The average retirement age in China has in reality been reduced to about 53 while its pension system is designed to serve retirees at or over 60 years old, creating a huge payment gap for pension funds.

This worsens an already severe situation, in which many of the country's retirees have not seen their pension accounts established. Since China began such a system only in 1997, those who retired before 1997 and those who began work after that year are facing blank or incomplete accounts for their post-retirement pensions.

Some enterprises, on the other hand, tend to let their employees go as early as possible to save costs. An official survey in 10 cities shows that about one-third of new retirees quit before they reach the official retirement age.

It seems that this can create vacancies for new employees and caters to the nation's growing demand for jobs. Around 14 million laborers are expected to have difficulties finding work this year.

The abnormal increase in the number of retirees will mean more pension costs and fewer contributions to the fund. This places even greater pressure on the fund, which is already in the red.

The central government has allocated 209.3 billion yuan (US$26.2 billion) to replenish the fund over the past five years.

We must hold back the trend of early retirement. It may appear to provide new jobs, but early retirement is actually a de facto transfer of costs from enterprises to the pension repayments.

However, as China is undergoing deepening corporate reforms, which involve the axing of staff at many enterprises in order to improve efficiency, early retirement has been taken as a convenient means of cutting staff numbers.

It would be short-sighted to push early retirement at the cost of the pension system.

It is not only a problem that will affect the operation of the pension system, but one that will influence our whole social welfare system. If the pension system's repayment gap continues to widen, it will become unsustainable and fail to play its role of supporting elderly retirees, which would lead to social problems.

Local labor policy-makers must be cautious in introducing the early retirement scheme. This only shifts the problem elsewhere, it does not offer a solution.

They should further discipline enterprises under their jurisdiction to ensure the strict implementation of the national retirement policy.

Failure in this respect may bring some instant benefits, but will create big problems in the longer term.

(China Daily July 11, 2006)