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The Pain of a Pension Deficit (4)

(Beijing Review)

08:53, August 24, 2012

Government coverage

At present, distribution of pensions for retirees from enterprises has not been affected, without default or reduction of payment.

The MOHRSS figures showed that by the end of 2011, China's basic endowment insurance system had covered 261.14 million persons, and 62.99 million persons had been drawing pensions. In 2011, 1.14 trillion yuan ($179.53 billion) of pensions were distributed, and the shortfall was made up for with government funds. Among the 1.56 trillion yuan of incomes of the national pension fund system, 208.24 billion yuan ($32.79 billion) was from government subsidies, accounting for 13.35 percent; employers paid 787.89 billion yuan ($124.08 billion), accounting for 50.49 percent; employees paid 494.23 billion yuan ($77.83 billion), accounting for 31.67 percent; and interests and other incomes stood at 67 billion yuan ($10.55 billion), accounting for 4.49 percent.

"A few provinces, autonomous regions and municipalities once faced deficiency in pension payment, but with subsidies from the central and local governments, all the provinces, autonomous regions and municipalities now have balanced incomes and expenditures," said Yin.

According to the China Pension Report 2011 released by the CASS, from 1997, governments at various levels have granted 1.25 trillion yuan ($196.85 billion) in subsidies to the pension fund system. By the end of 2011, among the balance of the country's pension funds, two thirds had come from the government budget. With fiscal subsidies, China's pension fund system still has a surplus in terms of current cash flow. Many provinces and municipalities might have had difficulties in distributing pensions without government fiscal subsidies.

According to a research made by the Institute of Finance and Trade Economics of the CASS, under the present framework of the endowment insurance system, there will be inadequate cash to pay pensions by 2015. A report released by the World Bank shows that under the existing mechanism, China's pension fund will have a shortfall of 9.15 trillion yuan ($1.44 trillion) by 2075.

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