China is facing a decline in birth rates, an aging population, and rising unemployment. At a time when the Chinese economy is declining and various problems are becoming increasingly prominent, the Chinese Communist Party (CCP) proposed to “delay retirement age” at the Third Plenary Session, sparking widespread attention. Analysis suggests that the CCP’s approach of delaying retirement age is merely a superficial solution that fails to address the root causes of the issues at hand.
The CCP’s “Decision” announced during the Third Plenary Session on July 21 mentioned the need to “delay retirement age.” Although the statement was vague, stating the promotion of a gradual reform of the statutory retirement age based on voluntary and flexible principles, it has stirred up significant reactions among the public. Some argue that 65 is just the age to start receiving retirement benefits, not an indicator of being able to work until 65. Others believe it is a way to force people to death without any sense of justice. Questions arise about the impact on recent graduates if retirement age is extended. Even the CCP’s official media, People’s Daily Online, presented a plethora of criticisms from netizens, with sharp language questioning the rationality of delaying retirement: “You talk about delaying the retirement age to seek personal gain at the expense of lives? You obstruct the elimination of the dual-track system. Are you robbing the rich to help the poor?”
Economist David Huang, currently residing in the United States, suggests that delaying retirement age does not guarantee employment until the age of 65. He stated to Epoch Times, “Perhaps the essence of this so-called reform is that retirement benefits can only be received at the age of 65, effectively postponing the age at which benefits can be claimed.”
Economist Li Hengqing of the American Institute of Information and Strategy believes that the CCP’s decision to delay retirement age is due to the government’s shortage of funds and the misuse of a significant amount of retirement funds. Li indicated to Epoch Times, “With the current downturn in the Chinese economy and tax revenue drying up, the government is facing financial constraints. Moreover, a substantial portion of the existing social security funds has been misappropriated, prompting the necessity for such a policy.”
Chinese affairs expert Wang He expressed to Epoch Times that while reforms like the one in question seem reasonable considering China’s aging population and comparatively low retirement age globally, there are numerous challenges in its implementation.
Wang mentioned, “The contradictions in this situation are extremely acute. Simply raising the retirement age without comprehensive systemic reform would result in a sense of deprivation among many ordinary citizens, leading to perceptions of unfairness. The vested interest class, including the entire bureaucratic hierarchy of the CCP and retired officials, have a disproportionately high share of the pension funds. Would people be willing to delay retirement psychologically? This issue touches upon public sentiment and is bound to provoke strong reactions. China’s development model is characterized by national wealth and individual poverty, a highly distorted development pattern where the government retains a large share of the economic benefits, leaving little for the general populace to enjoy.”
Following the implementation of the CCP’s “delay retirement age” policy, concerns about the adequacy of pension funds have become a focal point of public attention.
In November 2023, the China National Social Security Fund Council released its operational report for 2022. The report revealed that the total assets of China’s basic old-age insurance fund stood at 1.84573 trillion yuan by the end of 2022, with total liabilities of 225.558 billion yuan (mainly short-term debts formed through investment operations).
Due to economic disparities among different regions of China, variations in pension revenues and expenditures among provinces have surfaced. According to data released by the Ministry of Finance in 2021, provinces such as Guangdong, Beijing, Shanghai, and Zhejiang contributed more to pension funds than they spent, while the northeastern provinces faced deficits exceeding 130 billion yuan.
A study conducted by the Chinese Academy of Social Sciences warned in the report “Actuarial Report on China’s Pension Funds 2019-2050” that the cumulative balance of the urban employee basic old-age insurance fund would be depleted by 2035.
The report projected that the dependency ratio over the next 30 years would double, which means that in 2019, almost two contributors were supporting one retiree, whereas by 2050, the ratio would nearly be one-to-one.
The report further predicted a declining surplus starting from 2023, with the first deficit of 118.13 billion yuan expected in 2028. The deficit would continue to expand, leading to an estimated deficit of 1.128 trillion yuan by 2050.
Emphasizing that these figures were calculated under the assumption of substantial government subsidies, the report underscored that without such subsidies, the balance had already been negative in 2019. Although the subsidies narrowed the immediate income gap, they were insufficient to reverse the trend of deficit expansion.
Considering the calculations based on substantial government subsidies, the cumulative balance of the national social security fund was 4.26 trillion yuan in 2019, peaking in 2027 and then rapidly declining, depleting by 2035.
The policy recommendations outlined in the report included seizing the opportunity to reduce fees, expanding individual pension accounts, swiftly achieving nationwide coordination of pension schemes, along with designing and coordinating various parameters rationally. The report identified several issues requiring immediate attention, such as the relatively low retirement age and short contribution periods, suggesting the urgent need for a plan to delay retirement age.
David Huang noted that with the current economic downturn and rising unemployment rates, the total number of young individuals contributing to social security funds continues to decline. Therefore, the CCP’s strategy effectively postpones addressing issues by shifting the burden onto future generations.
Wang He also pointed out, “The CCP invests hundreds of billions annually in non-economically viable infrastructure projects. Why not allocate these funds towards improving people’s livelihoods? Economic incentives would be far more effective than pouring money into unproductive investments. However, the CCP prefers to waste money rather than provide social security relief to the people.”
As China’s demographic shift speeds up with a declining birth rate, the aging process accelerates as well. From 2000 to 2023, the proportion of China’s elderly population has soared from over 10% to over 20%, marking one of the fastest rates of aging among populations exceeding 100 million in developed countries, resembling a process that took several decades in most developed nations, if not longer.
According to data from the CCP’s National Bureau of Statistics, by the end of 2023, the population aged 60 and above in China had reached 297 million, accounting for 21.1% of the total population. Among them, the population aged 65 and above stood at 217 million, comprising 15.4% of the total populace.
Calculations based on statistical data indicate an 80.21 million lower population of those aged 65 compared to the total population aged 60 and above. If employees were to delay retirement by 5 years, hence delaying the receipt of pension benefits by 5 years, this figure would undoubtedly be substantial and have a significant and extensive impact on the overall economy.
Starting around 2020, the peak population group born in the 1960s began retiring, resulting in a sharp decrease in the labor force and a corresponding rapid increase in the number of pension beneficiaries. This trend is inevitably leading to an imbalance between pension fund inflows and outflows.
Amidst the rising unemployment rates today, many young individuals are either without income due to joblessness or faced with reduced earnings resulting from wage cuts. Consequently, numerous individuals have lost interest and financial capacity to invest in their future. The current situation in China forces many young people to lose motivation to contribute to pension funds and opt for early retirement to begin receiving pension benefits.
In April of this year, the Chinese government’s Ministry of Human Resources and Social Security published an article refuting the belief in society about a “wait for retirement” mentality.
The article clarifies the misconception that individuals think they can stop paying into their pension after 15 years of contributions once they reach retirement age. According to social security laws, those who have paid contributions for at least 15 years by the time they reach statutory retirement age can start receiving basic pension benefits each month. The 15-year requirement is not the minimum contribution period. In other words, as long as one continues working, pension contributions must be made.
Li Hengqing stated that this policy aims to “delay pension disbursements by postponing your retirement by five years,” aggregating a significant sum over the additional years. However, China’s pension system exhibits numerous flaws, with many individuals, such as self-employed workers, refusing to contribute to pension funds.
“For young people, job opportunities are becoming scarcer, while older individuals are asked to prolong their retirement, occupying positions. The CCP’s actions will only exacerbate social disparities, as establishing a civil and rule-of-law society akin to Western nations is implausible for the Chinese regime,” remarked Li Hengqing.