In 2022, China's population decreased by 850,000, marking the first negative growth since 1961. Apart from the declining birth rate, China is also one of the fastest-aging countries in the world. By the end of 2022, the population aged 60 and above reached 280.04 million, accounting for 19.8% of the total population. The population aged 65 and above was 209.78 million, making up 14.9% of the total population. The aging trend is intensifying, and it will have significant impacts on the elderly care system.
郑秉文 (Zheng Bingwen), Director of the World Social Security Research Center at the Chinese Academy of Social Sciences, expressed concerns about the challenges posed by aging and discussed potential solutions in a recent interview.
Zheng emphasized the need to adjust the retirement age in China, which is currently the youngest globally, with an average retirement age of 55. He mentioned the challenges in delaying retirement due to significant economic and employment pressures. He also highlighted the physiological limits associated with delaying retirement, mentioning Japan's discussion of a potential retirement age of 70 due to physiological constraints.
To address the pressure on pension funds, Zheng suggested transitioning from the current pay-as-you-go system to a partially funded system, similar to approaches taken by the United States and Canada. He considered this transition as the best model for coping with aging populations, utilizing capital dividends to compensate for the diminishing demographic dividends.
Regarding China's pension system, Zheng pointed out that it relies on the pay-as-you-go model, where the current workforce's contributions mainly fund the pensions of retirees. The challenges arise from the decreasing number of contributors and the increasing number of retirees. Zheng discussed various measures to tackle the aging population issue, including gradually raising the retirement age, adjusting replacement rates, and increasing contribution rates.
Zheng also discussed the importance of activating the individual pension system by having a vibrant capital market. He emphasized that a poorly performing stock market hinders the effectiveness of the pension system, as a good market stimulates individual participation.
The interview covered China's demographic challenges, policy responses, and the necessity of adapting the pension system to the changing population dynamics. Zheng expressed optimism about the potential benefits of adjusting the retirement age and transitioning to a partially funded system to address the aging population's impact on the pension system.
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