'China should build effective pension-adjusting mechanism'

Chinese experts have lauded the nation's move on Wednesday to raise pensions for corporate retirees, but also urged the government to set up an effective long-term mechanism for pension adjustment.

Chinese authorities have decided to raise the pension for corporate retirees by 10 percent to cope with rising living costs.

The new rules took effect on Jan. 1, 2013, according to a State Council executive meeting, chaired by Premier Wen Jiabao, on Wednesday.

The government has increased the corporate pension for nine consecutive years.

Data showed the average monthly pension for corporate retirees had increased from 700 yuan in 2005 to 1,893 yuan this year, representing a compound annual growth of 11.69 percent.

Raising pensions for corporate retirees not only guarantees their living standard, but also lets them enjoy the fruits of social development, said Zheng Bingwen, a researcher with the Chinese Academy of Social Sciences (CASS).

"It is also a part of China's program to double people's incomes by 2020," Zheng said, referring to the plan set out during last year's 18th National Congress of the Communist Party of China (CPC) to double the country's 2010 gross domestic output and per capita income for both urban and rural residents by 2020.

Experts believe that the 10-percent increase is in line with the country's slowing economic growth and moderate price rises.

In the third quarter of 2012, the country's GDP grew by 7.4 percent year on year, slowing for the seventh consecutive quarter and down from 7.6 percent in the second quarter and 8.1 percent in the first, according to the National Bureau of Statistics.

China's consumer price index (CPI), a main gauge of inflation, grew 2 percent year on year in November, up from a 33-month low of 1.7 percent in October.

Zheng suggested that China should set up a permanent mechanism for adjusting corporate pension.

"The adjustment mechanism can take into full consideration the country's GDP, CPI and average salary," the CASS researcher said.

Zhou Tianyong, a professor with the Party School of the Central Committee of the CPC, echoed Zheng's view, saying that a sudden break in the trend of consecutive pension raises may provoke discontent.

More importantly, without a long-term mechanism for pension adjustment, the country's basic pension funds will find it difficult to strike a balance, the professor believes.

"If the pension funds of local authorities see an increasing amount of deficits, central financiers will have to make transfers to maintain their balances," he said.

Pension funds for retirees are set to face tremendous pressure as the proportion of old people in the country's total population is on the rise, according to Zhou.