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Speaker 1: Bloomberg, Audio Studios, podcasts, radio news.

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Speaker 2: This is Gao Punchin. He's twenty two, just graduated from

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Speaker 2: college and lives in China's southern city of Shenzen. Gao

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Speaker 2: wants to become a full time social media influencer. He

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Speaker 2: posts video blogs of his life and does freelance work

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Speaker 2: on the side too. He makes about one thousand dollars

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Speaker 2: a month, a moderate income in Shenzen, but Gao still

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Speaker 2: appreciates the finer things in life. Here he is on

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Speaker 2: Shaohumshu China's Instagram saying that he's treating himself to a

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Speaker 2: luxurious first class flight to South Korea for quick.

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Speaker 1: Getaway should she set.

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Speaker 2: But to afford the occasional splurge, Gao decided to scrap

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Speaker 2: one major expense from his budget, his pension payments. It's

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Speaker 2: about two hundred dollars, and he told Bloomberg that that's

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Speaker 2: a fifth of his monthly income, money that Gao says

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Speaker 2: he'd rather spend enjoying himself.

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Speaker 1: What's all the cases union? Yoo? Uh now someone some

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Speaker 1: one question one not true? Your Michael Paul Bahoma.

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Speaker 2: Gao says most of his friends don't pay into the

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Speaker 2: pension fund either if their line of work like freelancing,

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Speaker 2: makes the payments voluntary. And across China there are millions

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Speaker 2: like Gao who are boycotting the pension plan.

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Speaker 1: Based on Bloomberg's calculation of data from Chinese think tank,

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Speaker 1: tens of millions of China's young workers have suspended contribution

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Speaker 1: to Chinese pension plans, and that was additional pressure on

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Speaker 1: a system that's already wobbly.

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Speaker 2: Chenway Jong is a Bloomberg editor based in Hong Kong.

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Speaker 1: China's basic pension fund is at the risk of drying

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Speaker 1: up by twenty thirty five, and the government is not

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Speaker 1: able to provide the most basic social security. That risk

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Speaker 1: undermining the publicist faith in the Common Party and its

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Speaker 1: social contract with the people, and it could be a

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Speaker 1: taking time bomb, posing us throughout to China's social stability.

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Speaker 2: Welcome to The Big Take Asia from Bloomberg News. I'm Wanha.

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Speaker 2: Every week we take you inside some of the world's

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Speaker 2: biggest and most powerful economies and the markets, tycoons and

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Speaker 2: businesses that drive this ever shifting region. Today on the show,

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Speaker 2: why is China's pension fund and danger of drying up?

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Speaker 2: What are the risks to the country's already struggling economy

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Speaker 2: and the credibility of the Communist Party. Like most things

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Speaker 2: in China, the size of the Chinese pension system is daggering.

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Speaker 2: The country has the world's largest social security system, and

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Speaker 2: Bloomberg's Chenwai Jung says the easiest way to think about

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Speaker 2: the different systems set up for retirement in China is

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Speaker 2: to break it down to three pillars.

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Speaker 1: The first one is the government funded basic pension system.

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Speaker 1: This is what we talk about when we refer to

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Speaker 1: the pension system. It currently covers one point one billion people,

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Speaker 1: and that's around eighty percent of the entire population.

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Speaker 2: If you work in China with a formal job, you're

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Speaker 2: required by law to contribute to this basic pension plan.

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Speaker 1: So if I work for a company insite mainland China,

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Speaker 1: every month, I'm supposed to pay about eight percent of

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Speaker 1: my income to the pension system, and in the same token,

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Speaker 1: my employer is supposed to pay sixteen percent of my

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Speaker 1: income to the pension fund. This is a largely mandatory plan,

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Speaker 1: but it also covers freelancers and gig workers like Gao,

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Speaker 1: who don't have a formal job and can opt out

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Speaker 1: if they truce, So their contribution is entirely voluntary, and

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Speaker 1: all that money goes to the basic pension system and

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Speaker 1: is going to pay for the present day retirees.

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Speaker 2: Okay, so I got that. What's the second pillar.

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Speaker 1: The second pillar is called the voluntary cooperate pension and

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Speaker 1: it's similar to the four to one K plan in

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Speaker 1: the US. It only covers thirty one million business workers

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Speaker 1: and with a little over three trillion women in assets.

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Speaker 2: And what's the difference between the two pension systems.

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Speaker 1: So the main difference is the volunteer croper pension is

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Speaker 1: set up by companies for their employees and by the

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Speaker 1: time the employees retire, they will mostly be able to

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Speaker 1: destroy every single penny that the company put in there

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Speaker 1: for them. But the basic pension system, you don't really

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Speaker 1: know how much money you will be withdrawing by the

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Speaker 1: time you retire, and there's no guarantee you will be

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Speaker 1: getting every penny out of everything that you put in.

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Speaker 2: Workers in China used to enjoy social welfare that covered

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Speaker 2: them from cradle to grave, guaranteed by state owned enterprises,

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Speaker 2: but that policy was upended after China's economy opened up

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Speaker 2: in the seven and for decades, most people rely on

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Speaker 2: the Basic pension Plan, the first and the largest pillar,

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Speaker 2: while only a small number of companies offer voluntary corporate

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Speaker 2: pension plans.

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Speaker 1: I think in the past time when times are good,

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Speaker 1: when China wasn't in such a dire demographic situation, there's

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Speaker 1: hope that government would be able to give you the

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Speaker 1: money back. And on top of that, for a really

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Speaker 1: long time, the basic pension system is people's only option.

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Speaker 2: And chen way, what about that last pillar of the

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Speaker 2: pension system. What's that about?

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Speaker 1: So the third pillar is still very young. It's called

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Speaker 1: the volunteer Individual Pension System. The government only started testing

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Speaker 1: it in twenty twenty two, and it's similar to the

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Speaker 1: individual retirement accounts in the US. So you can contribute

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Speaker 1: to text sheltered saving fund and then can pick whatever

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Speaker 1: investment that you want to put the money in. So far,

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Speaker 1: only a little over sixty million people signed up, but

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Speaker 1: less than a third people have actually putting any deposit.

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Speaker 2: Okay, so we've got the mandatory government pension plan, voluntary

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Speaker 2: corporate pension plan and voluntary individual pension plan. How are

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Speaker 2: these three pensions doing right now?

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Speaker 1: So all of the three pillars of China's pension fund

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Speaker 1: are underfunded. According to the Chinese Academy of Social Sciences,

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Speaker 1: the savings in the biggest pillar the Chinese basic pension

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Speaker 1: system will peak at seven trillion in twenty twenty seven

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Speaker 1: before shrinking sharply, and by twenty thirty five, the basic

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Speaker 1: pension system is at the risk of drawing up even

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Speaker 1: if the government steps in.

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Speaker 2: One of the main reasons all of these pension plans

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Speaker 2: are underfunded is because of China's falling population. For decades,

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Speaker 2: China imposed a strict one child policy that only allowed

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Speaker 2: each couple to have one kid.

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Speaker 1: Now, after decades of successful family plan policy, China has

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Speaker 1: created this unique four to one family structure, which means

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Speaker 1: that four grandparents will be taking care of one precious child.

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Speaker 1: But if you reverse the structure, we're looking at an

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Speaker 1: entire generation of people having to take care of two

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Speaker 1: parents and four grandparents.

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Speaker 2: That's a lot of pressure on the younger generation, who

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Speaker 2: now make up the workforce. They're expected to help provide

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Speaker 2: for the growing number of retirees. But some people like

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Speaker 2: Galpun Chung, are opting out of the pension system altogether.

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Speaker 1: And on top of that, many of us are delaying marriage,

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Speaker 1: delaying having children, and a lot of people also say

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Speaker 1: they don't want to have children at all, and that's

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Speaker 1: going to be a problem for the future demographics. We're

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Speaker 1: looking at a rapidly shrinking population, which means not enough

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Speaker 1: labor will be entering the job market and putting money

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Speaker 1: into the pension funding.

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Speaker 2: To government data, more than twenty million workers will retire

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Speaker 2: each year over the next decade in China, and by

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Speaker 2: twenty thirty five, the number of Chinese citizens over sixty

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Speaker 2: is forecast a top four hundred million. That's more than

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Speaker 2: the population of the US and Canada combined.

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Speaker 1: This is simple mass. On one hand, more old people

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Speaker 1: will be retiring, and on the other hand, there will

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Speaker 1: be less people being born. In China, the population has

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Speaker 1: been shrinking since twenty twenty two, and the United Nations

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Speaker 1: projects that China's population could shrink to half of its

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Speaker 1: current size by the end of the century.

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Speaker 2: Now, Chinwai. Problems like aging populations are faced by many

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Speaker 2: developed nations in Europe and the Americas. Even the US

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Speaker 2: Social Security Trust Fund faces insolvency by twenty thirty five.

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Speaker 2: So how is China's pension fund situation any different?

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Speaker 1: So On one hand, China has way more old people

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Speaker 1: than the US and Canada. The ratio owe to working

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Speaker 1: age people in China is forecast to soar. And on

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Speaker 1: the other hand, China's pension fund is mostly dependent on

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Speaker 1: the basic pension fund, whereas US and Canada, their pension

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Speaker 1: system is more diverse and more people are enrolled in

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Speaker 1: the second pillar and third pillar.

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Speaker 2: After the break, What the Chinese government is doing to

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Speaker 2: prevent the world's largest social security network from running dry

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Speaker 2: and what could happen if those efforts fail. China's rapidly

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Speaker 2: aging population is putting a lot of pressure on the

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Speaker 2: country's policy makers. The government is throwing everything at the

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Speaker 2: wall to prevent the pension fund from running out. In

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Speaker 2: twenty sixteen, Beijing reversed the one child policy after more

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Speaker 2: than thirty five years, and it's been stepping up efforts

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Speaker 2: to boost the birth rate every since, but that's done

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Speaker 2: little to slow down the problem. The population remains in

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Speaker 2: decline and most parents can't afford to have multiple children,

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Speaker 2: and last.

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Speaker 1: September, Beijing took a major step last September to shore

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Speaker 1: up the system by delaying retirement age for up to

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Speaker 1: five years, and the shift is the first of its

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Speaker 1: kind in nearly five decades. The policy whenning to effect

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Speaker 1: on January the first, twenty twenty five.

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Speaker 2: The new policy up to the retirement age for men

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Speaker 2: to sixty three from sixty and for women to fifty

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Speaker 2: five years old from fifty. The policy shift has triggered

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Speaker 2: an outpouring of anger on social media, with many complaining

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Speaker 2: about the sluggish job market. Goo the blogger we heard earlier,

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Speaker 2: also says the pension plan isn't sustainable.

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Speaker 1: So looking at postponing retirement age, Gao is very upset

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Speaker 1: and he's asking questions like why do I have to

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Speaker 1: work for so much longer than my parents' generation? And

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Speaker 1: how much money do I put into the system? The

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Speaker 1: big problem for Gao is how much money is he

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Speaker 1: actually going to get by the time he retired. And

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Speaker 1: Gao is not the only one who thinks this way.

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Speaker 1: According to a Chinese Academy of Social Sciences report, about

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Speaker 1: a fifth of urban employees did not contribute to the

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Speaker 1: system in recent years.

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Speaker 2: Those were mostly migrant workers. Thirty eight million people stopped

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Speaker 2: payment in twenty thirteen alone. That also includes employees of

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Speaker 2: businesses that suspended contributions due to financial difficulties, Chinwai. What's

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Speaker 2: at stake here to China's economy and its government. If

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Speaker 2: the pension fund does run dry.

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Speaker 1: If the government is not able to provide even the

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Speaker 1: most basic social security, it's going to undermine the public's

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Speaker 1: faith in the system, and it can create more opportunities

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Speaker 1: for social unrest. And what's worse is that young people

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Speaker 1: are going to lose hope of the government and they're

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Speaker 1: not going to be motivated to work hard and fight

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Speaker 1: for the economic growth of the country.

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Speaker 2: Mack and shinzen Gow says he doesn't see the point

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Speaker 2: of paying into the pension fund with so much uncertainty.

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Speaker 3: My parents could have retired last year or the year before,

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Speaker 3: but now because of the policy change, they have to

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Speaker 3: work longer and pay more into the pension fus and

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Speaker 3: we don't even know if they can get that money back.

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Speaker 3: To put it bluntly that if they can live long

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Speaker 3: enough to see that they even come. China has one

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Speaker 3: point three billion people. If everyone retires at a later age,

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Speaker 3: the contribution altogether is huge. I understand that the country

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Speaker 3: needs this to help the economy, and this might be

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Speaker 3: good policy for the nation, but it's not a good

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Speaker 3: policy for regular people like us.

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Speaker 2: This is The Big Take Asia from Bloomberg News. I'm

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Speaker 2: one ha. This episode was produced by Young Young, Naomi

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Speaker 2: Mum and Jessica Beck. It was mixed by Amr Sultan

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Speaker 2: and sound designed by Jessica and fact checked by Young.

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Speaker 2: It was edited by Aaron Edwards, Luluchen and Tracy Samuelson.

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Speaker 2: There was additional reporting by Ding Ming, John and Charlotte Yang.

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Speaker 2: We also want to give a shout out to the

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Speaker 2: Bloomberg Originals team and David Englaise name was Shaven is

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Speaker 2: our senior producer, Elizabeth Ponso is our senior editor, Nicole

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Speaker 2: Beemster Bower is our executive producer, and Sage Bauman is

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Speaker 2: Bloomberg's head of Podcasts. Please follow and review The Big

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Speaker 2: Take Asia wherever you listen to podcasts. It really helps

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Speaker 2: new listeners find the show. See you next time.