I’d meant to include this point in my post on the graying of China but somehow managed to leave it out. China’s current pension system is unfunded to the tune of approximately 1.5 times their GDP. Interestingly, that’s roughly the same multiple of GDP by which our own Social Security system is unfunded (you may be read some of the brouhaha about that lately). The differences are that
- for practical purposes there’s no private alternative in China—there’s very little in the way of personal savings, China’s capital and banking systems are very fragile, and there’s essentially no private pensions
- work in China is very much oriented to youthful skills—there’s not much prospect for elderly workers to continue to work even if they were able to
- China’s system only covers about 25% of workers and there’s really no prospect for extending it to the whole population
China’s economy is growing fast but it’s not growing that fast. China will need to take major steps to deal with this problem. The alternative is lots and lots of sick, destitute old people—a humanitarian catastrophe of incredible proportions.
Previous posts in the China’s time bombs series:
The next post in the series is here: