Population Ageing, Pension System and Retirement Age Extension in China --- an Applied Dynamic General Equilibrium Analysis

China is experiencing rapid population ageing. According to UN’s medium variant population projection, the proportion of population aged 65 and over will increase from10.5% in 2015 to 11.7% in 2020 and further to 23.9% in 2050. Meanwhile its working age population aged 15 to 64 declined at 2015 and will continue to decline. Furthermore, China’s low retirement age compounds the ageing problem. The rapid population ageing is putting high pressure on China's current pension system. Using a dynamic CGE model of the Chinese economy, We investigate the effect of rapid population ageing on the macro economy and the current pension system. We also explore whether increasing the retirement age can mitigate the negative effect of population ageing and reduce the burden of pension system.