Over 40 percent of China's flexible workers reject state pensions, straining fiscal stability
More than 40 percent of flexible workers in China—including delivery drivers, livestreamers, and freelancers—are choosing not to participate in the national pension system, according to Morningstar Canada.
Their shift away from the system has contributed to the state pension fund’s first cash-flow deficit since 2018, raising concerns about its sustainability.
29-year-old delivery driver Liu Xin works six days a week in Chengdu but cannot afford the $195 monthly contribution to the state plan.
“That’s two weeks of groceries,” he said. “I can’t lock that money away for 40 years when the fund might be broke.”
His sentiment reflects growing mistrust among younger workers.
China’s Ministry of Finance reported that in 2024, social insurance revenue increased 5.2 percent to $1.65tn, but payouts rose faster, up 7 percent to 1.99tn yuan $1.66tn.
The resulting shortfall was covered by central government subsidies, even as Beijing’s fiscal deficit reached a record $790bn for 2025.
While wealthier provinces like Guangdong remain solvent, regions such as Heilongjiang and Liaoning continue to report pension deficits.
In 2023, the central adjustment fund transferred $39bn between provinces, a figure that is expected to keep growing.
Voluntary nonparticipation is becoming a central concern. Flexible workers often must pay both employee and employer shares—roughly 20 percent of income—making contributions unfeasible for many.
In Shenzhen, 32-year-old freelance designer Chen Hui questioned the value of contributing to the system.
“If the rules reward people who skip the system, why be the sucker who pays in?” she said.
Hashtags like #PensionMath, which express such sentiments, are frequently moderated once they gain traction.
To respond, Beijing began implementing structural reforms in January. Retirement ages are set to gradually rise, with men retiring at 63 by 2040.
This measure is expected to delay benefit payouts and extend payroll tax contributions by about five years.
In addition, state subsidies to the pension system have risen 8 percent in 2024, surpassing GDP growth and approaching levels typically allocated for education.
However, analysts warn this could impact other public priorities, including innovation and infrastructure.
In rural regions like Gansu, the disparity is stark. Pensioner Zhang Fengyan, 68, receives just $17 monthly.
“It’s enough for salt and noodles,” she said. “But I still pick grapes during harvest.”
Despite yearly increases, rural pensions remain significantly lower than urban ones, driving migration and dissatisfaction.
Pension funding now constitutes nearly 25 percent of government borrowing.
Beijing faces difficult choices: raise payroll taxes, cut benefits or increase debt—each with its own economic risks.
The financial pressure has also affected capital markets. The National Council for Social Security Fund sold $17bn in assets last year to meet provincial demands, shifting from a long-term investor to a net seller.
Some localised reforms show promise. Jiangsu province launched a “pension point” system for individuals to monitor their contributions and benefits.
Nationwide, a third-pillar private pension account system was introduced with tax incentives, though uptake remains low.
More extensive reforms under discussion include transitioning to a notional defined-contribution model similar to Sweden’s, where payouts adjust based on wages and life expectancy. But cultural resistance remains.
Zhang Wei of the Beijing Future Forum said, “Chinese families still treat property as their real pension.”
As workers continue to prioritise present needs over long-term security, the trend of opting out may prove as consequential as China’s real estate crisis or export downturns.
Analysts now point to pension-fund cash flow as a critical indicator of public confidence in China’s economic future and the government’s ability to uphold its social contract.
China’s pension challenges mirror issues faced by Canadian plan sponsors, particularly concerning the gig economy.
In Canada, approximately 871,000 individuals engaged in gig work as their primary job in late 2022, with many lacking access to employer-sponsored retirement plans. This situation places them at risk of financial insecurity in retirement.
Canadian pension regulators are addressing these concerns.
The Canadian Association of Pension Supervisory Authorities (CAPSA) introduced updated guidelines in 2024 to enhance governance and transparency in capital accumulation plans, reflecting the evolving nature of work and retirement savings.
Moreover, the Association of Canadian Pension Management (ACPM) is focusing on flexible pension models in 2025, aiming to accommodate diverse employment arrangements and improve retirement outcomes for all workers.
