Although it is the most populous country with an extensive workforce and a booming economy, China will find itself in "funding the old age" bind within the next generation.
The country is on a cusp of a drastic demographic shift as consequences of the one-child policy become visible and the ratio between workers and retirees changes. In 1979, China implemented a "one-child policy" in an effort to control population growth.
"China already has the 1, 2, 4 factor, meaning that one child supports two parents and four grandparents," explains says Yvonne Sin, a World Bank Lead Social Protection Specialist.
Today, China's older than 60 crowd account for half the elderly in Asia.
China has had a generous, if unfunded, pay-as-you-go (PAYG) pension scheme for those in state-owned enterprises (SOEs), which covers a percentage of the workforce. A similar scheme covers civil service and public institutions employees.
China has started thinking about reforming its pension system, and the government has considered that it will have to start refunding obligations promised to SOEs employees.
But even as SOEs become less competitive in global markets, the government needs to take care of the people to whom it promised retirement benefits over the years.
Up to the late 1990s, its practice was to retire people early. The government used the pension system as a substitute for welfare or as means to control unemployment, explains Sin, adding that the system was often abused, which only made it more unsustainable.
Aware that this approach wouldn't solve its pending crisis, China moved in 1996 toward creating a multi-pillar approach to pensions.
But China believes in reforming gradually and slowly. "Everything is a pilot stage," explains Sin.
The government is trying to create incentives for people to work longer and don't take early retirement.
They are experimenting with funding the second pillar. But "the Chinese capital market isn't quite ready so they want to pursue it in gradual fashion," says Sin.
China has the first pillar, while the second and third are in their infancy, explains Sin, adding that the government has created the zero pillar, which is really a social safety net for the poor elderly.
But these changes apply only to SOEs workers. They don't encompass civil service or public institutions employees. "There's no coordination. These entities are trying out different pilots unrelated to those for SOEs employees," says Sin.
How to care for the rural population, which represents 60% of the total, is another challenge China must address.
"Some people believe that as long as China continues to develop and urbanization continues, the rural issue will disappear," says Sin. "But it probably won't be that simple. When young people move to the city and leave the old behind, it only exacerbates the problem."