How big is the Chinese pension fund?

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China’s pension system is a complex and evolving entity, reflecting the country’s rapid economic growth and changing demographics. This article provides an in-depth look at the size, structure, and challenges of China’s pension fund, offering a fresh perspective on this critical aspect of the country’s social security system.

The Size of China’s Pension Fund
As of the end of 2022, the basic pension fund managed by China’s social security fund was reported to be 1.62 trillion yuan. This fund, which experienced a 0.33% investment gain in 2022, has posted an annual average gain of 5.4% since the end of 2016. In addition to the basic pension fund, China also has a mandatory second-tier pension plan. The asset value of Chinese pension funds amounted to 216 billion U.S. dollars in 2021.

The Structure of China’s Pension System
China’s pension system is two-tiered, consisting of a basic pension and a mandatory second-tier plan. The basic pension pays 1% of the average of the indexed individual wage and the province-wide average earnings for each year of coverage, subject to a minimum of 15 years of contributions. The second-tier pension is financed by an 8% contribution from employees.

In addition to these two tiers, China has recently introduced private pension accounts, which had accumulated about 20 billion yuan ($2.9 billion) in contributions as of April 2023.

Challenges Facing China’s Pension System
China’s pension system is facing significant challenges due to the country’s rapidly aging population. By 2040, an estimated 28% of China’s population will be older than 60 years old. This demographic shift is putting pressure on the pension system, which recorded its first-ever annual deficit in 2020.

To address these challenges, the Chinese government has been moving towards central coordination and the establishment of a national pension system. The government has set the completion of a national basic employee pension system as a goal by 2035.

FAQ
Q: What is the size of China’s pension fund?
A: As of the end of 2022, the basic pension fund managed by China’s social security fund was reported to be 1.62 trillion yuan. The asset value of Chinese pension funds amounted to 216 billion U.S. dollars in 2021.

Q: How is China’s pension system structured?
A: China’s pension system is two-tiered, consisting of a basic pension and a mandatory second-tier plan. The basic pension pays 1% of the average of the indexed individual wage and the province-wide average earnings for each year of coverage, subject to a minimum of 15 years of contributions. The second-tier pension is financed by an 8% contribution from employees.

Q: What challenges is China’s pension system facing?
A: China’s pension system is facing significant challenges due to the country’s rapidly aging population. By 2040, an estimated 28% of China’s population will be older than 60 years old. This demographic shift is putting pressure on the pension system, which recorded its first-ever annual deficit in 2020.

Glossary
Basic Pension: This is the first tier of China’s two-tier pension system. It pays 1% of the average of the indexed individual wage and the province-wide average earnings for each year of coverage, subject to a minimum of 15 years of contributions.
Second-Tier Pension: This is the mandatory second part of China’s pension system, financed by an 8% contribution from employees.
Private Pension Accounts: These are recently introduced pension accounts in China, which had accumulated about 20 billion yuan ($2.9 billion) in contributions as of April 2023.
National Basic Employee Pension System: This is a goal set by the Chinese government to be completed by 2035. It represents a move towards central coordination and the establishment of a national pension system.

The source of the article is from the blog publicsectortravel.org.uk