Mr Frazier says the fragmentation in China’s pension system, with over 2,000 local governments managing funds independently, has led to administrative expenses being wasted.
“If you centralise or even bring it to 31 provincial-level pensions, then you’re going to save a tremendous amount of administrative costs,” he added.
The Mercer CFA Institute Global Pension Index 2024 suggests increasing the minimum level of support for the poorest individuals.
Another policy solution is to relax the country’s hukou household registration system, which experts say would improve eligibility and support for migrant workers and rural residents.
Meanwhile, China’s reliance on payroll taxes to fund pensions is increasingly unsustainable as the workforce shrinks.
To increase contributions to the pension pot, Ms Liu pointed to untapped revenue sources. “Right now, China doesn’t really have property tax, for example and I think capital gain tax in China is fairly minimal or is completely non-existent,” she said.
Dr Huang emphasised the urgency of broader fiscal measures. “The demographic crisis can easily turn into a fiscal crisis for the government,” he said. “Redistribution and changing the taxation system are crucial to managing these challenges.”
A more radical approach, as suggested by Mr Frazier, is to delink pensions from employment to create a universal basic pension.
“You have to consider ways to introduce reforms that would guarantee pensions for people in an economy in which, over 40 years, there may be 40 different jobs, 40 different employers,” he said.
China’s demographic decline has led others like Mr Poston to propose immigration as “the only answer” to replenish the labour force and alleviate pension funding pressures.
“China needs to turn to immigration to get them out of this quagmire. The country’s several attempts to implement policies to increase the birth rate have not worked, and they will not work.”
However, he also acknowledges the challenges. “It will not be easy to introduce and implement an active immigration policy in a country with little experience with immigration, few preferences for immigrants, and a seemingly deep-rooted belief in racial purity held by many leaders in the Chinese Communist Party.”
For millions of Chinese citizens, the stakes are high, and the path forward remains fraught with challenges.
“To be honest, I do have concerns,” said Ms Long.
“I worry that by the time I retire, there might be insufficient pension funds or a decline in the quality of services.”
“However, I hope the government and society will continue to address these issues and improve the system to ensure it remains reliable.”
