The country’s ageing population poses a serious danger to the long-term development prospects of the economy by undermining Beijing’s policy objectives for the next ten years, which include increasing domestic consumption and containing spiralling debt.

China’s population of over 60s increased from 280.04 million in 2022 to 296.97 million in 2023, or 21.1% of the country’s total population. As the country ages quickly, there are many worries that the country’s pension system may not be able to keep up without major reform.

Three pillars support China’s pension system, the first of which is the state-run basic pension system.

Employers’ voluntary employee pension plans are in second and third, respectively, and are run by private organisations.

According to researchers, the public system is already facing severe financial strain, while the corporate and private programmes are still in their infancy. It is not implemented as a national programme, but rather primarily at the provincial level.

Due to significant population departures over time and poorer economies, northern governments have the largest pension deficits in the nation.

In an effort to address cross-national discrepancies, China established a special fund in 2018 to transfer pension assets from wealthier coastal provinces like Guangdong to regions like Heilongjiang and Liaoning.

A third of China’s provincial governments are experiencing pension deficits. The Chinese Academy of Sciences, a government agency, projects that the state pension system would run out of money by 2035.

Pension specialists estimate that China’s public pension spending already accounts for over 5% of GDP.

Chinese nationals are entitled to pensions upon retirement, which begin at age 50 for factory workers, 55 for white-collar workers, and 60 for men.

However, compared to the United States, China has a longer life expectancy—78 years as of 2021 compared to about 44 years in 1960—and is expected to surpass 80 years by 2050.

Among China’s 1.409 billion citizens, nearly 20% are over 60.

By the end of 2022, 1.05 billion individuals will have contributed to or received benefits from China’s national basic pension, making it the largest social security system in the world, according to state media.

The International Labour Organisation of the United Nations estimates that the average monthly pension payment in China in 2020 was approximately 170 yuan ($23.62).

As of January 2024, the government-funded social security programme in the United States paid an average of $1,907 per month.

Even though the average American worker makes more than three times as much as the average Chinese worker, there is still a significant difference in retirement benefits.

In 2022, the State Council of China released a plan to help the country’s ageing population. The plan called for building more nursing homes and instituting a new private pension system to facilitate people’s investment in a variety of financial items.

Reforms to the pension system, however, have been gradual.

China declared in official policy for 2020 and 2021 that the statutory retirement age would be raised; however, no additional information was provided.

Several people have taken to social media to vent their frustration and fear about any prospective changes, citing the challenging job market and high unemployment rates of the present.

In 2002, ten Chinese of working age provided support for one retiree; by 2021, the ratio had dropped to five. The ratio is expected to decline to 2 in 2050 and 4 in 2030, according to Macquarie Chief Economist Larry Hu.

(Adapted from Reuters.com)

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