State pension growth to fall for fifth consecutive year

Beijing is increasing the state pension by a miserable 2% this year.

• The Ministry of Human Resources and Social Security (MoHRSS) made the announcement on Thursday.

Some context: Between 2018 and 2020 pension payouts grew by a cool 5% per annum, broadly in line with wage growth.

• However, China’s aging population is straining the pension fund – which is projected to be depleted by 2035 – forcing authorities to reduce annual pension rises.
• Growth in the state pension has eased for five consecutive years – this year’s 2% increase marks a new low.

The issue: China has a massively underdeveloped private pension system – which was only properly launched in 2022 – leaving many reitirees dependent on the meager state pension.

Get smart: Given China’s fiscal constraints – and unwillingness to expand welfare through debt – pensions will continue to grow at a snail’s pace.

• This will weigh on consumption growth and undermine Beijing’s attempts to develop the silver economy.