Raising retirement age won’t solve China’s demographic problem, immigration might

Dudley L. Poston Jr., Texas A&M University

China’s recent decision to raise the retirement age is a response to its looming demographic crisis, driven by an aging population and shrinking workforce. The Communist Party’s move, expected to set the retirement age at around 65, may slightly extend the viability of China’s pension system, but it does little to address the root of the problem.

China’s population has been on a steady decline since peaking at 1.43 billion in 2021. With a fertility rate of just 1.1 children per woman – far below the 2.1 needed to maintain the population – China is facing a future where deaths outnumber births.

Projections suggest that if current trends continue, the population could fall below 1 billion by 2070 and down to 633 million by 2100. This drastic decline would not only reduce the total population by more than half but also drastically alter the population’s composition, leading to significant economic and social challenges.

The proportion of elderly citizens is expected to surge from 20% in 2023 to over 52% by 2100, creating a massive imbalance between working-age adults and dependents. Simultaneously, the workforce will shrink, with the proportion of young workers aged 20 to 29 expected to drop from 12% to just 7%. This shift will place an enormous strain on China’s economy, as fewer workers are available to support an increasing number of retirees.

One potential solution to this demographic “time bomb” is immigration. Many countries with low fertility rates have turned to immigration to replenish their workforces. For example, the U.S. and Germany have significant foreign-born populations, at 14% and 18% respectively, which help to sustain their economies. Even Japan and South Korea, which are also grappling with aging populations, have higher percentages of foreign-born residents than China, where just 0.1% of the population is foreign-born.

China has long been resistant to immigration, partly due to a deeply ingrained belief in racial homogeneity and a lack of experience with integrating foreign populations. This resistance poses a significant challenge to implementing an effective immigration policy. However, without a significant influx of young workers, China faces a future of economic stagnation and a rapidly aging population that could cripple its social systems.

Past efforts by the Chinese government to boost the birth rate through policies encouraging larger families have largely failed. Experts agree that these pronatalist policies are unlikely to reverse the demographic decline. This leaves immigration as one of the few viable options to address the shrinking workforce and growing number of dependents.

Adopting a more open immigration policy would not be without its challenges. In the short term, an influx of immigrants could lead to job competition and displacement for young Chinese workers. However, immigrants often take on jobs that are less desirable to the local population, a trend observed in many other countries. Over time, the benefits of a larger, younger workforce would likely outweigh the initial disruptions.

Without a significant shift in immigration policy, China risks becoming one of the oldest and most economically strained countries in the world by the next century.

Raising the retirement age is a necessary but insufficient step. To truly mitigate the impending demographic disaster, China must consider embracing immigration, despite the cultural and political hurdles it presents. The alternative is a future marked by economic decline and a rapidly aging society that is increasingly difficult to support.

[Abridged]