The fast-aging population, job losses, and worries about poor wages among the young have heavily strained China’s pension system. Almost the entire population of the United States—300 million people—will be retiring in the next decade from working age in China. The strain on the pension system is more significant since most of the population is older than the average retirement age in the country.
An already overburdened pension system is feeling the full force of China’s rapidly shifting demographic makeup. The already-underfunded pension system in China is under tremendous pressure due to the rapidly shifting demographic composition.
The average retirement age of 54—one of the lowest globally— has increased the severity of this pressure. The biggest economic recession in China since the country’s adoption of capitalism forty years ago is causing widespread unemployment and making it difficult for many to save money.
As with many other nations, China’s population has crossed a demographic Rubicon. China is not alone in having underfunded retirement schemes. Pension trust is eroding due to the confluence of China’s demographic and economic crises. Almost 520 million individuals, or almost 40% of the present population, will be 60 or older during the next 25 years. The Chinese Academy of Social Sciences predicts that the state pension fund will exhaust its assets within ten years.
Recent events have also contributed to the issue. In China’s planned economy before the 1980s, employees were guaranteed a living wage by state-owned companies until they passed away. Officials sought to establish a more equitable pension system with market-oriented changes. Communist Party leaders, however, put economic expansion ahead of the funding that would have been necessary to establish a more comprehensive social safety net.
According to experts, the benefits could be too high in some instances, and China will have to cut them if it doesn’t raise the retirement age. Every municipality oversees its unique pension scheme, which numbers in the hundreds. A municipality’s budget and the number of people eligible for pensions determine how much retirees receive.
Worried Chinese authorities and specialists have resorted to prodding the country’s youth to start saving and join the private pension plan as the demands rise. The high cost of the basic public pension plan has prevented some young people from enrolling.
