HONG KONG: After three decades of selling homemade buns on the streets of the Chinese city of Xian, 67-year-old Hu Dexi would have liked to slow down.

Instead, Hu and his older wife have moved to the edge of Beijing, where they wake at 4am every day to cook their packed lunch, then commute for more than an hour to a downtown shopping mall, where they each earn 4,000 yuan (US$552) monthly, working 13-hour shifts as cleaners.

The alternative for them and many of the 100 million rural migrants reaching retirement age in China over the next 10 years is to return to their village and live off a small farm and monthly pensions of 123 yuan (US$17).

“No one can look after us,” said Hu, still mopping the floor. “I don’t want to be a burden on my two children and our country isn’t giving us a penny.”

The generation that flocked to China’s cities at the end of last century, building the infrastructure and manning the factories that made the country the world’s biggest exporter, now risks a sharp late-life drop in living standards.

Reuters interviewed more than a dozen people, including rural migrant workers, demographers, economists and a government adviser, who described a social security system unfit for a worsening demographic crisis, which Beijing is patching rather than overhauling as it pursues growth through industrial modernisation.

At the same time, demand for social services is growing rapidly as the population ages.

“The elderly in China will live a long and miserable life,” said Fuxian Yi, a demographer who is also a senior scientist at University of Wisconsin-Madison.

“More and more migrant workers are returning to the countryside, and some are taking low-paid jobs, which is a desperate way for them to save themselves.”

If these migrants were to rely solely on China’s basic rural pension, they would live on less than the World Bank’s poverty threshold of US$3.65 a day, though many supplement their earnings by labouring in the cities or by selling some of their crop.

China’s National Development and Reform Commission, the human resources and civil affairs ministries and the State Council did not respond to faxed requests for comment.

China’s latest statistics showed some 94 million working people - around 12.8% of China’s 734 million labour force - were older than 60 in 2022, up from 8.8% in 2020.

That share, while lower than in wealthier Japan and South Korea, is set to skyrocket as 300 million more Chinese reach their 60s in the coming decade.

A third of this cohort are rural migrants, who typically lack the professional skills for an economy aspiring to move up the value chain.

The main reason China has not built a stronger safety net for them is that policymakers, fearing the economy might fall into the middle-income trap, prioritise growing the pie rather than sharing it, the government adviser told Reuters.

To achieve that, China is directing economic resources and credit flows towards new productive forces, a catch-all term for President Xi Jinping’s latest policy push for innovation and development in advanced industries such as green energy, high-end chips and quantum technology.

US and European officials said this policy was unfair to Western firms competing with Chinese producers.

They have warned Beijing that it stokes trade tensions, and that it diverts resources away from households, suppressing domestic demand and China’s future growth potential.

China, which has rejected those assessments, has instead focused on upgrading production, rather than consumption, as its desired path toward prosperity.

“It would be easier to solve the equality problem if we could first solve the productivity growth problem,” said the adviser, granted anonymity to speak freely about pension-policy debates happening behind closed doors.

“People have different views” on whether China can make that leap in productivity, the adviser said.

“Mine is that it may be difficult if we do not reform further and remain at odds with the international community.”

Pensions in China are based on an internal passport system known as hukou, which divides the population along urban-rural lines, creating vast differences in incomes and access to social services.

Monthly urban pensions range from roughly 3,000 yuan in less-developed provinces to about 6,000 yuan in Beijing and Shanghai. Rural pensions, introduced nationwide in 2009, are meagre.

In March, China increased the minimum pension by 20 yuan, to 123 yuan per month, benefitting 170 million people.

Economists at Nomura said transferring resources to the poorest Chinese households was the most efficient way to boost domestic consumption.

 - Reuters