China has a significant economic problem since the country faces a demographic transition that may occur when a country’s population stops growing. The International Monetary Fund working paper published in February 2026 explores this issue and assesses how changes in retirement ages may respond to the emerging challenges. The paper’s author argues that reforms of the retirement system will have a limited impact on the future development of the Chinese economy.

The study suggests that the number of China’s working-age population (20-59 years) is expected to reduce by 26.2% by 2050 if no changes in the retirement age policy are made. A smaller working-age population means a smaller workforce. According to the research, a decrease in the workforce will negatively affect China’s capital intensity and reduce the country’s economic growth.

The author finds that aging will reduce China’s real GDP growth by about 2% per year between 2024 and 2050. One should be careful about these numbers and remember that these are projected scenarios based on the author’s calculations. The results of such a path may be different, but, according to the article, a reduction in the annual economic growth rates by 2% will significantly slow down China’s economic development.

Growth in pension spending is another issue associated with an increasing number of retirees. The article states that China’s pension outlays as a share of GDP will grow from 5.4% to 15.3% between 2024 and 2050 if no changes to the retirement ages are made. A rapid increase in expenditure on pensions will put a significant burden on the Chinese economy.

The analysis suggests that the reforms of the retirement ages that China launched in 2024 will positively affect the two issues mentioned above. The author calculates that the reforms that extend the working life of Chinese citizens will increase the country’s annual GDP growth by approximately 0.2% per year. They will also reduce the share of pension expenditures in China’s GDP to 11.9%. Despite the expected positive effect on the economy, the projected growth in pension spending will still be significantly high in 2050 compared to the current levels.

Finally, the author offers to analyze other potential reforms that could be used in China to address the emerging challenges. For example, the research suggests that supplementing alternative retirement ages with adjustments to expected life expectancy at retirement may help respond to rising pension liabilities. The study also analyzes reforms of the Residents Pension Scheme, suggesting that benefits under the program should be reconsidered because they are currently inadequate. The analysis shows that policymakers should consider both fiscal sustainability and pension adequacy when designing reform options.

This study demonstrates why changes in the population structure present a serious economic challenge. Policymakers should carefully address the situation when the number of retirees grows rapidly compared to the working population. The slowing economic growth and increasing pension liabilities will put China in a difficult position in the future.

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