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How will China's ageing population meet the costs of social welfare?

China has been paying retirees with contributions made by the working population since it set up the current pension system in the early 1990s

China Population

Press Trust of India  |  Beijing 

China population
Photo: Wikipedia

China's rapidly ageing population which has touched 241 million, accounting for one-fifth of over 1.4 billion people in the world's most populous country, has sparked a fierce debate on who will foot their bills, the state media reported.

Ageing means pension contributions by workers no longer cover retiree benefits, forcing the Chinese government to fill that gap.

By standards, a country or region is considered to be an "aging society" when the number of people aged 60 or above comprises at least 10 per cent of the total population.

According to the latest figures released by the Ministry of Civil Affairs, the number of people aged 60 or older in China hit 241 million last year, accounting for 17.3 per cent of the country's population.

This number, according to the National Working Commission on Aging, is expected to touch 487 million, accounting for 34.9 per cent of the population, by 2050.

These data have sparked a debate in the state and social media about how to meet the costs of social welfare amounting to billions of dollars.

China's aging society resulted from increased life expectancy and a decreased fertility rate, Zhai Zhenwu, president of the School of Sociology and Population Studies at Renmin University of China said.

"Even if China abolished the family planning policy or enhanced efforts to boost fertility, the effect would be very limited on easing the pressure brought on by this aging society," he told the state-run Global Times.

According to World Bank analysis, life expectancy in China rose from 66 in 1979 to 76 in 2016, which means that older people are living longer.

According to the latest available data from the finance ministry, pension expenses rose 11.6 per cent to 2.58 trillion yuan ($409.4 billion) in 2016, leaving the government a 429.1 billion yuan tab to cover the shortfall.

That shortfall will reach 600 billion yuan this year and 890 billion yuan in 2020 if the system is not reformed, a report published in the South China Morning Post quoted Wang Dehua, a researcher at the Beijing-based National Academy of Economic Strategy, as saying.

China has been paying retirees with contributions made by the working population since it set up the current pension system in the early 1990s. The gap between money coming in and payments going out has been widening as more people retire and fewer join the workforce, the report said.

The communist giant in 2016 had ended its decades-old 'one child' policy and permitted couples to have two children with the declining number of young people and rising geriatric population in the country.

However, the response was not very encouraging due to high cost of living.

Last week two Chinese scholars proposed salary deductions for all under-40s to subsidise families with two children.

Their proposal included establishing a fertility fund where citizens under 40 would be required to annually contribute until they had two children, the Global Times report said.

This had outraged internet users, mostly made up of young and middle-aged people who shot back saying that that fines amassed from violators of family planning policies should instead be spent on the elderly.

China has collected about 25 billion yuan ($3.6 billion) in these annual "social maintenance fees".

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First Published: Mon, August 20 2018. 16:47 IST