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China's Pension Deficit Climbs to 77 Billion Yuan
Source: china.org.cn
Source Date: Tuesday, December 18, 2012
Country: China
Created: Dec 25, 2012

China's top think tank is reporting China's pension deficit reached some 77 billion yuan in 2011, an increase of some 9 billion yuan from a year earlier, raising worries about an unsustainable financial situation of the current pension system.

Li Yang is the vice president of Chinese Academy of Social Sciences, "Our basic pension insurance system seems to have saved a large surplus in recent years. And they have guaranteed the current needs. However, most of the surplus comes from financial subsidies by the central and local governments."

Li Yang adds China's economic growth will undergo a structural slowing-down with an increasing aging population, which will affect the growth of fiscal revenue. Therefore, relying on financial subsidies to cover pension budget is unsustainable.

Meanwhile, Dai Xianglong, chairman of the National Social Security Fund says China's pension fund just takes 2 percent of the total GDP.

The ratio is 83 percent in Norway, 25 percent in Japan and 15 percent in the US.

Dai believes the gap should be covered by the profits of state-owned-enterprises.

"I think we should set up a system to transfer one fifth of SOE profits to social security funds."

Dai also advises to establish a proper system for management and investment of the pension funds.
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