Former Central Bank Governor: Retirees Need to Fill Up Their Own Pensions

The number of seniors is climbing in China. A young couple born in the 1980s are the sole caregivers of four aging parents. Getty Images

Analyst and former governor of the Chinese central bank, Zhou Xiaochuan, admitted that China will soon face an aging society with a weak pension system. The only possible solution relies on retirees filling the gap on their own. The analyst says the real problem lies in the gigantic bureaucratic system that feeds on the entire populace.

In an economic forum on Feb. 25, Zhou, vice chairman of the Boao Forum for Asia and former governor of the People’s Bank of China, said that private pensions will likely play a role in the already limited pension pool as a massive number of workers are approaching retirement.

Economist Davy Jun Huang told The Epoch Times on Feb. 27 that China’s pension pool is indeed decreasing and runs on cash. He said, “The money deposited to social security now goes to the retirees right away. While there’s no more remaining balance, the past balance and reserved funds will continue to be consumed. The situation is very serious.”

The Retirement Age Meets Zero Pension

Recently, a magazine put out by the state media Xinhua published an article stating that within 10 years, China will enter the largest retirement wave in communist history. The number of people who retire after the age of 60 is increasing at an average rate of 20 million people per year.

In 2019, research by the Chinese Academy of Social Sciences (CASS) indicated that a deficit is anticipated by 2028, and the urban worker pension fund will run dry by 2035.

In April 2022, the Chinese regime introduced the idea of personal pensions. Three months later, multiple state-owned commercial banks announced the pilot retirement scheme with investment products of five, 10, 15, and 20 years at various interest rates of higher than 3 percent.

Mr. Zheng, a retiree, doesn’t have faith in these products. He said, “You can see that there are a lot of posts on the internet, and the money is gone when it is deposited [in the bank].”

Mr. Yang, an unemployed mainlander, believes that there’s a severe pension deficit. He said, “Any policy the regime comes up with is just to drag its ruling.”

Chen Xiangying (L), 92, draws her first pension at a bank on Sept. 28, 2006, in Shanghai, China. China Photos/Getty Images

CCP’s Bureaucracy Drains the Pension

Zhou said in the forum that the pension flaws are devastating and further “delay” in facing pension system flaws is going to lead to bigger challenges. He suggested strategies ought to be sought to treat the root cause, not the symptoms, or at least to treat both at the same time.

Economist Huang said the result of the “delay” means that even the contributions can’t meet the outlays. That spells the collapse of the entire social security system, he said.

As for the issues of treating the root or the symptom, Huang said on the surface, the deficit is consuming the reserved fund, and to treat the symptoms is to increase the contribution or reduce the number and amount of payment.

However, Huang said a considerable amount of the fund goes to those who occupy the state budget, such as public servants, departments, and state-owned enterprises. These contribute to the “root” crisis of the retirement fund.

“The mass poor populace is feeding and nurturing a huge bureaucratic system and party system, which has had very little contribution to the social security but consumed a major portion of the expenditure of the system. That’s the ‘root’ problem of the retirement pension flaws,” Huang analyzed.

A Chinese media reported on Jan. 13 that the local retirement pension fund has completed its January payment in Yingtan City, Jiangxi Province.

According to the report, there were 178.85 million yuan distributed to 75,500 enterprise retirees, 69.09 million yuan to 13,600 governmental retirees, and 28.54 million yuan to 137,800 urban and rural residential retirees.

On average, the retirees of Yingtan governmental agencies received 5,080 yuan (about $729.49) a month, enterprise retirees 2,368 yuan (about $340.04) a month, and the urban and rural residents 207 yuan (about $29.73) a month. Among them, the per capita pension received by governmental retirees is nearly 25 times that of urban and rural residents.

Delay Retirement to Ease the Symptoms

Zhou also mentioned the likelihood of delaying the legal retirement age in his talk. However, he cautioned about the relevant issues regarding the average health and productivity of the elderly, and the cost-effectiveness that companies will need to consider.

The legal retirement ages in China are 60 for men, 55 for female white-collar workers, and 50 for female blue-collar workers—as earlier retirements mean less tax collected on wages and fewer years of contributions from the employer.

The retiree Zheng said that nothing is going to help, referring to the current pension. “Those who have had less work history will receive less than 1,000 yuan (about $143.60) a month. But it only goes as high as 3,000 (about $430.80) for those of us with longer years [of contribution],” he said, noting that commodity prices are still relatively stable now. If the renminbi depreciation and inflation continue, 3,000 yuan will be worthless.

Haizhong Ning and Yi Ru contributed to this report.