Pension reform to help tackle aging issue

The central authority highlighted its resolve at a key meeting last month to create a unified national pension fund system, which experts said is expected to relieve the fund's payment pressure in rapidly aging segments of society.

The four-day Fourth Plenary Session of the 19th Central Committee of the Communist Party of China, which concluded on Oct 31, decided that China should speed up the establishment of a national system to operate the Basic Retirement Security plan, which sustains Chinese retirees.

That means local authorities running the fund would hand over its management to central authorities so that Beijing can collect the money and plan its spending as a whole.

Experts say the plenum sent out the message that China is ramping up efforts to address pension-related problems by creating a new system, which is expected to standardize the fund's management and benefit pension recipients in the long run.

Currently, the funds are mostly managed by provincial or prefecture-level authorities, with different contribution rates from place to place. Pensions also vary as retirees are paid based on local income levels.

That has led to a huge regional gap in retiree income levels, as well as mounting pressure for less developed regions to keep the fund balanced, said Jiang Xiangqun, a social security professor at Renmin University of China.

Jiang said regions such as the northeastern rust-belt provinces have seen a shrinking number of fund contributors because of the aging population and the exodus of young people. The remaining problem of numerous workers laid off by former State-owned businesses has exacerbated the issue there.

"That does not help achieve common wealth," he said, referring to the Party's pledge to turn China into a "moderately prosperous society in all respects" by the time the Party celebrates its centenary in 2021.

A 2017 report by the Ministry of Human Resources and Social Security cast a spotlight on the fund's balance problems in Northeast China. While the national collective fund balance was 3.7 trillion yuan ($527 billion) in 2016, Heilongjiang province had a deficit of 32 billion yuan that year.

In the past few years, Beijing has been working to address the issue. In late 2017, the Party put the issue high on its agenda at its 19th National Congress, vowing to unify the system as soon as possible.

The following year, the central government created a temporary adjustment mechanism to channel money from provinces with larger balances to places struggling with serious deficits. That started a series of efforts aimed at creating a national pension system by the symbolic year of 2021.

Zeng Hongying, a researcher at the Chinese Academy of Microeconomic Research of the National Development and Reform Commission, said the system is crucial because it makes it compulsory for local authorities to comply, considering that some places with a larger balance otherwise lack motivation to do so.

"It will also make it easier for workers to migrate across regions," Zeng said, adding that under the current situation, workers may risk receiving much less in pension payments if they move to less-developed provinces.

Experts said increasing pressure on pension funds as China grapples with a rapidly graying population. China had 249 million people aged 60 or older at the end of last year, according to the National Statistics Bureau.

That number is projected to reach 300 million by 2025, and peak at 487 million in 2053, when around one in three in China will fall in that age group, said Wu Yushao, deputy director of the China National Committee on Aging.

Livelihood issues have always been the Party's top concern, officials said. The Fourth Plenary Session decided to uphold and improve unified systems for ensuring the well-being of both urban and rural residents and to meet people's increasing need for a better life.

The Party stressed that it would improve the mechanism that promotes fuller employment with better quality, put in place an education system that serves lifelong learning for all, improve the social security system's coverage of all people and strengthen institutional guarantees for the improvement of people's health.

Xinhua contributed to this story.