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China's society is aging quickly. That's straining public welfare and health care systems. Now that tension came to the fore last month, when hundreds of elderly retirees in two Chinese cities protested a reduction in state health care benefits. As NPR's Emily Feng reports, some of China's younger citizens are growing weary of shaky public funds, and they're embracing private policies instead.
EMILY FENG, BYLINE: Amy Chen, an investor who works at a seed fund in China, was just 22 when she bought her first commercial pension plan.
AMY CHEN: (Through interpreter) I think whether the public pension funds will actually be able to issue payments by the time I retire is actually a real problem.
FENG: This is a policy on top of a mandatory public pension fund. She's also bought a life insurance financial product to hedge her bets.
CHEN: (Speaking Chinese).
FENG: Chen checks her commercial pension account...
CHEN: (Speaking Chinese).
FENG: ...And finds her pension has fallen 2.5% in value last year. Chen's outlook is totally different from the previous generation, including that of her own parents.
CHEN: (Through interpreter) My parents rely on their public pensions to fund their retirement.
FENG: Previous generations relied entirely on state pensions, largely from state firms, but China's demographic trends mean the country is aging fast, and fewer children are being born. That strained public pension systems because fewer young workers are paying in, and payouts are rising.
GABRIEL WILDAU: When the demographics shift in an unfavorable direction, a system that worked well suddenly becomes completely unsustainable.
FENG: This is Gabriel Wildau, who covers China for the consulting firm Teneo.
WILDAU: I think China is following a pattern that we see in many other countries, where you have politically difficult reforms that are ultimately unavoidable 'cause the money just isn't there to keep benefits at current levels.
FENG: So China is encouraging people to open their private pension accounts and not to totally rely on public funds. Commercial pensions are still so new in China that there's no concrete estimate of total assets under management in these funds, but they're fast-growing, according to 2019 research from consulting firm McKinsey. Licensed professionals are racing to meet the growing demand. One seller told NPR he had a quota to sell 100 private plans this quarter.
UNIDENTIFIED PERSON: (Through interpreter) I accomplished that task mostly through selling the policies to my friends.
FENG: He didn't give his name because he's not authorized to speak to the media by his employer, which is a provincial bank. He said he is also doubtful of public pensions.
UNIDENTIFIED PERSON: (Through interpreter) If they keep raising the retirement age to 80, for example, and if I do not even live that long, then my money will be locked in a fund.
FENG: Xian Huang, a political science professor at Rutgers University, says the state is carefully monitoring the growth of private plans. Private policies could compensate for the state pension shortfall and allow coverage to extend to hard-to-reach rural areas.
XIAN HUANG: But on the other hand, it also kind of, like, established themselves as an independent authority that have resources, that have authority. That is something that an authoritarian government cannot tolerate.
FENG: And that may pose a different kind of risk for the young Chinese who are trying out this experiment with private pensions. Emily Feng, NPR News, Taiwan.
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