National-level management to better balance pension funds

An elder shows her social security card in Nantong city, Jiangsu province, March 30, 2016. [Photo/IC]

OFFICIAL DATA show that in six provinces the social security paid by the working population is not enough to support the payments for retirees. Beijing News comments:

The number of provinces that suffer from a deficit in their pension funds has increased from four last year to six this year, and more provinces might face the problem in the coming year.

A look at the six provinces show that they have some common challenges. For example, all three provinces in Northeast China are on the list of provinces with a deficit, because they have too many State-owned enterprises that hired large numbers of retired workers who receive a full pension, although they did not pay social security until recent years.

The provinces with deficits also have low GDP growth rates. The three northeastern provinces, for example, ranked bottom among the 31 provinces, municipalities and autonomous regions in terms of GDP growth last year.

In stark contrast to these cities is the fact that some rich provinces enjoy pension fund surpluses. For example in South China's Guangdong province, the flourishing private sector has attracted so many migrant workers who pay social security that its pension fund has a surplus every year. In 2014, it had a surplus of 32 billion yuan ($4.82 billion).

For long, there have been calls for the richer provinces to help the poorer ones, but the absence of a national-level management system makes that impossible. If the current situation continues, certain provinces might be unable to pay their pensioners.

As early as the 1990s, the central government launched reform to establish a national-level management system for pension funds. In 2010, the Social Security Law required the building of such a system, and the 12th Five-Year Plan (2011-15) also said the reform should be propelled. But the rich provinces are dragging their heels because that might hurt their interests.

It is time for the top leadership to intervene, and accelerate reform before more problems emerge.