China’s old-age reforms reduce long-run economic risks

Significance

The reform aims to bolster the size and quality of the workforce and ensure the long-term sustainability of pension funds. The number of years formal workers must contribute to pensions will also increase.

Impacts

• A higher official retirement age will enable firms to retain skilled workers longer, aiding workforce quality and cutting turnover costs.
• Foreign asset managers can leverage pension product design experience to gain a foothold in China’s underdeveloped private pension sector.
• Reforms to expand the employee contribution and voluntary aspects of the pension system will boost investment in domestic stock markets.