In a report by “The Wall Street Journal”, it is highlighted that China’s pension system is facing a crisis of trust as more and more young people, especially those in flexible employment like delivery drivers and live streamers, are choosing not to contribute to the pension insurance.
For instance, Liu Xin, a 29-year-old delivery driver from Chengdu, mentioned that the monthly contribution of 1400 RMB is equivalent to two weeks’ worth of food expenses. He bluntly stated that he doesn’t believe he will receive any money after 40 years.
Statistics show that in 2024, China’s social security fund saw a 5.2% increase in income, but the expenditures rose even faster, reaching 7%, resulting in a cash flow deficit for the first time in six years. Although the central government fills the gap with financial subsidies, the pressure from the deficit is rapidly increasing. In 2025, China’s fiscal deficit is expected to reach a new high of 790 billion US dollars.
A more challenging issue is the significant number of young people voluntarily opting out of the social security system. According to surveys, over 40% of flexible workers choose not to pay their contributions, as they are required to pay both the employer and employee share, totaling 20% of their income, which seems “not worthwhile”.
Designer Chen Hui from Shenzhen stated, “If the rules reward those who don’t pay, why bother paying?” This sentiment is circulating on social media platforms, although related discussions are often censored.
To ease the burden, Beijing has initiated a delayed retirement plan. Starting from January this year, the statutory retirement age has been gradually extended, with the plan aiming for men to retire at the age of 63 by 2040, and women following suit.
The situation is even more grim for elderly individuals in rural areas. 68-year-old Zhang Fengyan from Gansu can only receive 123 RMB per month, barely enough to buy some salt and noodles. The significant disparity in pension benefits between urban and rural areas has also accelerated the outflow of population from rural areas.
The pension issue also impacts the financial markets. Last year, due to various regions tapping into reserves, the national social security fund was forced to divest 120 billion RMB worth of assets, shifting from a “long-term buyer” to a “net seller,” which negatively affected market confidence.
Despite the efforts by the Chinese government to promote the “pension points system” and the “third pillar” individual account system, progress has been slow with limited effectiveness.
Policy analyst Zhang Wei pointed out that until confidence in the real estate market is restored, Chinese households are more inclined to invest money in property rather than government accounts.
“The Wall Street Journal” also cautioned that in the future assessment of China’s economic confidence, it is essential to pay attention not only to steel production or export figures but also closely monitor the cash flow of the pension system, as that is the key indicator of whether the government can fulfill its promises.
Why do you think young people nowadays are reluctant to contribute to the pension system? Feel free to share your thoughts in the comments section.