China's State Council on Wednesday announced the government will set up a central adjustment system in July to ensure adequate pension payouts for provinces experiencing less dynamic growth.
A government official, in a statement posted on the council's website, called the move an important step in creating a national pension plan "as soon as possible" to deal with the challenges facing provincial pensions in regions on the periphery of China's economic boom.
You Yu, vice minister of human resources and social security, said there are eight workers for every retiree in bustling Guangdong Province, facing Hong Kong and Macau on the east coast of the mainland, but the ratio for Heilongjiang Province in northeastern China is less than 1.3 to 1, leaving its pension fund facing severe challenges.
The State Council said assets for the central adjustment system would come from contributions from the provincial pension insurance funds that will begin at roughly 3% of the average wages of their respective work forces, and "gradually increase."
The vice minister said under the adjustment arrangements provinces with fast-growing economies and young work forces — "with relatively large fund balances and strong support capabilities" — will be provinces "of contribution" while those receiving more in disbursements than they contribute will be "beneficiary provinces."
The new system won't result in any contribution increases from workers or companies, the official said.
The official and the State Council announcement said the new system will contribute to the pension system's sustainability.