China.com recently reported that Tsinghua University just released a study report on China’s Pension Fund Individual Accounts, which are facing more and more serious financial risks. The Tsinghua Report assessment showed the risk level is at Level Three (the top risk level is Four). The Report found that the Pension Fund Individual Accounts currently has “empty accounts” valued at RMB 4.7 trillion (around US$684 billion). The current pension payments are paid out of “accumulated balances” which are only at the level of RMB 3.5 trillion. At the current pace, the Report expects the accumulated balance to be fully consumed in the near future at which point the entire pension system may collapse. The cause of the imbalance was the difficulties that occurred in the national level process of balancing among wealthy and poor regions. The general expectation now is to put hope in the central government to supply money to fill up the black hole. The pension investment funds have not been performing well in the market and spending consistently exceeds income. The Tsinghua Report found that the current model is not sustainable.
Source: China.com, April 25, 2017