Unification of pension funds on agenda for five-year plan

Experts say national system will allow funds to flow to rapidly graying areas

After laying the groundwork for more than a decade, China has announced it will set up a unified national pension system before 2025.

The decision was unveiled in a document released by the Central Committee of the Communist Party of China late last year, as policymakers addressed challenges posed by a rapidly graying population.

The document makes wide-ranging proposals for China’s development priorities for the 14th FiveYear Plan (2021-25) period and beyond, with details set to be ironed out at the two sessions — the annual meetings of the country’s top legislature and top political advisory body — which start next week.

In a section of the document on creating a stronger safety net, the CPC Central Committee said China needs to achieve “national unification” of basic old-age insurance.

Lu Quan, secretary-general of the China Association of Social Security, said the unification of old-age pension funds has been widely achieved at the provincial level, which is a major milestone. A decade ago, most of the funds were separately run by authorities at city or lower levels.

Sources of revenue for pension funds include contributions from local companies and their employees, government subsidies and earnings from investments, according to the Ministry of Finance, which oversees their management. The money is used to pay retirees’ pension benefits and reimburse their health bills and funeral costs.

Experts say a unified national system — which would allow for the flow of funds from regions with younger populations to those with larger numbers of elderly people — will help optimize fund management, given that some rapidly aging regions are heavily dependent on central government bailouts.

“The task to achieve unification is urgent, and cannot be postponed further,” Lu said.

Researchers estimate that 80 percent of a national surplus would be generated by city clusters in the Pearl River and Yangtze River deltas, Lu said, referring to the manufacturing hubs that emerged following economic reforms that began in the late 1970s.

Northeastern regions, meanwhile, are struggling to meet the pension requirements of their populations, official data shows.

In 2017, then social security minister Yin Weimin said Heilongjiang province had the country’s most alarming retiree-worker ratio. For an individual pension holder withdrawing from the fund, the equivalent of 1.3 workers contributed to the fund in Heilongjiang.

However, the ratio was 1-to-9 in Guangdong province, where the

Pearl River Delta is located.

A report published by the Chinese Academy of Social Sciences in 2019 found that pension funds in several provinces, including Jiangxi, Hubei, Gansu and Qinghai, faced serious financial issues.

No time to spare

The drive to unify the funds came as the Ministry of Civil Affairs, which oversees a sprawling network of nursing homes, projected the number of Chinese aged 60 and above would surpass 300 million by 2025.

The payout pressure is also fueled by sweeping efforts to improve pension benefits and cut fees for businesses. The payouts from pension funds have been increasing by an average of about 5 percent a year over the past four years, according to a China Central Television report.

Over the past four decades, coastal areas have emerged as the drivers of the country’s fast-growing economy. With numerous better paid jobs, coastal regions are favored by young workers in search of opportunities.

With more than enough contributors to pension funds, these regions have lowered the rate of business contributions to improve their appeal to investors and the capital market.

However, less affluent regions hit by exoduses of younger workers have raised businesses’ contribution rates to meet retirees’ payouts, which in turn has raised labor costs.

Lu said areas with younger labor forces that have reaped the “demographic dividends” are reluctant to embrace unification, as it would spell the loss of control over the rate of business contributions. “They have become the biggest opposition force to a unified system,” he said.

Groundwork done

The resolve to quickly complete the unification process has followed more than a decade of preparation for the move.

China started to push for provincial-level unification in 2008, nine years after people aged 60 and older accounted for 10 percent of the country’s population — a benchmark for an aging society.

China’s Social Insurance Law, which came into effect three years later, stipulated that steps be taken to piece together the segmented pension fund system, which was established in the 1990s as part of a social safety net program.

In recent years, employment authorities set up a national social security database. Taxation authorities also took over the collection of social security fees, including those for pensions, to guarantee more efficiency.

In 2018, central authorities introduced a temporary relief measure to direct money from provinces with pension surpluses to regions struggling to meet retirees’ payouts.

“All of these (measures) have laid important foundations for a national system,” Lu said. “It was impossible for China to complete the process in one go given China’s economic and fiscal situation earlier on.

“When completed, the unification will help create a fairer labor market, which can benefit China’s regional development and help China shift to new development models.”

In mid-2019, the Hong Kong Police Force reported that the overall crime figures for the first half of the year had reached a record low since 1977, when the system of six-monthly reporting was introduced. The crime rate had fallen for the 12th consecutive year, and the city’s reputation as one of the safest cities in the Asia-Pacific region seemed as secure as ever. Starting from June 9, 2019, however, this all changed, when the protest movement and its armed wing declared war on society, causing criminality of all types to spiral.

Although things have since settled down, the repercussions of the insurgency have yet to fully subside. Whereas 10,200 people were arrested for their involvement in protestrelated crime, only about 24 percent have been prosecuted so far. Of the 940 people whose cases have been processed by the courts, about 80 percent have received punishments of one sort or another, with some of the rioters being sentenced to substantial terms of imprisonment of up to 5½ years.

In judging the overall law and order situation, the updated crime statistics are always informative, and sometimes instructive. They not only indicate the levels of general safety, but also alert the public to the latest crime trends, which enables them, if necessary, to take precautionary measures. If a particular type of crime is proliferating, this may mean that remedial measures are required. If so, this can involve new laws, more intensive policing, or tougher sentences.

Thus, for example, given that 70 percent of those involved in serious crime are exploiting the system of pre-paid telephone cards, the government last month proposed the regulation of all Hong Kong mobile phone users, requiring the provision of real names and personal details for registration purposes. Since, moreover, drug trafficking cases are increasing, the law enforcement agencies will have to adjust their focus. As the incidence of online shopping frauds tripled from 2,194 in 2019 to 6,678 in 2020, the courts will need to mete out deterrent sentences on culprits, thereby demonstrating that this activity will not be tolerated.

In 2019-20, when the insurgency was at its height, large numbers of police officers had to be diverted away from their regular duties, including crime prevention and intelligence gathering. They were required instead to police the riots and investigate protest-related crimes, much of it involving injury and destruction. In consequence, there was a spike in “ordinary” criminal cases, with, for example, burglars, fraudsters and robbers having a field day, and this is reflected in the latest crime statistics.

One of the protest movement’s vilest tactics was to target beat officers, single patrolmen and officers responding to “999” calls. To ensure their safety, therefore, much of the force’s routine anti-crime activity had to be suspended. In consequence, street crime jumped, including pickpocketing, robbery and sexual assault. With the apparent return of normality, the latest crime report is, therefore, an important indicator of the overall safety of the city, and merits close analysis.

On Feb 2, when the Commissioner of Police, Chris Tang Ping-keung, briefed the Legislative Council about the crime situation in 2020, he painted a picture which, like the curate’s egg, was good in parts. The overall situation, notwithstanding some concerns, stabilized last year, which was reassuring. The number of crimes related to the social disturbances had, moreover, dropped since the enactment of the National Security Law on June 30, 2020, with 97 people having been arrested on suspicion of violating the new law. Offences related to public order and possession of unlawful instruments fell, respectively, by 71.7 percent and 54.7 percent, which showed the force now had the upper hand. Whereas, over the past year, the number of arson cases was reduced by half, possession of offensive weapons cases and criminal damage cases also decreased by, respectively, 23.2 percent and 14.4 percent, which was an encouraging development, related, in part, to the new law.

At the same time, Tang cautioned that the police could not let their guard down, as the violent protesters have certainly not gone away. In this, he was quite correct, for although the insurgents may have suspended operations, partly because of the pandemic, they remain highly dangerous, and could mobilize again at any time. Of immediate concern, Tang noted, is the threat of “lone wolf attacks”, against which the force must remain vigilant. On Dec 1, for example, there was a petrol bomb attack at the Police Sports and Recreation Club, in Kowloon, and it is clear that officers remain in danger from terrorists, who still have access to the materials they need and can strike at will.

In spite of the hopeful signs, however, there are ongoing problem areas, although the situation is, in some respects, swings and roundabouts. The total number of crimes reported in 2020 rose by 6.8 percent to 63,232, although many were fraud-related. There were 842 crimes reported for every 100,000 people, compared with 789 crimes in 2019, although this may reflect a renewed confidence in the efficacy of local policing. Whereas robbery cases rose by 25.7 percent to 264 in 2020, there was a decrease of 12 percent in recorded burglary cases, at 2,095, while serious drug offences climbed by 55.3 percent, to 1,149.

Although blackmail cases, many involving “naked chat” scams, soared from 355 in 2019 to 1,399 in 2020, and deception cases, often involving online shopping frauds, rose from 8,216 in 2019 to 15,553 in 2020, Tang was at pains to point out that the second half of last year saw an improvement on the first half, with the number of crimes declining significantly as the year wore on. This is readily explicable, as it was only toward the latter part of 2020, with the insurgents at bay, that the force was once again able to concentrate its energies upon combating general, as opposed to protest-related, crime.

Although the hikes in crime in particular areas are obviously a worry, some real positives have nonetheless emerged from the latest statistics. In particular, after the horrific crimes inflicted by the protest movement in 2019, which included homicide and setting people on fire, it was gratifying to learn that violent crimes decreased by 3.1 percent last year.

Since June, the police have been able to concentrate more upon their core functions, including crime investigation, and the increase in their overall detection rate, from 37.1 percent to 37.8 percent, was, albeit slight, clearly welcome. Indeed, once particular offences are broken down, it emerges that the police detection rate for robberies was 63 percent last year, up from 37 percent in 2019, while the detection figure for burglaries was 28 percent in 2020, an increase of 10 percent over the previous year. These trends will hopefully gain momentum this year, and the law-abiding public must also contribute to making the city a safer place.

During the insurgency, the protest movement made wide use of young people, often involving them in its bomb-making activities. Their gullibility was ruthlessly exploited, and they were simply treated as cannon fodder, whether throwing Molotov cocktails, destroying traffic lights, or tossing bricks onto the roads. This, of course, was tragic, particularly when they faced serious punishment upon apprehension. Most of them had little understanding of the issues at stake or the long-term harm they were doing, let alone the ulterior motives of the protest leaders who were so shamelessly leading them up the garden path.

It is, therefore, gratifying to learn that, in 2020, there was a decrease of 6.6 percent in the number of arrests of juveniles and young people, and that the number of young offenders arrested for public order offences fell by 40 percent. That said, the number of young people involved in triad-linked crimes and robbery almost doubled, which is alarming. It strongly suggests that serious delinquency, much of it unleashed during the insurgency, remains a threat, and will have to be neutralized by more responsible teaching and better parenting. As part of its focus for 2021, the force plans to strengthen communication with the public proactively, in particular young people, and this will hopefully bear fruit.

Quite clearly, there are important lessons to be learned from the latest crime figures. Although they are very encouraging in some respects, they also reveal the existence of underlying problems, some of which are increasing. Although the police, the prosecutors and the courts can do much to promote a safer society, others in government, including the teachers, also have a pivotal role to play. Tang’s report, therefore, is a wake-up call, and everybody in a position of authority must play their part in redressing the outstanding areas of concern.