BEIJING - A government proposal asking people to work longer and draw their pensions later has sent China into a nationwide debate, with many people wondering how the nation should cope with its rapidly aging population.
The Ministry of Human Resources and Social Security said last week that it is studying a more flexible retirement and pension system that allows people to continue working past the current retirement age of 60 for men and 50 for women.
The existing retirement system was introduced in China more than six decades ago, when the average Chinese life expectancy was 50 years.
The upward revision of the retirement age in the future will be "an inevitable trend" as China's economy grows and people live longer, the ministry explained.
Pension shortfall?
Analysts say financial pressure and the fact that people are living longer are the reasons behind the proposal, as an increasing number of Chinese will be retiring in coming years and claiming their pensions.
According to a joint study by the Bank of China and the Deutsche Bank, an aging population will leave China with a shortfall of 18.3 trillion yuan ($2.89 trillion) in pension funds by 2013 and create a heavy fiscal burden for the country.
Liao Shuping, an investigator from the BOC's research team, said the pension fund deficit projection is an accumulated calculation based on past data released by the National Bureau of Statistics over the years, using presumably unchanged variables such as interest rates, mortality and salary growth rates.
Without any change in the pension system, Liao warned, the funding shortfall will expand year by year and hit 68.2 trillion yuan by 2033, or about 38.7 percent of the country's estimated gross domestic product, if the Chinese economy maintains an annual growth rate of 6 percent.
She said the estimated size of the deficit may vary due to changes in those variables. "But a widening gap in pension funds and an increasing fiscal burden are certain," she said.
Outstanding contributions to China's pension system, which now covers about 289 million working people, retirees and beneficiaries, stood at 1.9 trillion yuan at the end of last year, according to the ministry.
Under the existing pension system, each employee pays 8 percent of his or her salary into a private pension fund account, while employers add another 20 percent into private accounts.
More and more Chinese are beginning to spend their pension savings, however. The latest data showed that the number of people aged 60 or above reached about 185 million nationwide at the end of 2011.
A human rights action plan released by the Chinese government on Tuesday predicted 357 million urban residents will be covered by the pension insurance system by the end of 2015, thus adding to the government's pension payment pressure.
The number of Chinese people aged above 65 is also expected to rise sharply to 323 million, or more than 23 percent of the nation's population, by 2050.
Fan Jianping, chief economist of the State Information Center, insisted that the country's pension fund deficit has been exaggerated, saying the 18.3-trillion-yuan deficit is "too scary to be true."
"A pension deficit does exist in our country, but the government is well-equipped to solve the problem," Fan said, noting that the government can replenish the pension balance with the huge number of State-owned assets, bonuses and dividends from State-owned enterprises, if necessary.
By the end of last year, aggregate government fiscal subsidies for pensions amounted to 1.25 trillion yuan through the transfer of pension insurance payments.
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