According to the latest issue of China Economic Weekly,
the Ministry of Labor and Social Security announced that the
country's pension fund had a deficit of 800 billion yuan (US$100
billion) by the end of 2005.
Another somber fact is that China is quickly becoming an ageing
society.
A sample survey of the population at the end of 2005 indicated
that 144 million people were aged over 60 or above, accounting for
11 percent of the total population. The figure would jump to more
than 28 percent by 2050.
A research report by the Deutsche Bank estimated that every 100
workers would have to support 79 retirees in 2050 if China does not
change the current limits on the retirement age. Based on that,
some experts suggested revising the retirement age and extending
working lives to ease the pressure on the pension fund.
China, the world's most populous country, has yet to feel the
pressure of the ageing population. But the problem can no longer be
ignored, otherwise the ageing population will cast a huge shadow
over China's economic development in the coming decades.
The ageing problem exists in many countries other than China,
but most developed countries have an annual GDP of between US$5,000
and US$10,000 for each of its citizens.
In contrast, China only had an annual GDP of US$1,700 per capita
last year it will experience an ageing population before it became
affluent.
To make things worse for China, the country has not established
a pension plan covering all of its citizens.
The current pension plan only includes employees in State-owned
or collectively owned enterprises in cities. Civil servants have an
independent pension plan.
About 10 percent of rural residents have set up their own
small-scale pension plans. The rest of China's rural citizens, the
majority of them, are excluded from any basic pension
insurance.
Currently only 25 percent of the working-age population is
covered by any kind of old-age pension plan.
Without proper handling, the ageing problem could trigger dire
consequences.
As the number of senior citizens increases, the government will
have to spend more on pensions. Government expenditure on
retirement pensions increased by 37.4 times from 1982 to 2000.
Medical care and daily nursing for senior citizens would also
see a huge increase in demand, which should be taken care of within
the community.
Senior citizens also have needs in terms of entertainment,
community participation and other forms of recreation.
Under the market economy, senior citizens will face a larger
risk of being exposed to poverty, and the authorities will be
called on to deal with this problem.
Some experts claimed China would have a 15-year "golden period"
from this point on because there are 10 million people of working
age, making the country's population age structure fitful for
harvesting a "demographic dividend."
According to recent demographic research, nations in which a
relatively large share of the population have reached the prime age
for working and saving may enjoy a boost to income growth stemming
from the higher share of the population that is working, from the
accelerated accumulation of capital, and from reduced spending on
dependents. This phenomenon is known as the "demographic
dividend."
Experts suggest that the country should make good use of the
time because the combined effect of this "dividend" and effective
policies in other areas can stimulate economic growth and settle
the problems caused by an ageing population.
However, these experts seem to forget that there will not be
such a dividend if the labourers do not have adequate positions or
cannot earn good money from their work.
The current situation in China is that the unemployment rate
worsens every year. Many cannot find a position and the average
salary cannot be increased significantly.
To make things worse, education is more expensive for most
families since the beginning of the practice to make education
"marketized." Accordingly, more children, especially those from
rural areas, lose their chance of getting educated. As a result,
the average new worker that comes of age does not have adequate
education qualifications.
Hence, China has a lot of problems to tackle before it has a
chance to enjoy the so-called "demographic dividend" like the
developed countries.
A real fix for cushioning the shock on economic growth posed by
the ageing population is to make good use of resources and time at
this moment to construct a social security system covering all
citizens without difference.
Many people, especially those who are middle-aged and older,
have a good memory of the social security system under the planned
economy. Even though the national economy was less vibrant, people
were taken care of.
Since the country launched a market economy reform, a new social
security system is yet to be established after the old ones were
dismantled.
With social wealth much more abundant than before, establishing
a new social security system would not be difficult as long as the
decision-makers hold firm.
When the country takes care of the basic needs of its citizens,
it will see sound economic growth and the pension fund deficit will
not cause substantial damage to the lives of its senior
citizens.
(China Daily December 19, 2006)