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China's Looming Pension Crisis: 402 Million Seniors by 2040 Strain Economy

China is confronting a severe pension crisis driven by a rapidly ageing population, with over 400 million people expected to be over 60 by 2040. The government plans to gradually raise the retirement age starting in 2025 to ease fiscal strain. Recent reforms, including extending the minimum pension contribution period, may disproportionately affect rural and informal workers. The crisis pits rising elderly care costs against other critical spending needs like defense and industrial upgrading.

Key Points: China's Ageing Population Sparks Pension Crisis

  • 402 million over 60 by 2040
  • Retirement age rising from 2025
  • Pension contribution period to increase
  • Fiscal strain from competing priorities
  • Reforms risk deepening inequality
2 min read

China faces looming pension crisis amid ageing population: Report

China faces a massive pension crisis as its population ages, with 402 million over 60 by 2040, challenging fiscal stability and social systems.

"These demographic pressures prompted China to begin a gradual adjustment of its statutory retirement age in 2025 - The Diplomat report"

Beijing, Feb 13

China's pension crisis stems from demographic, economic, and institutional changes, rather than a single policy failure. The decision made in the coming years will shape the country's "fiscal sustainability, social stability, and public trust", a report said on Friday.

"By 2040, roughly 402 million people in China are expected to be over the age of 60, more than a quarter of the population. By comparison, the total population of the United States is expected to reach around 379 million by that time. This shift marks a turning point for China, signalling the erosion of its longstanding advantage in abundant and affordable labour while presenting a formidable financial challenge in caring for an ageing society," a report in The Diplomat detailed.

"These demographic pressures prompted China to begin a gradual adjustment of its statutory retirement age in 2025, the first such change in more than seven decades. The retirement age for men will gradually increase from 60 to 63 over a 15-year period, while the retirement age for women will rise from 55 to 58, with adjustments varying by occupation. While delaying retirement may ease fiscal strain, it does little to alter the underlying demographic arithmetic driving the crisis," it added.

According to the report, China has recently introduced reforms to improve pension sustainability, but these measures may risk deepening inequality.

"Beginning in 2030, the minimum contribution period required to qualify for monthly pension benefits will rise from 15 to 20 years. While fiscally rational, the change disproportionately affects rural workers, migrants, and informal employees with fragmented careers. For many, meeting the new threshold may be unrealistic, effectively excluding them from meaningful retirement support," it mentioned.

"China now faces three major fiscal demands competing for limited resources. Aging drives rising costs for pensions, health care, and social services. Security and resilience require sustained spending on defence, energy, and supply chains. Industrial upgrading demands long-term investment in advanced manufacturing and strategic technologies. None of these priorities can be deferred, leaving policymakers with limited room to manoeuvre," it further said.

The report stressed that while ageing is inevitable, how China handles its impact "will determine whether its next phase of development rests on solid ground or fragile foundations".

- IANS

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Reader Comments

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Priya S
The part about rural workers and migrants being excluded is so concerning 😔. It's the same story everywhere—informal sector workers always get the short end of the stick. India's NPS and other schemes need to be much more inclusive to avoid this future trap.
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Aman W
Interesting read. China's one-child policy consequences are unfolding. It shows that short-term population control can have long-term economic disasters. India's demographic dividend is precious, but we need to create enough quality jobs to harness it fully.
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Sarah B
From a global economic perspective, this is huge. China has been the world's factory for decades. An ageing, shrinking workforce will impact global supply chains and inflation. Countries like India and Vietnam have a window of opportunity, but we must be ready.
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Vikram M
The three-way fiscal demand is the real challenge. Pensions, defence, and tech investment—all need money. It's a tough balancing act for any government. Makes you appreciate the complexity of policy-making. Hope our planners are taking notes.
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Kriti O
While the report is analytical, I feel it's a bit simplistic to blame only demographics. Economic models that rely on endless growth and cheap labor were always unsustainable. We need to rethink development itself, not just pension plans. A more respectful criticism.

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