the importance of adapting to the changing demographics.
China's population has been declining for the past two years and is projected to continue shrinking, leading to an increasingly aging population. National health authorities predict that the number of people aged 60 and older will increase from 280 million to over 400 million by 2035, equivalent to the combined populations of Britain and the United States.
Currently, each Chinese retiree is supported by the contributions of five workers, a significant decrease from previous years. This ratio is expected to decline further to 4-to-1 by 2030 and 2-to-1 by 2050. Eleven of China's provincial-level jurisdictions are already facing pension budget deficits, with the Chinese Academy of Sciences warning that the pension system could run out of funds by 2035.
Analysis:
The potential delay in China's retirement age has significant implications for investors and the economy. As the working-age population shrinks and the number of retirees increases, there will be greater pressure on the pension system and the overall economy. Investors should monitor developments in China's retirement policies closely, as changes could impact investment opportunities in various sectors. Additionally, the aging population could lead to shifts in consumer behavior and demand for certain products and services. Overall, understanding and adapting to these demographic changes will be crucial for individuals and businesses alike to navigate the evolving landscape of China's economy.