China is expected to raise its basic pension by 10 percent in 2016, according to the Economic Information Daily.

If it is confirmed, the 12th consecutive increase will benefit over 80 million retirees. However, analysts believe that the sustainability of the pension fund will come under pressure.

With pension reform on the way, capital reservation in many regions is close to drying up, according to analysts.

Some regions have even already encountered a shortage of funds, since their expenditure on social welfare cannot be offset by fiscal revenue in the same period.

Guilin, a city in southern China, encountered just this situation.

A survey by the Research Institute of Fiscal Science found that the city saw a 1.65 billion yuan shortage in its pension fund in 2014. Despite a subsidy of 1.35 billion yuan, the deficit reached over 300 million yuan last year.

Based on current calculations, Guilin’s pension fund will continue with a negative balance in 2016; 200 million yuan would be required to fill the gap.

In addition, pension deficit in different regions varies since the financial burdens of each region are different. Regions with a larger aging population and labor outflow are more vulnerable to pension imbalance.

For instance, pension expenditure in Heilongjiang Province totaled 93.9 billion yuan in 2014, while revenue was only 83.4 billion yuan, leading to an imbalance of 10.5 billion yuan.

Meanwhile, provinces like Liaoning, Jilin, Hainan, Guangxi and Jiangxi were just barely able to break even.

The subsidy for urban pension funds is increasing annually. In 2014, the subsidy from the central government increased to 302.7 billion yuan, up from 180.7 billion yuan in 2009. This amount accounts for 13 percent of corporate pension fund income.

In 2014, local subsidies totaled 28.2 billion yuan. Chongqing and six other local governments contributed over 1 billion yuan to the capital pool.

Ongoing pension reform in government organizations and institutions also puts pressure on local fiscal performance. So far, 25 provinces have released official plans after the State Council initiated the reform.

Experts believe the reform will cost the equivalent of almost one year of fiscal revenue in China. In addition, the reform is likely to encounter difficulties if all the cost is shouldered by local governments.