Chinese People Are Not Ready to Retire

In November 2015, Citibank and AIA jointly released a report titled “Report on Chinese Citizens’ Preparation for the Retirement” (Zhong Guo Ju Min Yang Lao Zhun Bei Dong Cha Bao Gao). The research covers 13 cities, including 4 first-tire cities and 9 second-tire ones.

China has long been faced with its prominent aging issue. According to the report, 32 percent of the average-aged-58 retired interviewees said they hadn’t prepared well before retiring. Based on their economic reserve, they predict the current living standards can be maintained for about 10 years. For them, the reality differs from their ideal of comfort. Decline in economic capacity, high cost of medical expenses, and being divorced from society are problems the retired may encounter.

However, those who have not retired yet hold positive opinions. Among them, almost 70 percent are longing for the happy days to come; more than 40 percent believe they can manage it with a good plan; about 30 percent are planning to retire earlier.

*Data Source: “Report on Chinese Citizens’ Preparation for the Retirement”

Although 67 percent of them have begun preparing, a large gap exists between the market value of their household assets and their individual financial goals for retirement, with 34 percent of the latter hasn’t been realized.

*Data Source: “Report on Chinese Citizens’ Preparation for the Retirement”

As the report tells, expected economic sources for retirement include stable investment income, national pension, and investment return/savings accumulated before retirement. National pension is seen as the main source by 61 percent of the not-retired-yet interviewees.

*Data Source: The Ministry of Human Resources and Social Security

According to the Ministry of Human Resources and Social Security, from 2002 to 2014, the subsidy pension by all levels of government has reached 2 trillion RMB. The amount of subsidies is experiencing a significant increase: in 2003, the subsidies were 53 billion RMB; it reached the 200 billion RMB (227.2 billion RMB) in 2011; and then broke 300 billion RMB (301.9 billion RMB) in 2013. The financial subsidy for this year’s budget is 367.12 billion RMB, based on the “2015 National Social Insurance Fund budget” published by the Ministry of Finance.

*Data Source: The Ministry of Human Resources and Social Security

The basic pension fund income is greater than its expenditure currently, but the income growth rate is significantly lower than the expenditure growth. For example, in 2014, the income increased by 11.6% over 2013, while the expenditure increased by 17.8%. In this instance, the gap between income and expenditure will be narrowed down until the expenditure overcomes the income.

*Data Source: United Nations

*Data Source: United Nations

According to the United Nations, the median age of Chinese population has increased from 23.7 in 1950 to 37.0 in 2015. The number is expected to reach 49.6 in 2050. At the same time, life expectancy of Chinese population has been extended from 66.3 of male, 69.3 of female in 1981, to 72.4 of male, 77.4 of female in 2010.

As the life expectancy extends, Chinese population over 65 has almost doubled within 20 years, rising from 7.18 million in 1995 to 13.14 million in 2015; the ratio of total population rises from 5.85% to 9.55%. Obviously, the problem of aging population is growing worse.

*Data Source: United Nations

With the aging population changing, more and more Chinese people have reached the retirement age, making a surge in the number of pensioners. The reform of China’s pension system becomes pressing and calls for a better institutional design, seeking a way out from appropriate adjustment of retirement age, fiscal control over pension fund, and other actors to address the potential shortage of social security fund.

Wan Huang

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