Government moves to solve pensions shortfall

Unified system

To narrow that gap, in December, the Communist Party of China pledged to speed up the process of establishing a national pension fund, which would allow the central authorities to collect the money and plan spending as a whole.

The Party's preference for centralizing management of funds emerged in late 2017, when the CPC's National Congress decided to unify the system as soon as possible.

That commitment was followed by the rollout of a temporary relief plan in 2018, which aimed to direct money from provinces with larger balances to places struggling to pay retirees before the completion of the unifying process.

"The solution is far more complicated than just channeling money between regions," said Nie Riming, a researcher with the SIFL Institute, a public policy think tank in Shanghai.

He said a well-designed system is needed to ensure that urban and rural residents receive equal treatment along with members of different generations "because today's young people could end up receiving much smaller pensions, despite being burdened with high contribution rates".

Concerns

Last year marked the 20th anniversary of the UN listing China as an aging society, and people age 60 and older accounted for 10 percent of the population.

That makes China one of the few countries to fall foul of the aging process before becoming fully industrialized.

Given that the country was once dependent on labor-intensive industries for growth, the fading demographic dividend that quickly followed sent a warning to policymakers.

In the past two decades, the country has seen the number of over-65s almost double, reaching 166.5 million in 2018, according to the National Bureau of Statistics.

The elderly dependency ratio-the proportion of seniors supported by people of working age-was 16.8-to-100, compared with 10.2-to-100 in 1999, the NBS said.

Meanwhile, the pension funds-which used to be reserved for government employees-have expanded to cover nongovernmental workers, who used to be supported by their families during old age.

Those developments have led to concerns that providing cover for so many retirees could put the pension fund under strain.

The fear was reflected by a CASS report in April, which said pension funds could run out before workers born in the 1980s retire. One Sina Weibo user commented, "If the prediction is accurate, many people born after 1975 will also bear the brunt in about 15 years."

At a regular news conference in April, Nie Mingjun, a pension fund official with the Ministry of Human Resources and Social Security, said the report's authors had failed to fully understand how the fund works.

He attempted to assuage fears by saying that adjustments have been made to ensure that benefits do not run out, including cutting the contribution rate to entice a larger proportion of the working population to participate in the pension fund.