I'm from a western country and I agree with your statement and have a similar fear. My country is doomed because of the pension system.
BUT this doesn't apply to China. Their system isn't structured this way, therefore this is mostly irrelevant for them.
As long as China have a working population bigger than most countries, as well such amazing universities, they will perform better than all those countries.
Even with the population decline, they'll still have more able workers than all western countries for at least the next 100 years.
Let that sink in.
I never understood this thinking. Doesn't it assume infinite population is possible?
It was more likely something like "for the foreseeable future we'll have population growth and therefore a pyramid like scheme is a good solution for now".
Ideally the scheme should have already started adapting to the changing population dynamics, but humans for the most part (unfortunately) tend to kick problems down the road.
Politicians don't tend to get rewarded for solving tomorrow's problem when their populace tend to me more interested in having more money to spend right now.
So here we are, living large today with little regard for the cost to our future.
Canada saw the demographic writing on the wall, and solved its public/government pension problem in the 1990s:
* https://en.wikipedia.org/wiki/Canada_Pension_Plan#1998_refor...
Good book on the history of the CPP, and how the reforms were determined and enacted (Fixing the Future by Bruce Little):
* https://utppublishing.com/doi/book/10.3138/9780802095831
There's no reason other countries could not have done something similar earlier (or even now).
In France it is reported that retirees now have higher (average?) incomes than workers:
* https://archive.is/https://www.thetimes.com/business-money/m...
This is completely ludicrous. For retirement planning purposes, it is often recommended to assume you'll need 70% of your working age income for the same lifestyle (you have fewer expenses—live not having a chunk of your income go to retirement savings), but in many situations it could even be ≤50%:
* https://archive.is/https://www.theglobeandmail.com/globe-inv...
To have the same (or more) in retirement generally means you "over saved" while working, and you could have had more resources for enjoyment of life earlier (after all, we don't know when our time will come).
It may not be exactly true, but it's close to be true, and then like you said the workers have way more expenses (rent, children).
I will point out that in the 90s we in France already knew that the retirement system was unsustainable. It is quite obvious if you look for 2 seconds at the population pyramid :-)
Generations of politicians tried and failed to do something about it, thanks to the left (and sometimes extreme right wing) saying that there was enough money and we just need to tax the rich more.
In the current pension system (at least the ones in the Nordics), the new generation pays for the old generation. This mechanism is broken, as it expects (as you pointed out) an ever-growing population, which is of course unrealistic.
Fixing [*] the broken pension system in a sustainable way is politically unpalatable and seems to have been so for decades. Lifting the pension age is the only "innovative" action available that is even discussed nowadays anywhere in public, as if that were the only viable alternative, which of course it isn't.
I've pondered why. Hammering out the details of a new system and taking care of a transition period etc. cannot be unsurmountable problems. It probably has to do with pensioners being a large voter demographic, thus the reason is some form of political self-preservation on behalf of the traditionally large parties.
So, instead of changing things to the better, a broken system must be maintained. Since the system is not only broken, it's essentially untouchable, therefore political decision-taking has to accept possibly sub-optimal decisions in related areas to avoid disturbing anything. In a way, the brokenness leaks.
Then, a shrinking population only exacerbates the problems of the pension system, spreading the brokenness further into other societal systems and decisions. And that's a bad path to be in.
[*] In an example of a better-working alternative system, any pension contributions would be personal, kept in an account managed by the state. The money is (low risk) invested by the state, profits/dividends reinvested, etc. Once one becomes a pensioner, the money can be withdrawn in whole or parts. Add taxes somewhere, such as when withdrawing the money. The state guarantees the lowest level of pension, something like today. Simple enough, and not tied to "children pay for parents".
Edit: formatting
Issue is due to the same politics as everyone else, Australia is having trouble reigning in the state pension (ideally in this scheme meant as a fallback to provide a minimum subsistence level).
One of the problems is that many of our society's systems are predicated on a growing population. Social security and pensions, for example, are structured not unlike a pyramid scheme: for every old person we should have more than one working young person. People take more than they give. Fixing that will be painful, but possible.
More worrying is how many countries' birth rates have fallen below the replacement rate. Some SE Asian countries are interesting case studies here (Japan, S Korea), but it's not looking good, and much of western Europe is heading in the same direction. Maybe the worry is overblown and populations will eventually stabilize at a lower point, but currently it seems like a declining population will just add to the stressors that are putting people off from having children, so it could just as well keep snowballing.
All that's to say, I don't worry too much about over/underpopulation, but I do worry about a shrinking population.