As China’s birth rate declines and its population ages, the pension fund is also on the verge of depletion. Last month, the Chinese Communist Party (CCP) officially proposed to expedite the formulation of individual pension support policies to attract more people to participate and increase fund accumulation. However, analysts believe that in the overall economic downturn in China, there is a great risk for people to pay into the pension fund, and the social security fund is completely out of control.
China’s pension fund structure consists of three major pillars: basic old-age insurance, enterprise annuity and occupational annuity, and personal pension. Among them, the personal pension is voluntarily chosen by the public and operates in a market-oriented manner, fully implemented since December 15th last year. According to official CCP figures, as of the end of November last year, a total of 72.79 million people had opened personal pension accounts.
On February 6th, a mainland Chinese netizen posted, “The era of relying on social security for retirement is coming to an end.” What concerns everyone is not how much the social security payments have increased, but whether they will be able to receive their pensions in the future. “The current pension system is about young people paying money in so that older people can receive it.”
Statistics show that approximately 3 young people support 1 elderly person in China. According to predictions from the Chinese Academy of Social Sciences, the Chinese pension fund will be exhausted by 2035, leaving only 10 years from now.
According to a decision passed by the National People’s Congress of China, starting from January 1, 2025, the statutory retirement age for male workers will gradually be extended from 60 to 63 years old, while female workers will see their retirement age raised from 50 and 55 years old respectively to 55 and 58 years old. This measure is seen as a response to the crisis in the pension system.
However, a large number of young people in China do not trust the CCP’s pension system and have chosen to opt out of social security, saving money for their own retirement. According to a report by Bloomberg, tens of millions of young people in China have stopped paying into the pension fund. In the first ten months of 2024, the net inflow of pension funds for urban and rural residents amounted to 542 billion yuan, a growth of only 2.3%, lower than the double-digit growth of the previous two years, and the growth rate of participants was only half of that in 2019.
Chinese specialist Wang He told Epoch Times, “These young people who are opting out of the system are likely freelancers, numbering around 200 million. If they have formal employment, they are required to contribute. The CCP did not allow them to pay into social security in the past because they were unemployed.”
According to a report released by the National Social Security Fund of the CCP in October last year for the year 2023, the total asset amount of the institution was 3,014.561 billion yuan. Among them, the total liabilities of the fund amount to 357.619 billion yuan, mainly formed during investment operations.
A report released by the Chinese Academy of Social Sciences on April 10, 2019, titled “China’s Old-Age Insurance Fund Actuarial Report 2019-2050,” predicts that the cumulative surplus of the Chinese old-age insurance fund will be exhausted by 2035. In 2019, nearly 2 contributors supported 1 retiree; by 2050, almost 1 contributor will need to support 1 retiree.
The report predicts that, with fiscal subsidies, the cumulative surplus of the national urban enterprise employees’ basic old-age insurance fund will be exhausted by 2035. At the same time, with a decrease in the birth rate, a peak in population aging is expected.
Wang He stated that China’s social security deficit has been significant since 2011. The Chinese social security system is very chaotic, and currently, all personal accounts are empty and in disarray, like a financial mess. This is one of the reasons why many people are unwilling to contribute to social security.
On February 3rd, economic and financial commentator Zhai Shanying responded to a question from a netizen on his self-media platform, saying, “Avoid paying into social security if you can. Because the pool is drying up. Paying now will not guarantee you receive retirement benefits in the future. Keep some money for your own medical expenses, it’s better to self-pay for everything.”
He also mentioned that a large number of private hospitals in China are now opting out of the social insurance system. “When you go to them purely as a self-paying patient, they will treat you at the cost of self-payment, benefiting both parties. Joining social insurance is foolish.”
Last October, Tencent reported that at least more than 200 private medical institutions have exited the medical insurance system. The reasons vary, but commonly, these private medical institutions do not want to be tied down by the medical insurance system, avoiding scrutiny and penalties, aiming to integrate freely into the market.
Lee Hengqing, a scholar at the Washington Institute for Information and Strategic Studies, told Epoch Times that China’s social security system is exposed to significant risks, which is one of the reasons private hospitals are exiting the insurance system.
He said, “There are significant risks in the operation of social security funds. To tackle economic difficulties, one of the CCP’s approaches is to guide a large amount of insurance funds and social security funds into the market. However, the Chinese stock market has been non-profitable and volatile for a long time, spiraling downward. Putting money in brings great risks, and the social security fund is completely out of control.”
In 2025, China’s social security system is facing a new round of price hikes. For instance, in the city of Meizhou, Guangdong, the minimum payment base for employee medical insurance in 2025 has been set at 4186 yuan per month, while in Shantou it is 4037 yuan; Fujian has stipulated that the minimum payment base for old-age insurance and unemployment insurance should not be lower than 4043 yuan per month; and Dalian, Liaoning Province, has set the minimum payment base at 4914 yuan.
Taking Shanghai as an example, the specific payment situation requires a minimum payment base of 7384 yuan, with the pension insurance unit contributing 16%, and individuals contributing 8%; the medical insurance unit contributes 10%, and individuals contribute 2%; and the unemployment insurance unit contributes 0.5%, while individuals contribute 0.5%.
Regarding the increase in social security payments, netizens commented, “Many may choose not to pay social security anymore.” “The adjustments to social security are truly distressing; our future take-home pay will decrease again.”
Zhai Shanying referred to the new social security system developed by the CCP as an “extremely precise Ponzi scheme”. He advised the public not to pay any more money into the system when there is no money left in the pot, as “that money will all go to waste.”
He said, “The Chinese Communist Party used to manage the aging issue through the state by saying they would take care of retirement, but now it has become individuals paying for their own retirement. The CCP has expanded the scope and depth of exploitation of the Chinese people to sustain those within the CCP system.”
Lee Hengqing also advocates for giving up social security payments. He said, “Even though you know it’s a bottomless pit, you still pay into it; even though you know you won’t receive this money after retirement, you still contribute to social security for 30 to 40 years, that’s a scam. Being insured is like handing your money over to con artists to manage; people should manage their funds themselves.”
In 2022, the investment income of China’s social security fund was -138.90 billion yuan, with an investment return rate of -5.07%. This was the third year of investment loss after negative annual returns in 2008 and 2018.
Wang He believes that “there is currently very high financial risk in China, and a systemic financial crisis could erupt at any time. No matter how you invest or allocate assets, if a financial crisis erupts, all investments are water under the bridge. Even if you put your money in a bank or make investments yourself, there are risks. The only way is to buy gold during troubled times or transfer funds out of the country.”