China’s pension system is under mounting pressure as millions of young workers opt out of contributing to the state pension plan, reports Bloomberg.
Social media influencer Gao Pengcheng, 22, sees no reason to contribute. Living in Shenzhen and selling baked goods and cosmetics online, Gao refuses to contribute to the optional pension fund, believing it offers little future security.
A $200 monthly payment would consume nearly 20% of his income—money he prefers to spend elsewhere. “In theory, you are saving for your retirement—in reality, you are using your money to support someone else,” Gao said.
Pension fund shortage feared
Tens of millions of young workers share Gao’s scepticism, depriving the pension system of vital funding. More than 20 million workers are expected to retire annually over the next decade, but China’s shrinking workforce cannot keep pace with rising payouts.
Without government intervention, the system serving 460 million workers could face its first annual deficit within four years.
China’s economic challenges—including deflationary pressures and a persistent housing downturn—are now compounded by fears of inadequate pension funds.
This crisis threatens the Communist Party’s credibility, especially among disillusioned youth, and increases the risk of social unrest and weak economic growth, says Bloomberg.
“This confidence deficit further erodes households’ willingness to spend,” warned Zongyuan Zoe Liu, a senior fellow for China studies at the Council on Foreign Relations. “It will add to pressure on government finances that are already strained in a slowing economy.”
Retirement age raised
Beijing addressed the problem by raising the retirement age in January 2025—to 63 for men and 55 for women—but that made people unhappy.
Meanwhile, the money problem is growing. Bloomberg’s analysis of Chinese Academy of Social Sciences (CASS) data indicates the pension fund may be depleted by 2035. Without reform, the deficit could surpass 11.3 trillion yuan by 2050.
Young workers distrust the system, perceiving it as benefiting insiders such as government employees and military personnel. Pension contributions grew by only 2.3% in the first 10 months of 2024, reflecting waning public trust in the system.
China’s pension system is vast, covering 1.1 billion people, but it is underfunded. It consists of three streams, all of which are underfunded to some degree. The first covers urban workers and civil servants, who contribute about 8% of their salary, with their employers adding 16%.
In addition to this basic pension insurance, China has introduced two other streams, but neither has made a big difference yet. The second stream, introduced in 2004, has employers and employees paying into private, tax-deferred accounts, similar to 401K plans in the US.
In the third stream, launched in 2022, workers contribute to tax-sheltered savings funds, similar to Individual Retirement Accounts (IRAs) in the US.
Gig workers’ problems
Gig workers and part-time employees, representing nearly a quarter of the workforce, are particularly hesitant to participate in pension schemes. Many cannot afford contributions amid stagnant wages and rising unemployment.
Surveys show only 28% of companies fully comply with social security obligations.
Doubts about the pension system have led young people like Gao to invest in stocks and luxury goods instead. Others, like 24-year-old research assistant Humphrey Yang, refuse to join the pension programme altogether, saying they would fend for themselves.
Economists warn that opting out of pension contributions could leave young workers vulnerable in retirement. However, many believe the government will ultimately intervene to prevent system collapse.
Peking University professor Yao Yang argued, “No country will default on their pensions.”
Yet scepticism prevails. Long Bai, a 37-year-old gym salesman, has stopped contributions to the state pension plan. “The future of this country is not clear, and young people know they are just paying for the older generation. Even if you contribute, there isn’t much in it for you,” he said.
