Chinese Rage at the Pension System

[JayAtl]

A demographic bubble to burst
-------------
1.6:1—Expected ratio in 2050 of working-age people supporting 1 retiree, down from 4.9 to 1 today

When a Beijing professor recently suggested pushing back the age at which retirees get their pensions, China’s bloggers let loose. “You’re indeed completely without conscience, a mouth filled with poison and cruelty, your heart that of a beast,” wrote one blogger from Shenyang, in Liaoning province, on the online portal Sohu.com, according to ChinaSMACK, a website that translates Chinese Internet content. “The clamor to postpone the retirement age is getting louder, a raging fire burns in my heart,” wrote another from Jiangxi province. “Tsinghua University truly has raised a bunch of garbage professors,” wrote a blogger from Guangdong, referring to Yang Yansui, director of Tsinghua’s employment and social security institute, who raised the idea.

The heated responses reflect the crisis faced by China’s pension system. A shrinking workforce must support more than 200 million retirees. The government has moved in the last few years to add farmers, the unemployed, and migrant workers to its pension rolls, which now cover more than four-fifths of those registered in cities and 43 percent of rural Chinese.

When top officials gather in Beijing on Nov. 9 to map out the next set of reforms, solving the pension crisis could well be high on their list. Last year for the first time, the working-age population—those 15 to 59 years old—declined, falling by 3.5 million to 937.3 million. People older than 60 make up 13 percent of the population. By 2050 that number will rise to 34 percent, estimates the World Bank. Today an average 4.9 Chinese of working age support one retiree. That ratio could fall to 1.6 by 2050, estimates Robert Pozen, a senior lecturer at Harvard Business School.

http://www.businessweek.com/articles/2013-10-31/chinese-rage-at-the-pension-system 
Forget About Retiring, China's Economic Planners Say

What if Chinese were required to work an extra five years, or even a decade, before retirement? There are growing calls among officials and academics in China to consider that controversial move as the country’s rapidly aging population puts new stress on its pension program. China must consider “deferred retirement,” said Hu Xiaoyi, a vice minister of human resources and social security, on Oct. 22, speaking to journalists at a seminar in Beijing.

Right now most of China’s workers retire earlier than those in many other countries. Men, for example, stop working at 60, while many women retire at 50, a precedent set in Mao-era 1950s China. That fact, along with the still strong one-child policy, complicates the task of managing the growing costs associated with anaging population and shrinking workforce.

According to China’s National Bureau of Statistics, in 2012 the number of those of employable age—formally classified as those from 15 to 59 years of age—actually fell, dropping by 3.45 million, to 937.27 million. “Last year, the working-age population dropped for the first time, a signal that China needs to make better use of its human resources,” said Hu, reported the China Daily on Oct. 23. ”China should raise the retirement age as soon as possible, but it must take small steps and make the transitional period long enough for the public to adapt,” said Zheng Bingwen, a pensions expert at the Chinese Academy of Social Sciences in Beijing, reported the China Daily.

 

[Srinivas]

These are the affects of One Child policy.

 

[JayAtl]

These are the affects of One Child policy.

coupled with a socialist agenda that cannot sustain itself.

 

[Coltsfan]

China’s population time bomb

OSAKA – China has — rightly — been the toast of economic and political commentators alike for the way that it has pulled itself out of poverty to become the world’s second biggest economy and potential megapower in just 45 years since Deng Xiaoping opened the door to the outside world, an unprecedented achievement.

But two official announcements last month show that the progress has come with a large price. Unconventional Economist expressed the problem bluntly on the macrobusiness site, declaring that, “China will grow old before it grows rich.”

Not everyone is so pessimistic. One internationally respected economist of Chinese origin said, “China has a 15-20 year window of opportunity, which is the time between now and when the population peaks. Its leaders have to decide what is most important to them. For me, they should sacrifice everything for the 200 year old dream of joining the rich world.”

China’s ministry of education announced that in 2012 more than 13,600 primary schools closed nationwide. Between 2011 and last year the number of students enrolled in primary and secondary schools fell from nearly 150 million to 145 million. It also added that between 2002 and 2012, the number of pupils in primary schools fell by 20 percent.

This is the impact of the one-child policy — forcing parents to have only a single child — beginning to bite. But this slowing population is only half of the pincer movement squeezing China.

The other pincer is that the population is beginning to age. The People’s Daily warned the day before the announcement of the falling school population that China was facing an impending social security crisis as the number of elderly people is expected to rise from 194 million last year to 300 million by 2025.

The implications are clear. As Richard Koo of Nomura Research Institute noted: “Demographics will cease to be a positive for China’s economic growth and start to have a negative impact.”

The first stage of the demographic challenge is between now and 2015. From 2016, the second stage begins to kick in as a decline begins in China’s working age population, resulting in a rise in the age dependency ratio. The other factor that is going to squeeze China harder is that economists say that it has already passed the “Lewis turning point”: There are no more surplus workers to come in from the countryside, meaning that there is no cheap way to growth. China has to dedicate itself to upgrading its industry to get out of the middle income trap.

The squeeze has come at an awkward or an opportune time, depending on your viewpoint, when China has to take tough decisions about rebalancing its economy away from the investment binge that has left a debt overhang and towards an economy that encourages consumption.

In a careful analysis of the aging population, the U.S. research consultancy Stratfor says that the Chinese leadership is aware of the problem and the difficult implications of it, but that all the potential solutions come with their own problems attached.

Stratfor’s report has a less scary and even anodyne headline — “In China, an unprecedented demographic problem takes shape.”

It notes that the Chinese Communist Party “continues to flirt with relaxing the one-child policy in an effort to boost fertility rates, most recently with a potential pilot program in Shanghai that would allow only-child couples to have another child. On the other hand, the government has proposed raising the national retirement age from 55 to 60 for women and from 60 to 65 for men.”

Raising the retirement age would bring China into line with international norms and would delay the financial and social pressures of ballooning numbers of retired people dependent on government pensions or the care of their children. But Stratfor argues that raising the retirement age will only delay the inevitable, and could meet resistance. “It will meet stiff opposition from an important constituency of professionals, including many civil servants,” the report predicts.

In addition, “the government also risks exaggerating an employment crisis among the rapidly growing population of unemployed college graduates in cities, many of whom are looking to filter into the employment ladder as elderly workers exit the workforce.”

The hopes of reversing the one-child policy may fail, claims Stratfor: “It is no longer clear that the one-child policy has any appreciable impact on population growth in China. China’s low fertility rate (1.4 children per mother, compared with an average of 1.7 in developed countries and 2.0 in the United States) is as much a reflection of urban couples’ struggles to cope with the rapidly rising cost of living and education in many Chinese cities as it is of a Draconian enforcement of policy.”

China’s demographic profile today, as Unconventional Economist points out, bears similarities to that of Japan 20 years ago when Japan hit the economic wall.

The big difference, of course, is that in 1990 Japan was a rich developed country, whereas China today may best be described as an ambitious rising middle-income country. China’s per capita income in purchasing power parity terms is about $6,100, putting it in 86th place in the world league, according to the World Bank, or 90th according to the International Monetary Fund or 92nd according to the Central Intelligence Agency.

Upgrading industry is an urgent task. China is facing competition from Bangladesh and Myanmar where wages are cheaper, and some African countries are also scrambling up the ladder.

What will China do? The respected economist points out: “If a country is run by a dictator, he would typically use foreign enemies to distract the people from domestic affairs. China should do the opposite and declare that this is the first chance in 200 years that China has a chance to achieve developed country status.

“If they use the remaining 15 to 20 years effectively to upgrade the economy, they can join the developed world again. This is what the Chinese nation has been waiting for the last 200 years having been screwed up by the British, the French, the Japanese, and their own massive blunders like the Great Leap Forward, the Cultural Revolution.

“The leaders should give the economy priority and put everything else on the back burner, so conflict with Japan, with Vietnam, the Philippines, those are tiny problems compared to the goal of bringing China to first world status.”

Is Beijing listening? There is of course always the prospect that a big rich country can then build its military firepower.

http://www.japantimes.co.jp/opinion/2013/09/03/commentary/chinas-population-time-bomb/#.UnZninCsiSo

 

[Genesis]

Nobody can sustain their policies, not France, not America, and as it turns out, not China.

As to retirement age, do you guys know what the Chinese retirement age relative to American or Canadian is? The answer may shock you.

 

[Coltsfan]

Nobody can sustain their policies, not France, not America, and as it turns out, not China.

As to retirement age, do you guys know what the Chinese retirement age relative to American or Canadian is? The answer may shock you.

Isn't it 60 years, just like most other developing countries?

 

[Genesis]

Isn't it 60 years, just like most other developing countries?

60 years for men and 50 years old for women. Do you know what the age is for US?

So what's pushing it back a few years when we are still below that of the US. So there is protest, Americans protest Obamacare, but that doesn't mean American policies have failed.

 

[Coltsfan]

60 years for men and 50 years old for women. Do you know what the age is for US?

So what's pushing it back a few years when we are still below that of the US. So there is protest, Americans protest Obamacare, but that doesn't mean American policies have failed.

I know you can draw social security at 59.5 years, and retirement ranges from 62+

Why the different retirement ages for men and women in China? What's up with that?

 

[Genesis]

I know you can draw social security at 59.5 years, and retirement ranges from 62+

Why the different retirement ages for men and women in China? What's up with that?

Communist Agenda? IS that not the theme of this thread?

 

[JayAtl]

Communist Agenda? IS that not the theme of this thread?

actually-
the " socialist part" when it comes to pensions
and " communist" part when it comes to forced abortions and one child policy

 

[Götterdämmerung]

Here in Germany, we are gradually pushing the retirement age from 65 to 67 in the next few years. Of course, you can retire earlier but that would also lead to cut in your pension. Unless you don't have to depend on state pension or have safer enough for the rest of your life, even a cut of 5 % is quite a large chunk of money.

So, I don't see why the Chinese should complain since their life expectancy has increased dramatically in the last few decades, they should have no problem to work a few years more. The life expectancy in China is not that different from most European countries.

 

[Genesis]

actually-
the " socialist part" when it comes to pensions
and " communist" part when it comes to forced abortions and one child policy

No where in communism does it say one child policy. It's a Chinese over population kinda deal, believe me if we only had 2 million people we wouldn't use the one child policy.

In fact Mao's crazy policy of reproduction is what let to the one child policy.

So back when we were the most communist, we had the opposite policy. Usually a developed country with limited immigration will lead to decline in birth rate, we can't wait that long so we pretty much took matters into our own hands.

 

[Coltsfan]

Communist Agenda? IS that not the theme of this thread?

I asked you a simple question, whether you know why two retirement ages for men and women.

If you don't know the answer just say so, no need to get so defensive! 

Here in Germany, we are gradually pushing the retirement age from 65 to 67 in the next few years. Of course, you can retire earlier but that would also lead to cut in your pension. Unless you don't have to depend on state pension or have safer enough for the rest of your life, even a cut of 5 % is quite a large chunk of money.

So, I don't see why the Chinese should complain since their life expectancy has increased dramatically in the last few decades, they should have no problem to work a few years more. The life expectancy in China is not that different from most European countries.

Effects of raising the retirement age aren't distributed evenly across the economic strata. People at the bottom of rung, who work in physically demanding jobs and manual labor will have a much tougher time dealing with the increased retirement age and having to work for another 3-5 years that they hadn't planned for.

Also, its going to create a push back at the other end with young workforce having to wait another 3-5 years to be absorbed into the economy.

 

[tranquilium]

Here in Germany, we are gradually pushing the retirement age from 65 to 67 in the next few years. Of course, you can retire earlier but that would also lead to cut in your pension. Unless you don't have to depend on state pension or have safer enough for the rest of your life, even a cut of 5 % is quite a large chunk of money.

So, I don't see why the Chinese should complain since their life expectancy has increased dramatically in the last few decades, they should have no problem to work a few years more. The life expectancy in China is not that different from most European countries.

You are correct. It's just that people will complain about just anything, but it will pass.

 

[armchairPrivate]

Whenever there is a policy change in a country, some citizens will be affected. Some negatively, and some positively. Those who are affected negatively and are also vocal will voice their objection and dissatisfaction. It is just human nature.

In Canada, the retirement age has been raised from 65 to 67. If has both negative and positive effects. The positive is the young people who will not have to fork out more of their pay cheques to fund the CPP (Pension fund).
Those who object to the changes are those who are approaching the retirement age. Now they will have to work an extra two years or to find a way live on their own dole.

I don't see what the big fuss is about.