China's pension invisible debt or 86. 2 trillion
In response to a question on the report of the twelfth session of the standing committee of the national people's congress on the integrated promotion of social security systems in rural and urban areas, on 28 november, deputy prime minister mackay of the state council stated that last year the state council had set up an inter-ministerial top design research group and had also specifically asked the ministry of finance, the ministry of human resources and social security and the social security foundation to assess the extent of the gaps in the future。
According to makai, the future pension gap is measured in different circumstances and outcomes, but it is certain that if institutions are not changed, mechanisms are not changed and policies are not adjusted, the gap is inevitable. "not a star and a half point gap, but a huge gap."
Invisible debt increases future financial risk
As one of the sub-reports of the china pension development report 2014 - transition to the nominal account system, this report, entitled " invisible debt forecast and measurement under the current generalization model " , states that, by 2012, the hidden debt of the social integrated account was 83. 6 trillion yuan, the hidden debt of the personal account was 2. 6 trillion yuan, and the hidden debt of the combined basic pension insurance system for urban workers was 86. 2 trillion yuan, or 166 per cent of GDP in 2012。
China's basic old-age insurance system for urban workers uses the “collective combination” model, which combines social integration with individual accounts。
According to the reported author, wei ji-chul, the world social security research centre of the chinese institute of social sciences, there are two reasons why future pension gaps may arise: first, the social integration account on a pay-as-you-go basis for defined treatment (db), whose hidden debt was not paid at the time of conversion; second, individual account funds that are specifically earmarked for contribution certainty (dc type) have been misappropriated into empty accounts。
“since such a large hidden debt does not immediately cause a serious current financial deficit, it will gradually be reflected in future financial accounts.” the report states that hidden debts will gradually be turned into financial gaps in future cash receipts and that the larger the hidden debts, the less ready to represent the fund, the more difficult the financial situation of basic pension insurance will be in the coming years。
This is not the first time that china has measured the hidden debt of pensions. At least five institutions have published measurements of the hidden debt of pensions in the last three years。
In june 2012, the team of the chief economist of the bank of china, cao cao, estimated that china's hidden pension debt would amount to 18. 3 trillion yuan in 2013。
In december 2012, the national balance sheet prepared by a research team led by the then chief economist of the greater central china region of the deutsche bank indicated that there were gaps in china's basic pension insurance system for urban workers, which, assuming that fiscal subsidies would remain unchanged in 2011, would run out of accumulated balances in 2022 and would remain in debt thereafter, leaving a cumulative gap of $3. 7 trillion between 2013 and 2050。
In november 2013, professor zheng wei et al., faculty of economics, beijing university, estimated that the pension insurance fund would show a shortfall in income and expenditure in 2037 and that the pension insurance fund would be depleted in 2048。
Assets liabilities made by li yang's team, vice-president of the chinese institute of social sciences, december 2013
The results show that basic old-age insurance for employees in urban enterprises, including institutional enterprises, will be unaffordable in 2023, the accumulated balance will be depleted in 2029 and the cumulative shortfall will reach rmb 80. 2 trillion in 2050, or 91 per cent of GDP in that year。
In response to a question about the deficit in the pension fund, makai said that the china pension fund had no problems in terms of overall guarantee of current payments, and had never seen the balance of payments to be more prominent and uncertain, since the factors affecting the income and expenditure of the pension fund were diverse and complex and the extent of the shortfall was difficult to determine。
The pressure on the fund to operate is increasing year by year
Zheng weng, director of the world social security research centre of the chinese institute of social sciences, believes that the sustainability of pension funds will rise to the level of major contradiction immediately after the reform of the pension insurance system in the institutional sector has resolved the biggest injustice, namely the “two-track system”。
Data on the operation of pensions in china for 2013, published under the authority of the china pension development report 2014 - transition to the nominal account system, indicate a general decline in the indicators of the basic pension insurance system for urban workers and increasing pressure on the operation of funds, particularly the current balance of 22,927 million yuan less than in 2012。
According to makai, in the current period, the income and expenditure of the basic pension insurance were generally stable, and the fund's income exceeded expenditure, leaving a balance. Two issues are worth noting: regional disparities, with some provinces with much savings, others with low balances, and central fiscal transfers to pay subsidies to sustain payments; second, the fund's income grew at a slower pace than its expenditure。
Makai indicated that it was a matter of concern that the balance of payments was widening as the ageing process accelerated。
“the result of this expansion is to keep the balance in balance, but the balance is also getting smaller, to a certain extent, to eat the old ones, and to run out of them.” mackay said。
Data for 2013 show that the total income of the basic pension fund for urban workers amounted to 22,68 billion yuan, an increase of 26,79. 9 billion yuan over 2012, an increase of 13. 4 per cent and a decrease of 4. 99 percentage points。
The total expenditure of the basic pension insurance fund for urban employees in 2013 was 1847 billion yuan, an increase of 29. 9 billion yuan over the previous year, an increase of 18. 69 per cent and a decrease of 3. 22 percentage points, but still 5. 29 percentage points higher than the total income of the fund in 2013。
Not only has the current balance been declining, but also the cumulative fund balance. By the end of 2013, the accumulated balance of basic old-age insurance for urban workers nationwide had reached rmb 28,269. 18 billion, an increase of rmb 43,287 million over the end of 2012, an increase of 18. 08 per cent and a decrease of 4. 72 percentage points from the previous year。
Compared to 2012, the cumulative balance of basic old-age insurance for urban workers decreased in most provinces in 2013, with only six provinces experiencing an accelerated increase。
In the face of the enormous and hidden debt and the ever-increasing balance of payments, it is recommended that any delay should only make it more difficult to deal with early and early reforms。
According to mackay, both the new and the old standards
