China’s social security fund is stable, and there is no problem with insurance payments, the central government announced on Feb 26.
But the rapid rate at which the average age is growing poses major challenges to the sustainable development of the country’s insurance system, You Jun, vice-minister of human resources and social security, said at a news conference.
Surpluses in the five major social security insurance programs－including pensions and medical care－have steadily grown in recent years despite increasing expenditures, he said.
Total surpluses reached 7.6 trillion yuan ($1.2 trillion) last year, compared with 6.6 trillion yuan in 2016, You said.
Pension insurance spending for retirees from companies reached 2.86 trillion yuan last year－up 10.4 percent over 2016 but still managing to leave a yearly surplus of about 420 billion yuan, he said.
The total insurance surplus reached 4.12 trillion yuan as of the end of the year, enough for payments of pensions to company retirees for 17.3 months, he said.
Of the five insurance types, which all enterprises in China are obliged to pay for their employees, pensions, medical and unemployment insurance portions are paid by employers and employees together, while insurance premiums related to work injuries and maternity are paid solely by employers.
Although the social security fund in general is stable, deficits exist in certain places, You said.
Pension fund surpluses in 2016 in 13 provincial regions, including Jiangxi, Hainan and Hubei provinces, are not enough to sustain payments for one year, because expenditures are growing faster than income, according to the ministry.
Anticipating increased payments into the insurance fund, various government departments have taken steps to ensure sustainability, including investing reserves for profit and acquiring more government investment in the fund, You said.
In 2016, governments at all levels invested 1 trillion yuan in social security, accounting for 5.72 percent of the country’s total expenditures, he said.
“Considering the fact that government expenditures on social security accounts are more than 20 percent in some countries, such as the United States and Germany, China still has potential to invest more,” he said.
The number of people aged 60 or above on the Chinese mainland reached 241 million as of the end of last year, accounting for 17.3 percent of the total population, compared with 16.7 percent in 2016, the National Bureau of Statistics reported in January.
Zhu Junsheng, a researcher at the Development Research Center of the State Council, said that pension payments will face increasing pressure, and the growth in pensions for retirees will continue to slow.
Commercial insurance should play a greater role for a more balanced development of pension insurance, he said.