China has announced plans to significantly enhance its 2.88 trillion yuan ($406 billion) social security fund in response to the country’s rapidly ageing population.
With the number of new births declining and a shrinking younger workforce to support its seniors, the National Social Security Fund is set to become “bigger and stronger,” according to Ding Xuedong, the fund’s party secretary.
Ding’s remarks were published in the Communist Party newspaper, the Study Times, on Monday.
Addressing the Aging Population Crisis
China faces a formidable challenge over the next decade, with approximately 300 million people expected to retire—a figure nearly equivalent to the entire US population.
By 2040, one in every two people aged over 65 in the Asia-Pacific region will reside in China, according to estimates by Euromonitor.
The National Social Security Fund, established in 2000, serves as a “strategic reserve fund for social security needs during the peak period of population ageing and the ballast of my country’s social security system,” as noted by Ding.
He emphasised that China has already entered a moderate ageing stage, and the next decade will usher in severe ageing, making the expansion and strengthening of the strategic reserve fund more urgent and challenging than ever.
Financial Stability and Future Investments
Concerns about the sustainability of China’s pension system are growing, with the state-run Chinese Academy of Sciences projecting that the pension fund could run out of money by 2035.
In response, Ding outlined several key initiatives to bolster the fund’s capacity.
These include improving and expanding the scale of pension fund investments, increasing transparency through the active disclosure of important financial information, and stabilising public expectations regarding old-age care.
Ding also highlighted plans to boost investments in the domestic capital market.
The fund will focus on long-term equity investments in strategic and essential areas that are crucial to the national economy and people’s livelihoods.
Moreover, investments in scientific and technological innovation and new quality productivity, which are key government priorities, will be increased.
Preparing for the Future
China’s efforts to reinforce its social security fund reflect a broader strategy to prepare for the impending demographic shift.
As the country braces for a rapidly ageing population, the government’s focus on expanding and strengthening the social security system aims to ensure that the needs of its elderly citizens are met in the coming decades.
(With Inputs from Reuters)
