Pension pressure up as less paid in, more paid out

Editor's note: The authorities have increased pensions by 5 percent. How is this being funded since the pension contributions that employers have to pay for their employees have been reduced at the same time? A post published on the official WeChat account of Qin Shuo, a financial commentator, says:

The authorities have raised basic pensions for 15 consecutive years, and the latest rise is expected to benefit 118 million pensioners nationwide. However, the declining growth rate of pension funds in recent years has also caused some to wonder whether the country will be able to raise pensions in the years ahead.

Although pensions have kept rising, the pension replacement rate - the ratio of a pension to a person's preretirement income - has been on a downward trend. According to the standard applied by the International Labor Organization in 1994, if the rate falls below the alert level of 55 percent, the living standard of retirees will be seriously affected. International experiences also show that it is only when the pension replacement rate of retirees exceeds 70 percent that they can basically maintain their previous living standard. The rate in China has declined from 87 percent in 1998 to about 45 percent now.