China’s Pensions System Is Buckling Under an Aging Population

Within two decades, China’s retirement-age population is projected to surpass the entire population of the United States. By 2040, an estimated 402 million people, or 28 percent of China’s population, will be older than 60 years old—the current legal retirement age for most men in the country—more people than the expected 379 million in the United States that same year. This trend means the end of China’s comparative advantage in cheap and skilled labor and the rise of the daunting financial challenge of caring for its rapidly aging population.

Chinese President Xi Jinping is determined to achieve technological self-reliance, hoping that innovation will improve China’s labor productivity and offset any potential future labor shortage. But even if Xi’s initiatives are successful, they will do little to address the financial burden posed by China’s underfunded social security and pension system. A 2019 report by the Chinese Academy of Social Sciences (CASS) warned that as the worker-to-retiree ratio declines, the National Social Security Fund (NSSF), established in 2000 to finance China’s future pension obligations, would likely be depleted by 2035.