June 14, 2012
Translated by Zhu Na

China is facing an 18 trillion yuan pension funding gap that will become larger as the country's population ages, according to one of the authors of a new report jointly produced by a research team at the Bank of China and researchers at Fudan University.

Liao Shuping (廖淑萍), one of the authors of the report from the Bank of China, told Economic Information Daily that China could see a shortfall of 18.3 trillion yuan in pension funding by 2013.

The report stated that due to an aging population, China’s pension system will place a very large burden on government finances.

The authors of the report suggested that among other measures, the government should consider pushing back the current minimum retirement age and also push ahead with reforms to the country's public institutions to help relieve the pressure.

At the beginning of this month, officials from the Ministry of Human Resources and Social Security said publicly that an adjustment to the age of retirement is inevitable. These officials also indicated that the ministry will put forward an official policy recommendation related to delaying the age at which people can begin to receive their pension at an appropriate time.

Chu Fuling (褚福靈), an academic from the Central University of Finance and Economy, explained to the Economic Information Daily that China’s retirement age policies were formulated in 1970s and that over the past 40 years, average life expectancy has increased by more than 7 years and family planning policies had also reduced the number of people paying into the system, therefore, he argued, it is inevitable that the age at which pensions are paid out will be pushed back.

According to the National Bureau of Statistics’ latest May 2010 report, the proportion of the population aged 60 and above grew to 13.3% in 2010, from 10.3% in 2000.

In March this year China's Social Security Fund announced that in 2011 it had earned returns of only 7.4 billion yuan on its investments, with losses of 35.7 billion yuan in its investments in the stock exchange being offset by 43.1 billion in returns on investments in other asset classes. This represented a rate of return of 0.85 percent.

The rate of return is down from the 4.23 percent earned in 2010 and the 16.12 percent registered in 2009.

According to Dai Xianglong (戴相龍), the chairman of China's National Council for Social Security Fund (NCSSF), China's social security fund has earned 132.6 billion yuan through its investment in both the mainland and Hong Kong stock markets over the past eight years, accounting for 46 percent of the fund's total investment income over the same period.

In March 2012, Guangdong Province was given permission by the state council to invest a portion of its pension funds in the local share market.

Links and Sources
Baidu: 化解國家資產負債中長期風險 (Text of full report)
Economic Information Daily: 報告稱到2013年中國養老金缺口將達18.3萬億