China Needs a National Pension System: Caixin

China posts a high savings rate, but the country needs pension reforms. Some workers do not receive benefits to which they are entitled. The median age is 37.3 and with a low fertility rate and improved health care, the population is aging. Caixin describes the pension system in crisis and need for national coordination with fair distribution among provinces – “an inevitable requirement for the rational allocation of labor resources in a market economy, a yardstick by which the state’s ability to govern is measured, and is also inseparable from citizens’ freedom of movement and their right to freedom of employment.” Seven provinces including Beijing and Guangdong are contributors; 20 are beneficiaries with some posting huge deficits. Urban employees contribute 16 percent of wages. “The situation where the stronger continue to get stronger and the weaker continue to get weaker is difficult to change all at once,” the Caixin editorial notes. “The national pooling of pensions has brought about a collision between local interests and national interests.” Solutions include preventing moral hazards deficits and possessive attitudes. Recommendations include provinces coordinating procedures and adopting unified pension insurance. The country could also adjust fertility policies, transfer of state-owned assets and increase the retirement age – YaleGlobal

China Needs a National Pension System: Caixin

Caixin describes China’s pension system in crisis – risks could be reduced with national coordination and adjustments in fertility policies and retirement age
Wednesday, April 17, 2019

Read the article from Caixin about China’s pension challenges.

Features of China’s pension program:

  • Retirement age is 60 for men, 50 for women in enterprises and 55 for women who are civil servants. The life expectancy is 75.
  • All employees are supposed to be covered.
  • Both employers and employees contribute, with recent decreases for employers.
  • Local governments manage funds.
  • Workers can move and retain benefits, though that is difficult to enforce.
  • A majority of workers do not receive benefits to which they are entitled.
  • Contributions go into a personal account, paid out monthly over 10 years after retirement.
  • Workers must participate for at least 15 years.   

Read more about China’s social security system from the China Labour Bulletin.

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