This Access Asia briefing covers the pensions market in China. At present foreign companies have only limited access to the Chinese market, largely in an advisory role.
The current pay-as-you-go system is being replaced by a new model that prepares China for a ‘greying’ population while protecting the future of the country’s social welfare system. The new pensions system also promises to create greater investment opportunities for pension funds and increased international involvement in a market hitherto closed to foreign investors. Several factors have forced the Chinese government to address pension reform and speed up change in the social security system: the country’s population is aging rapidly; life expectancy averaged 71 years in 2000 (on a par with mid-level developed countries); unemployment continues to grow; and the gap between pension fund revenue and expenditure continues to expand. Reform is therefore crucial. China now has ten workers per retiree, but within the next 50 years this figure will fall to just three workers per retiree. This will place tremendous pressure on the system, since every retiree is guaranteed a pension under the Chinese State Constitution.