China Prepares to Launch Nationwide Private Pension System

China, the world's second-largest economy, is facing a rapidly aging population and a dwindling public pension fund, prompting preparations for the rollout of a national private retirement system. In a joint statement today from five administrative bodies, including the Ministry of Human Resources and Social Security, it was announced that workers under the country's basic pension insurance scheme will be able to voluntarily open private retirement accounts and contribute up to 12,000 yuan, approximately equivalent to $1,650 per year.

The program is set to be implemented nationwide starting December 15. Since November 2022, China has been running a pilot program in 36 major cities, including Beijing and Shanghai.

China's pension system comprises three tiers: a state-managed basic pension system, a voluntary employee retirement plan provided by employers, and a private retirement system.

This move comes at a time when China's population is aging rapidly and beginning to shrink following decades of the one-child policy. Over the next decade, about 300 million Chinese, currently aged between 50 and 60, are expected to retire. A United Nations forecast released in July predicted that the demographic crisis could reduce China’s population by more than half by the end of the century.

In September, China's top legislative body, the National People's Congress, approved a proposal to gradually raise the legal retirement age starting in January. China, which has one of the lowest retirement ages among major economies, allows women to retire at 50 and men at 60. These policies have not changed since the 1950s.