China’s pension plan faces prospect of change or going bust

China’s pension plan for employees at state-owned and private businesses is facing the likelihood of major reform or the prospect of going broke.

Demographic shifts are adding pressure to the system. Under the pension plan for so-called enterprise employees, which covers nongovernment workers, current employee contributions fund payments to retirees. As the working-age population shrinks and the number of retired workers grows, the younger population is increasingly burdened, weakening their incentive to participate in the retirement program. According to a 2019 report by the Chinese Academy of Social Sciences, basic pension assets for urban employees may be depleted by 2035. Rural workers are covered by a separate retirement program.