China is aging. According to statistics, citizens aged 60 and about account for nearly 11 percent of its 1.3 billion people.
China is focusing on improving its insurance system to cope with the aging population, which will reach its highest percent in the 2030s, according to a report issued by the Information Office of the State Council Tuesday, Sept. 7.
The Chinese government established a social security system for business employees in urban areas across the country in 1997.
Under the system, employees who reach retirement age stipulated by law and have paid their share of the premiums for 15 years or more, shall be entitled to collect a basic pension each month. Last year, the average monthly pension was 621 yuan (75 US dollars).
However, under the old planned economy, employees relied entirely on the former employers to support their retirement. In 1993, the government first tried a new method to combine the social pool and personal accounts.
But the lack of fund accumulation in the period of planned economy has left many personal accounts empty, and the annual 300 to 400 billion yuan of old-age insurance premium collected in recent years is mainly used to guarantee the currently existing 36 million enterprise retirees, said Hu Xiaoyi, a spokesman with the Ministry of Labor and Social Security.
"In urban areas, every three employees in average pay the premium to support the pension payment for one retiree. When the aging peak comes, it may need 10 employees to back four or more retirees, if no significant measures are taken to set up stable fund reserves," Hu said.
Beginning in 2001, the government began a pilot project in northeast China's Liaoning Province aimed at replenishing personal accounts and accumulating funds.
So far, Liaoning has collected 11 billion yuan (1.33 billion US dollars) via personal accounts. Based on the success, the pilot project has been expanded to Jilin and Heilongjiang provinces this year and will later be promoted all over the country.
In addition to experimental reforms, China has also expanded the coverage of its basic old-age insurance.
China's social security program initially covered only employees at state-owned and collectively-owned enterprises in urban areas. In 1999, this coverage was expanded to foreign-invested, private and other types of enterprises in urban areas. In 2002, it was further broadened to include all those who were employed in a flexible manner in urban areas.
Last year, the number of people participating in the basic old-age insurance scheme in China reached 155.06 million, 116.46 million of whom were employees.
"In the following period, employees from foreign-invested, private and other non-state-owned enterprises as well as those who are employed in a flexible manner will be the major targets to expand old-age insurance," said Wang Dongjin, Vice Minister of Labor and Social Security.
As the population ages and the number of retirees increases, the pressure on the social security program is greater.
"In some poor areas, especially the middle and western areas, the basic old-age insurance premium paid by local enterprises cannot patch up the pension that should be granted to retirees," said Meng Zhaoxi, an official with the ministry.
In 2003, the central budget allocated 47.4 billion yuan (5.7 billion US dollars) to supplement the basic old-age insurance funds at 25 places in the middle and western areas.
According to the report, the Chinese government has encouraged businesses to set up annuities for their employees in addition to participating in the compulsory basic old-age insurance.
"China's social security system still calls for continuous reforms and improvement. One of the most knotty problem is to set up a sound old-age insurance system, which will experience a key period for progress in the first two decades of this century," Wang Dongjin said.