It isn’t just developed nations that are stumbling under the load of massive pension obligations: China is facing its own alarming problems, China Daily reports:
The report also shows that despite the rising pension insurance balance since 2012, the payable number of months fell to 17.7 months last year from 19.7 months in 2012.
More provinces are falling in situations where the pension fund cannot cover the expenditures. As one of six provinces with the same problem, China’s northeast province Heilongjiang’s enterprises pension can only pay up to one month.
Yang Yansui, director of the School of Public Policy & Management at Tsinghua University, said the four-trillion pension balance was mostly in personal accounts, while the pay-as-you-go pension system was greatly challenged by dependency ratio.
“When the actual dependency ratio of pension insurance gets down to three to one, thepayment cannot be lower than 17 percent. If it drops to two to one ratio, it means that everyone is going to pay 25 percent”, Yang said. “The financial burden gets heavier when the dependency ratio gets lower,” Yang said.
Yang says the central government needs to force provincial officials to “restructure.” Maybe, but it’s hard to see Beijing getting excited about any policy that would reduce the retirement opportunities for large numbers of people. It’s true that Chinese people would ultimately be better off if their pension savings weren’t at such risk, but Chinese authorities efforts elsewhere to balance long-term needs with short and medium-term political pressure haven’t been reassuring. Lately, kicking the can down the road seems to be official Chinese policy.
With an aging population and the prospect of an indefinite period of sluggish growth, China’s pension problems won’t go away on their own. Provinces like Heilongjiang are headed down a very rocky road, and whether Beijing bails them out or forces them to restructure, it’s not going to be pleasant.