At dawn look to the East

April 2017
china flag
China is not known for a generous or well-designed pension system, but a look to the East could nevertheless shed some light on how to manage retirement in the face of an inadequate welfare system.

In China, the state retirement age is exceptionally low – 60 for men and 50 for women, while the life expectancy is 74 and 79, respectively. A typical Chinese retiree receives about 2,250 Chinese yuan. This would correspond, in terms of purchasing power, to £441 per month which is 70% of the UK state pension. Only those few lucky ones who used to work in big, often state-owned, enterprises have an occupational pension.

The current state pension system is under pressure by the low retirement age and the rapidly increasing life expectancy. The demographic change is not helping either. After 35 years of one-child policy China is facing a rapidly aging population. By 2050, over a quarter of the population will be older than 65. Unlike western countries, China is getting old before it gets rich. This means that the state pension, in terms of purchasing power, will erode over the next couple of decades.

Without much choice, Chinese people seek out their own ways to manage retirement.

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