Charts of the Day: China’s Pension System Is Out of Pocket

Bad news for anyone born in China after 1980. The country’s pension system is expected to run dry well before that generation retires in 2035.

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.

The report also shows a huge discrepancy in the health of the pension funds of each of China’s provincial-level regions. South China’s Guangdong province, which reported the highest gross domestic product (GDP) in the country in 2018, has the largest pension surplus, roughly 200 billion yuan. In contrast, the northeastern province of Liaoning, whose economy is struggling, will not be able to cover its pension obligations this year and is expected to become the biggest beneficiary of the central government’s redistribution fund.

Last year, there were 249 million people over the age of 60 in China, accounting for 17.9% of the population, according to data released by the National Bureau of Statistics.

Contact reporter Gao Baiyu (baiyugao@caixin.com)