[Video] Why young Chinese are losing faith in the pension system
China’s social security system covers more than a billion people, yet many young workers hesitate to pay in. Wide payout gaps, ageing pressures and low wages are eroding trust in pensions meant to secure their future. ThinkChina’s Yi Jina finds out more.
China’s social security system covers five mandatory insurances — pension, medical, unemployment, work-related injury and maternity — as well as a housing fund. It provides a basic safety net for more than a billion people. Yet younger workers are increasingly hesitant to contribute, particularly to pensions. As Dr Zhao Litao, senior research fellow at the East Asian Institute, NUS, observes, the system is “broadly acceptable, but not fully trusted to be enough”.
Contributions are split between a personal account and a government-managed pooled social fund, which is used for pension payouts, medical cover, investments and so on, essentially redistributing wealth. And it’s this pooled fund that drives much of the distrust.
One major concern is the wide payout gap. Pension payouts are calculated based on local average wages. Rural residents, such as farmers, may receive less than 200 RMB a month, while retirees in Beijing or Shanghai can collect 10,000-20,000 RMB. Even between cities, pensions can differ by several thousand RMB for people who have paid the same amount over the same number of years. Furthermore, employees of China’s state-owned enterprises, central enterprises, and public institutions also generally receive higher pensions.
Sustainability is another concern. China operates a pay-as-you-go system, where today’s contributions support today’s retirees. With an ageing population, high youth unemployment and warnings about the long-term strain on pension reserves, younger workers are increasingly anxious about what — if anything — will be left for them.
For some, the problem is more immediate. Wages remain low for many workers. China’s median disposable income in 2024 was under 3,000 RMB and social security deductions significantly cut take-home pay. As everyday costs climb, money in hand can feel far more tangible than a pension promised decades down the line.
However, here’s the catch. Sometimes, it is employers who are finding ways to dodge mandatory social security contributions. They exploit loopholes by withholding contributions during probation, pushing workers to waive benefits or shifting them onto non-full-time contracts. Some are driven by self-interest, others by a poor understanding of the law.
Some even resort to hiring retirees, who traditionally fall outside standard contribution requirements. Therefore, netizens joke, “Lost my job at 35, then reemployed at 60.”
To address these issues, last year, China’s Supreme People’s Court clarified that any agreement waiving social security contributions is invalid. Coverage has also been expanded to include part-time workers and those beyond retirement age, who can now negotiate contributions with employers. Yet, as Dr Zhao notes, enforcement remains delicate: overly strict measures could slow hiring, accelerate automation and worsen unemployment, outcomes that the Chinese government wants to avoid.
To restore trust, Dr Zhao recommends three reforms. First, inject more state capital, particularly profits from state-owned enterprises, into the pension fund to signal firm government backing. Second, narrow the urban–rural gap by gradually raising minimum rural pensions. Third, continue measured adjustments to the retirement age, a process already underway. Together, these steps could reassure citizens that the system is inclusive, reliable and backed by the state.
