The Chinese urban public pension system is facing significant challenges due to a declining workforce and a rapidly ageing population. In 2015, to enhance its long-term sustainability and reduce the interventions of the central government required to improve its funding condition, the government removed several operational constraints and allowed investment in Chinese financial markets. Based on an investment decision optimization model that combines multi-stage stochastic programming and dynamic stochastic control, this paper systematically explores the impact of macroeconomic and demographic factors on the pension system from the perspective of Chinese pension policy makers. The results show that: a reduction in interest rate can effectively hedge the negative impact of a reduction in contribution rate on the pension system; an increase in inflation rate and a decrease in GDP growth rate will have a negative impact on the pension system; a decrease/increase in the growth rate of active/passive population will have a direct negative impact on the pension system, and the pension system is more sensitive to passive than to active population growth rate. Finally, this paper provides policy recommendations based on the evidence collected.