More than 1,000 workers and pensioners in the northern Chinese city of Liaoyang were grandstanding with security forces on the 17th of this month over unpaid monies stretching as far back as two years.
Just over 600 miles away, in Beijing, Tian Xiaobao, an official from the Ministry of Labour and Social Security, was addressing the cream of the financial world in one of the year's largest financial pow-wows.
The topic? The Reform and Development Prospects for China's Pension Insurance System.
The protesting Liaoyang pensioners are owed individually about 70 yuan ($8.50) a month. But collectively, across China, the government needs at least Rmb$1.8 trillion ($217 billion) just to keep the current pension system afloat, according to the latest official estimates.
Tian tells delegates how China will over the next five years introduce a social security system with pensions, unemployment benefits and healthcare as its main focus.
"Our target is to establish a pension insurance system with Chinese characteristics, independent from employers, more fund raising channels, multi-layer forms of social security and socialized management and services," he says.
As general a statement as it is, one would be wrong to suggest that China is not acutely aware of the seriousness of its "graying" problem - President Jiang Zemin recently told the Public Security Bureau that its first priority, ahead of fighting crime, should be to prevent social unrest like the incident in Liaoyang and others that have occurred sporadically in northern China since the collapse of its state-run economy, according to the Hong Kong Information Centre for Human Rights.
Tasks ahead
Many corporate executives have had much to be excited about in recent days as China announces the opening up of its financial services industry, under western pressures over the WTO negotiations table. Concerned as many of these executives are, none could come up with an answer for China's pension malaise.
Indeed, 100 billion yuan was siphoned off the newly set up individual pension accounts last year just to fill the pension budget gap, according to the Ministry of Labour and Social Security. The World Bank figures in 1995 showed China's pension debt stood at around 5 trillion yuan.
Meanwhile, Tian says the government has six tasks ahead:
First, explore more fund raising avenues. The current fund sources are
a) employees and employers contributions,
b) investment earnings of the pension insurance fund, and;
c) fiscal expenditure - "the state will provide the necessary financing when there is shortage of pension fund," Tian promises.
Second, maintain the security of the fund. Separate revenues from expenditures to guarantee special funds are used for special purposes. Avoid investment in "risk areas" to ensure the value of the fund can be maintained and increased.
Third, deliver payments in full and on time. Forty-seven percent of retirees currently receive pension payments through banks, post offices and society accounts. Efforts will be made to speed up the delivery and regulate the supply and demand of funds.
Fourth, seek a balance between the premium rate, collection rate and replacement rate. High premium rates, 20% on payrolls at present, lead to low collection rates. Wage replacement rates, 80% in China compared to the world's average of 50%, is considered high.
Fifth, separate the government from institutions operating the funds. Independent institutions should operate under government supervision while the roles of administering and operating the funds should also be played by separate parties.
Sixth, improve the immediacy and accuracy of statistical information. More emphasis will be placed on the construction of a social security statistical information system. At present, the government says, inaccurate information has caused misjudgement in policy-making.
As China's social insurance funds pay out pensions as well as unemployment benefits, the 12 million workers expected to join the country's 6% of unemployed this year are set to strain the system further.
The World Bank estimates the number of elderly aged above 60 will rise from the current level of 10% of the population to 22% by 2030.
