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China's pension system is faced with a major shortfall.
Mainland media reports that national pension funds
are sleeping at banks as deposits
and have lost 1.3 trillion yuan in the past 20 years.
A researcher regards China’s pension funds
a ‘time bomb’ for local governments.
Since a national debate on pension investment three years ago,
no investment program has yet been introduced.
The latest Human Resources and Social Security Ministry data
showed that as of last year, the total social insurance fund
has reached 4.77 trillion yuan,
accounting for as much as 8.3% of GDP.
But the vast majority of funds ‘sleep’ in the bank as deposits.
Only 71.1 billion, or 1.5% of the funds has been put
into national bonds or investment.
Chinese Academy of Social Sciences researcher Zheng Bingwen
analyzed, if the government had managed such funds better,
it could have made billions more over the past two decades.
Zheng Bingwen’s research showed, taking the Consumer Price
Index (CPI) as the inflation index, the pension from the past
20 years has devalued nearly 100 billion yuan;
and taking the average wage growth rate as a reference,
the loss is as high as 1.3 trillion yuan.
US-based Chinese social issue researcher Zhang Jian:
"The pension system is a disguised form of exploitation.
China's pension system was developed in a hurry just to get
rid of the historical burden of massive numbers of workers
in state-owned enterprises.
But the system was developed by the CCP behind closed doors.
It did not follow any international conventions."
Zhang Jian analyzes China’s pension has been hidden
with major risk.
The opaque, unfair and corrupt system has led to a big shortfall
The pension has increased the burden on the tax payers
and further damaged the basic old-age insurance system.
Zhang Jian: "Everyone knows the pension is a black hole,
but no one knows how deep the water is
and how much money has been sucked dry.
There is no unified management of the pension
in the social funds.
The local governments have misappropriated the pension
into chaotic investment.
The hole is only growing by robbing Peter to pay Paul."
Zhang Jian indicates that in this process many people
are left with the risk of no more pension funds.
According to China Pension Development Report published
by Economy and Management Publishing House,
the total amount of ‘empty accounts’ is more than 3 trillion yuan
in 2013, more than the total balance of basic pension fund.
Li Yang, economist of Institute of Finance and Banking, CASS,
had estimated last March that by 2023, over expenditure
will occur to the basic pension fund, the balance will be
exhausted by 2029, and a shortfall of 802 trillion yuan by 2050.
Faced with the shortfall of pension, the government keeps
tight restrictions on how pension funds can be invested,
with the country’s Ministry of Finance recently issuing
a statement warning local governments against investing
local pension funds in anything but the most conservative
assets, reported WSJ.
Given such restrictions and the fund’s overall poor track record,
Mr. Zheng said, the underinvested nature of the country’s
pension fund is a “time bomb” for local government finances,
US-based economic commentator Ma Jiesen: "This is certainly
a time bomb, one of the many the CCP faces.
The CCP certainly did not have a long-term plan,
but took a passive attitude towards the matter.
Aren’t there many so-called naked officials,
who sent their families overseas, in China?!"
Ma Jiesen points out that the ruling party is the fundamental
problem in China, for its unlimited power and greed,
as well as its deception and exploitation out of self-interest.
Facing a rapidly aging population and declining numbers
of working-age people, government officials have strongly
hinted that they may raise the retirement age, reported WSJ.
In 2013, China's Tsinghua University proposed raising
the pension age to 65 as of 2030 for both men and women,
up from the current 60 for men and 50 for women.