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China's Brewing Pension Crisis

A rapidly aging population is stretching government budgets
A woman in a wheelchair at a memorial park in Shenyang in China's northeast
A woman in a wheelchair at a memorial park in Shenyang in China's northeastPhotograph by Q. Sakamaki/Redux

Sixty-nine-year-old Li Qingyuan has it pretty good. He and his wife live in a cozy apartment in Beijing. Since he retired in 2003 from a state-owned textile machinery factory, his pension has grown by about 10 percent a year, well above inflation. His monthly 2,800 yuan ($440) check is more than enough to get by. With the extra cash, he buys high-end cameras and lenses. “Our life is not bad at all after retirement. I am very satisfied,” he says.

Despite happy retirees like Li—and partly because of them—China’s pension program is becoming unsustainable. According to a recent report by economists at Deutsche Bank and the Bank of China, the projected shortfall for future pension payments will reach 18.3 trillion yuan by next year. People older than 60 already make up 13 percent of China’s population, and by 2050, the World Bank estimates that they will account for 34 percent. “They are trying to expand coverage rapidly at the same time they are aging rapidly,” says Philip O’Keefe, Human Development sector coordinator at the World Bank in Beijing.