Pension costs. This phrase is giving the Chinese government a headache. With an aging population, the costs became more of a burden for the government. As per a research carried out by Deutsche Bank which was published in the Bloomberg Businessweek, currently around 13% of the population of China is over 60. This is expected to increase to 34% by 2050. The rapidly aging population would lead to a huge deficit in the pension funding. As a result, the central government would be forced to fill up the balance. The government has stated that currently, it has sufficient funds to meet the pension related liability for a while. However, it is unknown as to how long would the funds last.
Another problem with the entire pension system is the huge inequality. In the rural areas, people are paid as low as 55 Yuan while in the urban areas, the amount is nearly 1,500 Yuan. This means that the people who are earning well continue to earn well even after retirement while those in the lower income group sink further. This has angered the younger working population who has expressed their dissatisfaction of funding the government retirees without having sufficient funds to fund their own retirements. The one possible solution for this is participation by the local provincial governments, but they don't like handing out cash for pensions. As a result, the Chinese government's credibility over sustaining the pension system has come under fire. It would interesting to watch and see how it performs in the future.
Another problem with the entire pension system is the huge inequality. In the rural areas, people are paid as low as 55 Yuan while in the urban areas, the amount is nearly 1,500 Yuan. This means that the people who are earning well continue to earn well even after retirement while those in the lower income group sink further. This has angered the younger working population who has expressed their dissatisfaction of funding the government retirees without having sufficient funds to fund their own retirements. The one possible solution for this is participation by the local provincial governments, but they don't like handing out cash for pensions. As a result, the Chinese government's credibility over sustaining the pension system has come under fire. It would interesting to watch and see how it performs in the future.
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