cepr.org (21.03.2026) China is undergoing a sharp demographic transition: rapid population ageing, a shrinking labour force, persistently low fertility, and continued urbanisation. Using an overlapping-generations framework, this column shows that the demographic transition is a joint growth and fiscal headwind: the economy slows just as ageing-related spending pressures intensify. A recent retirement age reform mitigates some of the economic and fiscal pressures. However, a credible long-run strategy likely needs a comprehensive approach: sustainability levers, targeted adequacy improvements, and continued efforts to reduce fragmentation and strengthen portability as urbanisation continues.