China's pension fund is "under tremendous pressure", according to Xiang Huaicheng, chairman of the National Council for Social Security Fund.
Pension funds have been under pressure since 1997, when the Chinese government implemented a policy of combining mutual assistance programs with personal pension accounts.
The lack of cash in the pension fund is due largely to the fact that workers in state-owned enterprises never had to make any contributions to the pension fund before the government set up the combined pension insurance system.
But since 1997, in order to ensure that retired workers receive an adequate pension that is paid on time, the officials managing the pension funds have had no other choice but to use the money in employees' personal accounts to cover the pension payments. As a result, the shortfall in the empty accounts has snowballed to 740 billion yuan and is rising every year.
By 2004, more than 160 million people in China had participated in the pension scheme. However, this accounts for only 30 percent of the total urban population and covers only around 15 percent of the total labour force. Since 2001, the number of workers in state-owned enterprises and collectively-owned enterprises in cities and towns who are covered by pension funds has grown each year by an average of 4.04 percent, while the number of retired workers has increased by an average of 6.64 percent. The difference in the two figures means that the number of people paying pension premiums is lagging increasingly far behind the number of people who receive pension payments.
Source: China Securities Journal (14 November 2005)
Reference: China's Labour System
25 November 2005
Pension funds have been under pressure since 1997, when the Chinese government implemented a policy of combining mutual assistance programs with personal pension accounts.
The lack of cash in the pension fund is due largely to the fact that workers in state-owned enterprises never had to make any contributions to the pension fund before the government set up the combined pension insurance system.
But since 1997, in order to ensure that retired workers receive an adequate pension that is paid on time, the officials managing the pension funds have had no other choice but to use the money in employees' personal accounts to cover the pension payments. As a result, the shortfall in the empty accounts has snowballed to 740 billion yuan and is rising every year.
By 2004, more than 160 million people in China had participated in the pension scheme. However, this accounts for only 30 percent of the total urban population and covers only around 15 percent of the total labour force. Since 2001, the number of workers in state-owned enterprises and collectively-owned enterprises in cities and towns who are covered by pension funds has grown each year by an average of 4.04 percent, while the number of retired workers has increased by an average of 6.64 percent. The difference in the two figures means that the number of people paying pension premiums is lagging increasingly far behind the number of people who receive pension payments.
Source: China Securities Journal (14 November 2005)
Reference: China's Labour System
25 November 2005