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Guest Post: What Happens When China Goes “Gray”?

Tyler Durden's picture





 

Submitted by The Diplomat's  Mark W. Frazier, Professor of Politics and Co-Academic Director of the India-China Institute at the New School

What Happens When China Goes “Gray”?

Developed economies are beginning to struggle with aging populations and more retirees. China may soon join them.

As China's major trading partners try to control rising public pension and health care costs, they may not realize they also have an important stake in China's ongoing struggle to fashion a safety net for its own rapidly aging population. Many observers assume China has no pensions or healthcare insurance for the 185 million people over the age of 60 (13.7% of population), the highest official retirement age for most workers. They may well believe this explains why Chinese families save so much–more than 30% of household income–and therefore spend less on consumer goods, including imports from trading partners.

But this line of reasoning is faulty because China already has large and rapidly growing public pension and health insurance programs in the cities, and is in the process of extending them to rural areas. It's time that China's trading partners, especially the United States, understand what this means for China's economic future and, by extension, their own.

For all the criticism of outgoing President Hu Jintao for presiding over a “do-nothing” administration, he did manage to oversee a substantial increase spending on China's public support systems.As a result, pensions have now become the most expensive function of the Chinese government—which already spends a lot on infrastructure, housing and defense. In 2011, pension expenditures rose to 1.28 trillion renminbi (RMB, U.S.$205 billion), up from only 489 billion RMB in 2006. These and civil service pensions cover only about half of those over age 60, but at current rates of growth universal coverage—and vastly higher expenditures—are not far off. The number of urban workers (including migrants from rural areas who in theory are in the cities temporarily) contributing to the public pension system now exceeds 290 million, while rural pensions are also growing rapidly. With so many new people paying in, the government's future pension obligations are rising quickly. A recent report issued by the Bank of China and Deutsche Bank estimated that China’s pension system will have a U.S.$2.9 trillion gap between assets and liabilities by the end of 2013. By 2033 the gap is expected to reach U.S.$10.9 trillion, or 38.7% of GDP.

What happened in the past decade or so to cause China, with an annual per capita income of around $5,000 (adjusted for purchasing power), to begin to acquire pension burdens found in richer and heavily indebted industrial states? What will this mean for trading partners who keep urging the Chinese government to rebalance its economy toward greater consumption (and imports) and away from relying so heavily on exports?

Essentially what happened is that Beijing designed a pension system in the late 1990s that will leave households with much less to spend than many observers assume. Urged by World Bank economists and foreign pension experts, the Chinese government put in place a hybrid pension arrangement that relies on both traditional pay-as-you-go collections from employers and mandatory individual accounts, from which workers were to finance anywhere from one half to two-thirds of their retirement needs. (They also were expected to buy pension and annuity products from commercial providers). But that pension design has resulted in a double whammy: households consume less in order to save for retirement needs, while the government's long term pension debt is escalating rapidly because local governments raided the individual accounts to pay benefits to current retirees.

The central government has tried to prevent local governments from tapping current pension assets, but has done so only by allowing them to accumulate further debt. Moreover, many local administrations bristle under the requirement that pension assets must be invested in low-interest bonds and bank deposits. Don't be surprised if future pension scandals like the one that rocked Shanghai in 2006 are exposed as local administrations seek a higher, though riskier return on their pension assets.

As China's population ages, scholars and officials are seriously considering proposals to phase out the one-child policy that is beginning to curb the flow of new workers into the economy, as well as raise retirement ages (currently 60 for men, 5 or 10 years earlier for women). But such adjustments are just as politically difficult in China as in in Western democracies because, as it turns out, not wanting to work longer is a widely held preference. Many Chinese also view the relatively early retirement age as a way to make vacancies for the millions of young people who enter the labor market each year. If older workers continue working into their twilight years, young workers may encounter greater difficulty in trying to find employment. This would pose its own issues for the country.

What does all this mean for the Asian, European, and American economies that trade with China? First, they should understand that China's aging problem is a slow-motion fiscal crisis. China is not Greece, but local debt burdens are already enormous, and these calculations do not include the mounting pension obligations that local governments have incurred. Just as in America and Europe, the tendency in China is for local officials running state-level pension funds to ramp up current benefits and let future generations pay for them. China's National Social Security Fund is the largest in the world at $150 billion, but these assets (some of which are permitted to be invested in stocks) still fall well short of the liabilities racked up by provincial and city pension funds.

Second, we should realize that as China moves towards universal pension and medical coverage (a likely prospect under its 2010 Social Insurance Law), the effect on household savings will be limited. True, families may no longer need to save for the high costs of catastrophic illnesses. But it is quite plausible that any reduction in household savings arising from the new safety net will be offset by mandatory payments by both workers and employers into the new welfare programs. In other words, don't count on the new safety net to rebalance China's economy, because it won’t give discretionary income much of a lift. This means that countries that have large bilateral trade deficits with China should not expect a turnaround at some uncertain date when Chinese households suddenly have imagined new spending powers.

Finally, we must consider the larger implications aging has on China and major economies such as the United States, Europe, and Japan. Aging trends don’t make the decline of these economies inevitable, of course, but it is time to calibrate expectations. Aging will curb or even reduce household consumption, which is the primary driver of Chinese exports to industrialized economies and what many hope will fuel future exports to China. All these governments need to find ways to slow the growth of health care and pension costs. In the United States and China, for example, insurance and other financial services providers (state-owned in China) make large profits on fees and other administrative charges for handling the funds that pass through their accounts. Cutting these costs is essential. More broadly, all these societies will be compelled to rethink the outdated notion that work is over and retirement begins at some arbitrary age defined by law.

Aging and the policies to cope with a graying population are first and foremost domestic issues, but, as is so often the case, the consequences of Beijing’s pension policies will resonate far beyond its borders. Those who manage economic relations with China should focus less on trade deficits and exchange rates and spend more time thinking through the long-term implications of aging, and what it will mean for patterns of trade and investment among the world's largest economies.

 


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Sun, 01/13/2013 - 22:47 | Link to Comment endicott glacier
endicott glacier's picture

dont see lot of chinese with gray hair :-)

Sun, 01/13/2013 - 23:12 | Link to Comment AU5K
AU5K's picture

4-2-1 problem.  Eventually 1 worker will be supporting 6 parents/grandparents.  Say what you want about the US, but China is screwed long term and will never surpass the US before imploding.

Sun, 01/13/2013 - 23:14 | Link to Comment markmotive
markmotive's picture

More money printing will happen.That'll be 4 of the world's major economies (USA, Japan, EU and China) in a race to the bottom (currency deval). Who will pick up their slack? Peru?

Satyajit Das on gold: http://www.planbeconomics.com/2013/01/13/satyajit-das-on-gold/

Sun, 01/13/2013 - 23:29 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Peru will more than carry its share of the load...

:)

Mon, 01/14/2013 - 01:15 | Link to Comment Freddie
Freddie's picture

What is almost odd is that a few countries in Latin America, Eastern Europe, parts of Scandinavia (except that islamic problem), a few Baltic states, Australia, NZ and maybe Canada appear the best countries for survival.  Also a few countries in Asia like SK and maybe a few others. 

The rest are f******. 

Mon, 01/14/2013 - 03:01 | Link to Comment MisterMousePotato
MisterMousePotato's picture

Damn. Leo's back?

Mon, 01/14/2013 - 03:54 | Link to Comment August
August's picture

At least our 401(k)s are safe. Collectively speaking.

Mon, 01/14/2013 - 01:26 | Link to Comment TradingTroll
TradingTroll's picture

Yep finally found it. Finally found the worst article ever on gold.

 

Here is how he closes his piece. The final paragraph reprinted here so you dont have to spend 5 minutes of your life reading the whole thing:

 

Golden Deaths…

As the metal’s price rose, a Tuscan spa offered wealthy clients a treatment which entails the entire body being covered in 24-carat gold. Costing Euro 420, the treatment, proponents claim, provides unverified benefits such as delaying the visible effects of age, skin hydration and skin elasticity.

Having switched from traditional financial investments to gold to preserve their wealth, investors will be hoping for the health benefits of the gold treatment rather than another possible ending. In the film Goldfinger, the character Jill Masterson, played by Jill Eaton, is murdered by being painted head-to-toe in gold paint —one of movie history’s iconic scenes.

Read more at http://www.nakedcapitalism.com/2012/12/satyajit-das-lage-dor-part-2-golden-memories.html#r6mzsKfTLcH7FuBG.99
Mon, 01/14/2013 - 01:31 | Link to Comment fourchan
fourchan's picture

the the cfr and kissinger lead plan to pass americas torch to china will be

complete and we will be the new europe, and europe will be the new middle east/africa

Mon, 01/14/2013 - 00:07 | Link to Comment Anusocracy
Anusocracy's picture

They certainly won't surpass the US if they keep mimicking us.

China is taking a test and decides to copy the answers from stupidest kid in the class.

Mon, 01/14/2013 - 17:11 | Link to Comment laomei
laomei's picture

4-2-1 problem, sure.  But most of that 4 and the 2 have a shitload of money stashed away as well as assets.  And that 1 worker is earning a lot more than the 6 before were.  Minor revisions are honeslty all that's needed.  Once the population shift to the cities has a slightly higher majority, it's time to scale back on the one-child-policy, as it's primarily negated by economics anyways.  Hukou stuff as well, if for no other reason than to get the migrant workers paying into the city systems more.  Minor, gradual changes are honestly all that's needed, and thanks to the divisions of administration, it's possible to test it out first before roll-out.

Sun, 01/13/2013 - 23:40 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

dont see lot of chinese with gray hair :-)

China itself is looking pretty gray:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013...

Mon, 01/14/2013 - 07:29 | Link to Comment negative rates
negative rates's picture

We are in a world where it only takes one to make the news, and hundreds of others to report on it.

Sun, 01/13/2013 - 22:48 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Wait a second. Are you saying that the communist country only APPEARS wealthy, but is actually impoverished??

Huh.

Sun, 01/13/2013 - 23:04 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

China has LOTS of problems that we just do not hear about too much.  YES, the demographics are lousy, but in Asia, others have bad demographics too.  The old saying; "China will get old before she gets rich."

China has a lot of environmental problems (noted here at ZH in a column recently about N China air pollution).

China is also actively making enemies around her...

Mon, 01/14/2013 - 01:31 | Link to Comment Freddie
Freddie's picture

Clean water is a biggie in China.  They keep drilling these water wells deeper and deeper like Nevada (Vegas) but it is worse in China.   The depth of the wells is some cities is insane.  They are running out of water.

Mon, 01/14/2013 - 09:27 | Link to Comment trav777
trav777's picture

wtf do you expect when they POLLUTED all the drinkable water on the damned surface in the entire country?  A substantial share, even a majority, of the surface water in that country is unfit for human contact, much less drinking.

Sun, 01/13/2013 - 22:49 | Link to Comment reader2010
reader2010's picture

Foxconn,  BitcheZ!

Sun, 01/13/2013 - 23:31 | Link to Comment kalasend
kalasend's picture

Most people consider Foxconn a Chinese firm, when in fact it is run by Taiwanese. Sure, ethnic Chinese but when it gets down to the bottom line: Taiwanese is there to make money and squeeze margin whenever/whereever they can, and not much concern about fucking up the environment. What's better about Foxconn? Why, crooked Chinese aiming at milking more out of Chinese and nobody knows better than Foxconn!

Sun, 01/13/2013 - 22:51 | Link to Comment Whoa Dammit
Whoa Dammit's picture

Sunday Humor: The photo of her in the link is a must see.

The 400-pound Queens pedestrian who crashed through an Upper East Side sidewalk said yesterday that a thinner woman might have died from that fall.

“Thank God, they said that my size was the only thing that saved me,”

The FDNY had to use a crane and cargo net to get her out.

http://www.nypost.com/p/news/local/manhattan/too_big_to_fall_Fz8VbWLT2tM...

Mon, 01/14/2013 - 09:19 | Link to Comment tnquake
tnquake's picture

Amazon woman!
6'5" and 400 lbs...

Sun, 01/13/2013 - 23:01 | Link to Comment Cabreado
Cabreado's picture

China's just a different flavor of oppression, on a different timeline.

Pay attention to the Controllers.
Pay attention to the like behavior of the Self-Absorbed,
regardless of setting.

Pay attention to the timeline.
Pay attention to the truth.

Don't be afraid to be humble.

And don't go numb.

Sun, 01/13/2013 - 22:53 | Link to Comment Bollixed
Bollixed's picture

"Urged by World Bank economists... "

There ya go...

 

Sun, 01/13/2013 - 23:27 | Link to Comment booboo
booboo's picture

and "foreign pension experts" too. An old fella once told me that an "expert" was a drip under pressure.

Mon, 01/14/2013 - 02:30 | Link to Comment Dr. Sandi
Dr. Sandi's picture

You forgot the unknown or 'ex' factor.

Mon, 01/14/2013 - 16:25 | Link to Comment laomei
laomei's picture

"unfunded liabilities" is the new hyped up codeword for "we want access to that chunk of money" and "booo government bad" (which is in favor of privatization which means asset stripping, so it's really the same thing).

 

It's based on a guessed-at future possibility and presents it fraudulently as present-day fact.  It's a thing economists love to do, because they live in a self-interested rational bubble-world populated entirely with psychopaths and economists.  Fortunately, that world is not real, and economists are universally, speaking basely, dumbfucks whose only apparent sustenance is their own shit.

Sun, 01/13/2013 - 22:55 | Link to Comment Gort
Gort's picture

A Billion Shades of Gray

Sun, 01/13/2013 - 22:57 | Link to Comment NoDebt
NoDebt's picture

Soooo..... they're a big 'ol giant-sized Japan?

Sun, 01/13/2013 - 22:57 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

What happens when China goes gray?

They become Japan.

Sun, 01/13/2013 - 23:02 | Link to Comment Northern Lights
Northern Lights's picture

Isn't the whole aging/replacement thing kind of a moot point these days.  Seems to me more and more things that once required manual labour are now being done by robots.  Even market trading is being done by computers set up with algorithms that sense buying and selling opportunities that a human sitting behind a computer may not see and miss.

Sun, 01/13/2013 - 23:09 | Link to Comment DR
DR's picture

China will go gay before they go gray with the male:female ratio at 120:100.

Mon, 01/14/2013 - 03:35 | Link to Comment formadesika3
formadesika3's picture

It's not nice to play with Mother Nature.

Sun, 01/13/2013 - 23:16 | Link to Comment jonjon831983
jonjon831983's picture

Obviously, pensions are for one purpose:

"The central government has tried to prevent local governments from tapping current pension assets, but has done so only by allowing them to accumulate further debt. Moreover, many local administrations bristle under the requirement that pension assets must be invested in low-interest bonds and bank deposits. Don't be surprised if future pension scandals like the one that rocked Shanghai in 2006 are exposed as local administrations seek a higher, though riskier return on their pension assets."

I'd assume various levels of gov't would want the pension to grow "larger" with IOUs so more players can take their cut.

 

The safety net addition should allow for increased shift towards consumption as people start understanding the idea of having a pension.  With any pyramid scheme the first few people gain the full benefits and draw the successive layers etc etc.

Sun, 01/13/2013 - 23:19 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Spain and Greece have some of the oldest populations around.  Their solution?  Send all the hard working young kids overseas and put the rest out of work!

 

Sun, 01/13/2013 - 23:21 | Link to Comment WT Sherman
WT Sherman's picture

what's the big deal.  China won't go gray.  They'll just line people up and start shooting before that happens.

Mon, 01/14/2013 - 05:04 | Link to Comment Apostate2
Apostate2's picture

No need. They will all die of liver cancer from HB infections. Courtesy of the much lauded barefoot doctors dirty needles circa 1950s-2000.

Sun, 01/13/2013 - 23:24 | Link to Comment Marco
Marco's picture

"More broadly, all these societies will be compelled to rethink the outdated notion that work is over and retirement begins at some arbitrary age defined by law."

Ah yes, onwards to the glorious future where we drop minimum wage low enough that 70 year olds are still employable ... with savings so low that they actually want to work for that pittance while their body is slowly falling apart. The fucking fantasies of the rich sitting behind desks ...

If that's the only future capitalism can provide then fuck capitalism. Technologically if we can find some end run around peak oil there is no fucking reason why the current retirement ages are unsustainable with our current standard of living, our productivity still outgrows demographic shifts by a massive amount (see unemployment). The only reason why retirement is unsustainable is the structure of our economy and peak oil ... and having everyone work themselves to death won't solve peak oil.

Mon, 01/14/2013 - 02:30 | Link to Comment Matt
Matt's picture

Retirement is unsustainable because it is a government mandated, government operated, pay-as-you-go pooled fund. If there was real competition, it was all prepaid, and everyone had their own segregated funds, then it might work out, at least for those that put in enough.

Same goes for employment insurance, disability insurance, health insurance, car insurance (single crown corp provider here) etc.

Mon, 01/14/2013 - 16:10 | Link to Comment laomei
laomei's picture

No, that's a retirement account.  Very different from insurance.  And your idea on "how it should work" is stupidly regressive to the point of reducing the vast majority to abject poverty.

Sun, 01/13/2013 - 23:24 | Link to Comment UTICA CLUB XX PURE
UTICA CLUB XX PURE's picture

Nothing in particular, I'm ready for it.

Sun, 01/13/2013 - 23:30 | Link to Comment knukles
knukles's picture

The vast majority of Earths problems ultimately relate to too damned many people. The whole of demographic demise is Mother Nature and Natures God taking care of Its Own. Mother Earth will do very well for herself long after man has passed.

Mon, 01/14/2013 - 02:32 | Link to Comment Matt
Matt's picture

We'll show you how well Nature will do. I wouldn't bet against us rendering the planet permanently lifeless before this is all over.

Mon, 01/14/2013 - 03:37 | Link to Comment formadesika3
formadesika3's picture

"Mother Earth will do very well for herself long after man has passed."

Yeah but I'd kinda like my jism to survive me.

Sun, 01/13/2013 - 23:49 | Link to Comment q99x2
q99x2's picture

I'm an American I demand a Chinese pension and retirement at 60.

The banksters stole it from me and gave it to the Chinesers.

If that don't beat all hell.

Mon, 01/14/2013 - 16:11 | Link to Comment laomei
laomei's picture

I work here, pay taxes here, and have a green card here.  I'll be getting my Chinese pension here as well :)

Mon, 01/14/2013 - 00:19 | Link to Comment tooriskytoinvest
tooriskytoinvest's picture

BREAKING: 12 Japanese Naval Ships, 400 Servicemen Set To Defend Disputed Senkaku Islands From China

http://investmentwatchblog.com/breaking-12-japanese-naval-ships-400-serv...

Mon, 01/14/2013 - 00:45 | Link to Comment suteibu
suteibu's picture

No one should be surprised that the communists in China have a socialist welfare state.  The surprise is that Americans have allowed the US to have one.

Mon, 01/14/2013 - 01:09 | Link to Comment williambanzai7
williambanzai7's picture

Short red paint

Mon, 01/14/2013 - 01:28 | Link to Comment chump666
chump666's picture

Shanghai and Tokyo (Nikkei) are now both parabolic.  Money printing, inflation and war, which country will blow first? 

 

Mon, 01/14/2013 - 01:28 | Link to Comment billsykes
billsykes's picture

"Many Chinese also view the relatively early retirement age as a way to make vacancies for the millions of young people who enter the labor market each year. If older workers continue working into their twilight years, young workers may encounter greater difficulty in trying to find employment."

I don't know if anyone caught this zinger, if the authors supposition is correct this means the collective herd in China is cognitive of the logistics of growth- something the sheeple here don't understand. It would also show a egalitarianism unheard of in this generation of parents with working aged children, that is sacrifice earnings for the betterment of society and your own family.

So ingrained in the greed/fuck everyone over culture here it is hard to swallow.

 

Mon, 01/14/2013 - 01:34 | Link to Comment aminorex
aminorex's picture

the notion  that ghost cities are some form of malinvestment or keynesian boondoggle is mistaken.  they are, in fact, back-up cities, for when the major coastal population centers are bombed to rubble.  why is china importing 4 times the rice and twice the iron ore and copper this year?  they are preparing for a massive, devastating series of wars.

Mon, 01/14/2013 - 02:28 | Link to Comment Dr. Sandi
Dr. Sandi's picture

War is a time-honored way of getting rid of an excess of unemployed young men.

However, the Chinese need to start picking on somebody other than Japan, who has a severe shortage of young men of all stages of employment.

As I gaze into my magic ball that looks like a globe, I see India along China's border. Another nation with an excess of unemployed young men.

Chinese threats against Japan are much sabre rattling to excite the locals. But when it comes time to fix the demographically denegrated economies of two growing world powers, I'm putting my sports bets on China vs. India. Look for a best of one sudden death match.

Actually, more likely a slow and agonizing death match, now that I think about it.

Mon, 01/14/2013 - 03:33 | Link to Comment Hangfire
Hangfire's picture

No, not India, it's going to be Mongolia first, who rumor has it have been assembling a large cavalry force with aspirations of a new empire spanning all of asia and right up to the back door of Europe.   

Mon, 01/14/2013 - 06:11 | Link to Comment Dr. Sandi
Dr. Sandi's picture

That'll keep the Italians busy at the gates of Rome anyway.

Mon, 01/14/2013 - 03:55 | Link to Comment formadesika3
formadesika3's picture

Probably not.

China is wedged between India and Russia. Whether China attacks north or south, the other power will come to assist and China fights a two-front war. It's much easier to advance into Siberia than move over the Himalayas. For the same logistical reason, India cannot effectively support a ground war against China, only give token support.

Siberia is almost empty and has vast stores of natural resources which China covets.

Opulence, they has it.

Mon, 01/14/2013 - 04:05 | Link to Comment mkhs
mkhs's picture

Wishful thinking on your part.  Forget logic and the best desired outcomes.  India is still preoccupied  with Pakistan to get involved with China.

Mon, 01/14/2013 - 05:20 | Link to Comment Apostate2
Apostate2's picture

This article is a smooth over all the differentials from demography to how the actual system works (or doesn't work). Just ask the author for realistic demographic data. Ha, can't do that. Give me a realistic LE stat and we can go from there. He also has no idea about the differentials between urban/rural/ developed coastal regions vs inland provinces stats either. This article sounds like he is talking about Chicago not China. Conflation may be comforting but no subsitute for the search for a reasonable, testable truth.

China has serious problems in heathcare/welfare but not as analysed here. I suggest the author go live there and then report back.  

Mon, 01/14/2013 - 06:34 | Link to Comment Peter Pan
Peter Pan's picture

It will be interesting to know where the Chinese pension funds invest their money. US Treasuries? Empty cities? Paper money? Excess capacity? Gold? Bank shares?

 

 

Mon, 01/14/2013 - 07:36 | Link to Comment Inthemix96
Inthemix96's picture

The problems with Chineze citezenisms going grey is a far grey area to into.

About citezenisms greying in nature is far beyond fetched for most Americanists tollerance.  Mostly, they greying of citezenisms in Chinese never much comes to happenings, as far to many of the citezenisms get bad doses of doses from coal, and the power plants that consume the coals, and as such most Americanisms understand "Hair Loss?".

This why not to be unfair to fairish citezenisms workings of 23 hours a day, we not go grey, we all fall out,

Silly Americanist propaganda outlet of lies.

Mon, 01/14/2013 - 09:52 | Link to Comment Son of Loki
Son of Loki's picture

'Gray' from the smog?

Mon, 01/14/2013 - 16:02 | Link to Comment laomei
laomei's picture

The obvious answer here for state pensions pretty much everywhere is:

You means test them

You make the payout flat across the board

You remove the caps

 

Insurance pays enough to cover basic living expenses and a little pocket money.  Pension only kicks in once you certify your lack of income and assets.

As for the article... "liabilities" is kind of a bullshit thing when it comes to pensions.  It makes too many assumptions and it's more or less pissing away money that doesn't need to be pissed away so readily.  It's more of a "worst case scenario" that ignores actual annual payouts and pretends that everyone in the system at any given time must be accounted for in the total assets required from start to finish.  Sorry, but that's bullshit.  

 

The admin for it is on a local level and has been from the start, and a good handful of cities have already been smart enough to remove the pay-in cap.  The next step is to make the payouts more or less equal.  The general way they do increases now is "you worked X number of years, and for each year you're getting an extra Y amount per month".  It's not annual, it's not linked to anything really.  It's rather ad-hoc, and yes, it has the ability to go down as well.  Add in some basic means-testing, and there's another good chunk to save.... as the only real way to "cheat" and get it, is to transfer assets and wealth to the next generation.

Mon, 01/14/2013 - 16:38 | Link to Comment CTG_Sweden
CTG_Sweden's picture

Provided that the Chinese increase the productivity of their economy while they still have lots of young workers I doubt that demographics will be a problem in China. There isn´t enough work for people in Western Europe and the US today despite ”better” demographics than the future China.

 

It seems as if China has begun to ship some shoe manufacturing abroad now. But I´m not sure they are replacing imported high-tech goods like aircraft with domestically produced goods as fast as they could have and that they are paying enough attention to this problem. Or realize the potential economies of scale of their domestic market. Perhaps they have copied too much from the export-driven economies of their neighbours (I´m talking about what they looked like in the past)?

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