• Global Research
    • General Research Insights
    • Demographics

China’s pension reform

  • Article

China’s pension reform: Bolder measures needed to bridge the funding gap

  • An ageing population and low interest rates are posing challenges to China’s pension system
  • Raising the retirement age will move the needle, but we think bolder steps are needed
  • China’s huge pile of household wealth can help – RMB55trn could flow into insurance and pension products by 2030

The problems. An ageing population and a low interest rate environment are the two main challenges facing China’s pension system (many other countries have the same problems). Other issues include urban-rural disparities, regional funding imbalances, and limited pension options.

Sources: CEIC, National Council for Social Security Fund, MOHRSS, UN Population Division Data Portal, Netease, NPC, OECD, CASS, HSBC estimates; Data as of 2023

Incremental reforms to bridge the funding gap. In Q4 2024, China announced an increase in the retirement age and rolled out private pensions nationwide. The government has also transferred shares from state-owned companies to the National Social Security Fund to bridge funding gaps in the state pension system, which covers about 1.1bn people.

Note: Denotes women in managerial positions, while women employed as basic staff will have their retirement age increased from 50 to 55 Sources: CEIC, National Council for Social Security Fund, MOHRSS, UN Population Division Data Portal, Netease, NPC, OECD, CASS, HSBC estimates.

Bolder steps needed to re-engineer the system. We think further reforms are needed to address gaps in coverage and aid the transition towards sustainable and more transparent pension models. In the experience of other countries, a partial shift from defined benefit schemes to defined contribution schemes is often inevitable. Given the complexity of pension reforms, early planning is preferred to avoid overburdening either the state or private employers. We look at examples in the Netherlands and Chile and suggest re-engineering Pillar 1 (the state pension) and Pillar 2 (employer sponsored pensions) by balancing guaranteed benefits with individual savings plans.

Channelling China’s vast household wealth into pension savings. Based on our estimates for 2024, Chinese household wealth totals cRMB600trn, with c30% in cash and deposits and c44% in real estate. In the next few years, we expect to see a strategic reallocation towards non-cash financial assets, particularly under-allocated private pension and insurance products. By 2030, we estimate household wealth will rise to RMB800trn, with RMB55trn flowing into insurance and pension products.

Sources: CEIC, National Council for Social Security Fund, MOHRSS, UN Population Division Data Portal, Netease, NPC, OECD, CASS, HSBC estimates.

Would you like to find out more? Click here to read the report. Please note, you must be a subscriber to HSBC Global Research to access this link.

Dig deeper: Listen to Under the Banyan Tree, as Herald van der Linde sits down with Prerna Garg to discuss what mainland Chinese savers could do with a mind-bending USD22trn in savings, and what that could imply for markets at home and beyond. Available on Apple Podcasts, Spotify or wherever you get your podcasts.

To learn more about HSBC Global Research, including how to subscribe, email us at AskResearch@hsbc.com

HSBC Global Investment Summit

Our second Global Investment Summit took place in Hong Kong 25 to 27 March 2025. Explore expert insights and thought provoking dialogue on pressing opportunities and challenges with experts and leaders from around the world.

Need help?

Find out how we can support your transition to net-zero.