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Writer and Commissioning Editor
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This from the FT’s Darren Dodd made me think how far we’ve come in offering better retirements in this country. Not only do we live longer but we work longer and our state pension is better balanced between genders.
We may moan about our intergenerational transfers but we are a lot further down the road than China. We don’t know how lucky we are
China’s plan to raise the retirement age for the first time since 1978 in the face of a shrinking workforce comes as policymakers grapple with slowing economic growth, a prolonged property slowdown and a weak job market.
For male employees the retirement age will rise from 60 to 63; for female blue-collar workers it will increase from 50 to 55; and for female white-collar workers it will go up from 55 to 58. The changes will take effect in January and be phased in over 15 years. The current retirement age was set when life expectancy was much lower (it’s now approaching 80) and few people went into higher education, unlike today where it’s nearing 60 per cent.
Why this matters China’s policymakers have for years been grappling with the problem of a diminishing workforce, thanks to some of the lowest retirement thresholds in the world and a low birth rate. The country faces running out of workers just as its position as the world’s second-largest economy comes under threat.
The move, first floated at a key Communist party gathering in July, has not gone down well with younger people who are being forced to work ever-longer hours to support ageing extended families. Many of them are only children, thanks to the now defunct “one-child policy”, making their burden even harder to carry.
In the meantime, indicators continue to raise concerns about the strength of the country’s economy.
Deflationary pressures look like they are becoming entrenched, while empty office spaces in major cities demonstrate how the slowdown has hurt business confidence. In addition, foreign companies’ investment in China is said to be at a tipping point thanks to a growing tangle of ill-defined data, cyber security and anti-espionage laws, combined with weaker demand, meaning lower profits.
Internationally, trade tensions with the US and Europe show few signs of easing, especially if Donald Trump wins the election in November and makes good on his promise of slapping 60 per cent tariffs on Chinese goods — which according to UBS would more than half China’s annual rate of growth.
But whoever becomes president, the outlook for Beijing, in the words of one expert, is between “two bowls of poison”.
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Some years ago , I read an article by Caixin , explaining that the problems of pension provision were systemic but also geographic
There simply isn’t enough money set aside to meet obligations
According to a report released this month by the Chinese Academy of Social Sciences (CASS), the money that has been accumulating in China’s pension funds will fall to zero in 2035 after peaking in 2027 at 6.99 trillion yuan ($1.04 trillion).
In China, most provincial-level governments top up their own pension funds by taxing workers’ wages, though last year the central government created a separate pool of money to redistribute funds from regions with pension surpluses to those with shortfalls.
Without government subsidies, the pension contributions collected this year will not be able to cover the country’s pension obligations. In 2050, the annual balance is expected to fall into a 16.73 trillion yuan deficit.
Through subsidies, the government can put off the pension deficit, but that won’t change the fact that the current system is running out of money.
Even with subsidies, the pension system is forecast to begin running an annual deficit — estimated at 118.1 billion yuan — in 2028. That figure is expected to reach 11.28 trillion yuan in 2050.
The pressure on the pension system is steadily increasing. At present, one pensioner is supported by approximately two workers, but by 2050, each pensioner will be supported by only one worker, the CASS report said.
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About henry tapper
Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
I detect more of the usual actuarial pessimism in these Chinese projections of “running out of money”.
Mercer’s index
https://www.mercer.com/insights/investments/market-outlook-and-trends/mercer-cfa-global-pension-index/
shows China quite favourably in Asian comparisons (apart from Singapore and Hong Kong).
UK, on the other hand, lags The Netherlands and others in European comparisons.