China wants young people to save for retirement. Tao Swift, an unemployed 30-year-old, doesn’t care to hear it.
“Retired?” asked. “I don’t have much hope that I can definitely get my hands on it.”
Mr Tao, who lives in the southern city of Chengdu, is not alone in thinking this way. In social media forums and among friends, young people wonder whether they should save for old age. Some choose to leave, citing a lack of jobs, low wages and ambivalence about the future.
Their skepticism betrays the enormous challenge for China’s leaders. In less than three decades, the country has changed from a new society to an old one. Seven straight years of plummeting births are pushing the day when there will be fewer workers than retirees.
The rapidly changing demographic profile is putting enormous pressure on China’s existing underfunded pension system. The average retirement age of 54, among the lowest in the world, has made this stress more acute.
A crushing economic slowdown, the worst since China embraced capitalism four decades ago, is leaving many people out of work or with little room to put money aside.
China has crossed a demographic Rubicon like many other countries before it. The problem of underfunded pension plans is not unique to China either. But China’s demographic and economic problems are colliding, shaking confidence in the pension system.
China is aging so rapidly that over the next quarter century, 520 million people, or nearly 40 percent of its current population, will be over 60. And in the next decade the public pension will run out of money, according to the Chinese Academy of Social Sciences, a government research institute.
“Because of the aging population, people are skeptical about their future pensions,” said Tao Wang, chief China economist at UBS. “They worry that in the future the payment will be less.”
China’s leaders could begin to address the problem by raising a “worryingly low” retirement age, Ms. Wang said. They have talked about doing it gradually, but have yet to take action.
Recent history has also contributed to the problem. Until the 1980s, China had a planned economy and state-owned enterprises paid workers wages until they died. As officials moved forward with market-oriented reforms, they also began to create an inclusive pension system.
In the first decades after China opened its economy to the world, the Communist Party prioritized development, abandoning the investment needed to build a broader social safety net. And as officials overhauled state-owned enterprises in the 1990s, tens of millions of people lost their jobs.
Officials began creating a new pension system that would eventually cover most of the population in three pillars. The first is a public and mandatory program that has the largest enrollments, with just over a billion people. It consists of a basic plan for the unemployed in rural and urban areas, as well as migrant workers, covering more than 550 million people, and an employment-based plan covering 504 million workers.
The second pillar of China’s pension system is private and employment-based. It is voluntary for companies and covers far fewer people.
The third and most recent, also private and voluntary, is the personal pension. Introduced in 2022. With the public pension under greater financial pressure, officials began offering tax advantages such as an individual retirement account in the United States.
The growth of private pensions, still in pilot programs in dozens of cities, coincided with troubling news: China’s population was beginning to shrink for the first time in its modern history.
Working professionals like Xuan Lü, 27, are required to contribute part of their salary to one of the public pensions. Mr. Xuan, who is an exhibition developer in Beijing, said he didn’t think much of the roughly 5 percent of his income that is set aside each month.
“It’s too early to worry about these things,” he said.
But another problem has emerged in the past year: more people, whether unemployed or part-time or self-employed, are stopping their contributions or simply opting out.
“The number of people who regularly decided not to contribute or join the system is quite large,” said Dali Yang, a professor at the University of Chicago. “It’s gone up very significantly.”
Experts also warn that if China does not change the retirement age, it will need to cut benefits, which they say can be too generous in some cases. In 2022, the national average monthly payment for the Public Works Pension was $500 and just $28 for the Basic State Pension. But contributions and benefits varied drastically by city and province.
There are thousands of different pension schemes and each is run by a local authority. How much pensioners receive is linked to a local authority’s finances and the size of a given pensioner pool. Some pensions have as few as 30,000 participants, according to one study.
In some prosperous areas, as many as eight workers support each pensioner. But in the poorest areas, there are about two workers for every pensioner.
As pressure mounts, concerned Chinese officials and experts have been urging young people to save and sign up for private pensions.
A well-known professor urged young people to skip their daily coffee and put the money in a fund. Another warned young people that the basic pension will not be enough to see them through in old age.
For some young people, urgent appeals backfire.
“Their appeal is backfiring,” said Lumiere Chen, 27, a private insurance agent in Beijing, whose clients number about 35. “We are bothered by more and more appeals.”
Even those who are a bit older are not easy to convince.
“To be honest, I don’t expect to live on my salary and cover my future retirement life with it,” said Leon Li, 37, a driver for Didi, China’s equivalent of Uber. Mr Lee lost his job at a market research firm last year after working there for more than a decade. He had a company pension which he will continue to pay for the next two years to meet the 15-year minimum to be eligible for post-retirement benefits.
In contrast, Cesar Li, 27, has not signed up for the basic public pension scheme because, he said, it is too expensive. Mr Lee, self-employed, said he had noticed more elderly people claiming pensions and fewer young professionals paying into the system. He echoed a concern other young people have expressed — that their retired parents or grandparents are sometimes paid twice as much as their working family members.
Cesar Lee and his friends sometimes talk about the future, he said, and joke about who will take care of them when they get old. “We might end up alone and die at home,” he added.
With fewer young people and more old people, the gap between workers and retirees will only widen.
“This can only be left to fate,” said Mr Lee. “I have no control over that.”
Li You contributed to the research.
