Can China Afford to Live Longer? Addressing the Pension Gap in Asia

Thanks to its growing middle class, urbanization, falling poverty rates, and improved healthcare, China’s average life expectancy has more than doubled within one generation to reach 762 – five years longer than the global average. By 2050, there will be over 600 million retirees in China. Low birth rates, stemming from China’s one-child policy, and a lack of immigration, are adding to the country’s rapidly aging population and plummeting ratio of workers to retirees. That all adds up to a projected seven-percent year-over-year growth in China’s long-term savings gap—which is expected to reach US$119 trillion by 2050.1

But China can close this looming gap. The nation’s almost unprecedented wealth creation over the past decade, combined with a personal savings rate of 38 percent3 (significantly higher than for the US or UK, at 3.5 percent and 5.9 percent, respectively), gives China the means – and more importantly, the right savings behaviours and culture – to avoid this retirement debacle.

At the moment, however, most household savings in China are not in preparation for future retirement. Chinese families are more likely accumulating assets like homes and cars, saving for their children’s education, or even preparing to support aging parents!


The reason for this contradiction lies in the mistrust many Chinese citizens put in investment vehicles. The population remains largely “unbanked,” with approximately 50 percent of Chinese household savings (excluding property) held in savings deposits with negligible financial returns.3 Also, government regulations limit access to fruitful overseas investment options that would help Chinese savers diversify their investment risk1 (for example, China has a yearly USD$50,000 cap on exchanging yuan for foreign currency.)4

Bridging the Gap

Studies show greater financial knowledge by itself rarely translates into action. What does spur action is giving individuals access to smart tools, default options, tax incentives to save, and guidance that can help them succeed. Individuals, employers, government and financial intermediaries across China all have important roles to play in securing the financial future of the nation. 

David Anderson
by David Anderson

President, International, Mercer

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