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More Capital to Tackle Pension Deficit
By Fu Jing, China Daily
March 28, 2005
The national pension deficit will be tackled by expanding the social security network and using more capital tied up in State-owned assets.
Cai Zhenhong, a senior official of the Ministry of Labour and Social Security, said the government is preparing to take action to bring the pensions crisis caused by the "4-2-1 phenomenon" under control.
Having four grandparents and two parents to support is putting the country's only-children under huge financial pressure.
The government is set to introduce tough measures to encourage private and foreign companies to make sure their employees are not forgotten once they retire, Cai, deputy director of the ministry's pension department, told China Daily in an exclusive interview.
Cai's ministry forecasted the number of retired people living in urban areas will reach 100 million in 2020, from 70 million in 2010. There are currently about 48 million city dwellers of pensionable age.
But only 44.9 per cent of urban employees and 85.4 per cent of retired people are covered by pension plans, and most farmers work outside the pension system.
"If there is no sound pension system, a crisis is likely to occur when the retiring peak comes," said Cai.
Making up shortfall
Earlier this month, Minister of Labour and Social Security Zheng Silin said the pension shortfall totals about 2,500 billion yuan (US$301 billion).
About 600 billion yuan (US$72 billion) in the personal accounts of working-age people has been diverted to support retired people.
"We should gradually save enough in personal pension accounts and stop diversion," said Cai.
The official added that more capital will be transferred from the financial coffers of the central and local governments, and State assets will also be converted.
This announcement follows National Council of Social Security Fund President Xiang Huaicheng's statement at the end of last year saying that nearly one-10th of China's State assets - which are worth more than 12,000 billion yuan (US$1,400 billion) - will be transferred within five years.
Some researchers suggest increasing the retirement age to beat the pension problem.
"It will cushion pension pressure in China," said Tao Liqun, from the Beijing-based China Research Centre for Aging Science.
Tao suggested gradually boosting the retirement age - now 55 for women and 60 for men - to 65 by 2030 for all.
However, other researchers say the rise would exacerbate the jobs situation, as about 10 million people are currently unemployed.
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