China Starts Redistributing Pension Funds

iFeng: 养老金中央调剂：广东等7省贡献大 辽宁等22省最受益

In 2019, the enterprise endowment insurance central adjustment fund budget was 484.46 billion yuan. Among them, Guangdong, Beijing, Zhejiang, Jiangsu, Shanghai, Fujian, Shandong and other seven provinces are “contributing” provinces, contributing 122.06 billion yuan; 22 regions (including the Corps) such as Liaoning, Heilongjiang and Sichuan are “beneficiary” provinces.

Recently, the Ministry of Finance disclosed for the first time the income and expenditure of the central adjustment fund.

On July 1, last year, China established a central adjustment system for basic endowment insurance funds for enterprise employees. All localities have turned over funds to form a central adjustment fund. The central government does not retain funds, and all the retirees are paid to the local governments.

According to the data of the Ministry of Finance, the budget of the central adjustment fund in 2019 is 484.46 billion yuan , which means that the total amount of funds paid by the local governments is 484.46 billion yuan, and the central government should also give the whole part of the 484.46 billion yuan.

According to the budget of 2019, seven provinces including Guangdong, Beijing, Zhejiang, Jiangsu, Shanghai, Fujian and Shandong are “contributing” provinces, contributing 122.06 billion yuan; 22 regions including Liaoning, Heilongjiang and Sichuan (including the Corps). To "benefit" provinces.

Rising Social Insurance Collections Will Lower Rates, But What About the Evaders

Social security reform has been a hot topic of late. Prior coverage can be seen in these posts:

Social Security Change Could Cause Layoffs and Shave 1.5pc Off GDP in 2019
Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer
State Council Heard the Lamentations of the SMEs, Li Keqiang Call for More Cuts to Taxes, Fees

I'm leaning back towards thinking a policy error could be coming in 2019. One of the consistent themes in recent articles is that rates will come down when more people pay taxes. However, tax evasion is widespread and reports say it is concentrated in SMEs. These firms and their employees (co-conspirators in underpaying social insurance) will bear the brunt of compliance. Large and state-owned firms that already comply with the law will derive the largest benefit from rising compliance.

An example from Jiangmen, Guangdong is given in the article. Its tax bureau began collecting taxes more than a decade ago. Compliance and revenues grew steadily, the tax rate fell. This is the correct long-term forecast, but the question is how does it impact 2019? Reports say many businesses, perhaps around one-third, are making only minimum payments. Employees could be earning as much as 300 percent of the average and only paying taxes on 60 percent of the average salary. In 2019, their wages will stagnate or fall.

iFeng: 社保转税进展：五部门联合推动 为降费率争取更大空间

After the social insurance premiums are uniformly collected by the tax authorities, will there be a substantial increase in the burden of payment? This is also a question that everyone is very concerned about.

According to the requirements of social security contributions, the salary income of the previous year is generally the base of payment. If the wages and salaries of employees are higher than 300% of the average salary employees in the previous year, 300% of the average salary of the local employees in the previous year shall be the base of payment; if the wages of employees are lower than the average salary of 60% of the employees in the previous year, the previous year 60% of the average wage of employees is the base of payment; if the wages of employees are between 300% and 60%, they shall be declared according to the actual situation.

The "Daily Economic News" reporter noted that the vast majority of people belong to the base of payment according to the wages, but the actual situation is that some enterprises have significantly reduced the base payment.

According to Hu Yijian, a professor at Shanghai University of Finance and Economics, “According to the report on social security in 2018, less than 30% of companies pay in strict accordance with the social security system.”

At present, among the 36 provinces, autonomous regions, municipalities directly under the Central Government and cities with separate plans, 22 provinces and municipalities have been charged social security fees by the tax authorities.

Generally speaking, in the areas where the tax authorities collect social insurance premiums, the fee base is being implemented year by year, the rates are stable and the income is stable, and the income is growing steadily. For example, in Jiangmen City, Guangdong Province, since the taxation department unified the collection of basic old-age insurance premiums since 2005, efforts have been made to make the actual payment base, promote the expansion of insurance coverage, and the income has grown steadily. From 2005 to 2017, the number of households paying for old-age insurance premiums in the city increased by 8.6% annually, the average annual increase of contributions was 7.2%, the average per capita contribution base increased by 14%, and the average annual growth rate of social insurance premiums was 17.8%. At the same time, the city's rate was gradually reduced from 17% before the transfer to 13%.

The aforementioned people close to the State Administration of Taxation analyzed to reporters that after the tax authorities were responsible for collecting social insurance premiums, the capacity of collection and management would indeed increase, which has already formed a consensus in society. It is necessary to levy the expenses that have not been collected before, so as to gain more space for the overall reduction of the rate. From this point of view, for enterprises that pay according to law, the tax levy will gradually and reasonably decline, creating a more fair environment for the majority of enterprises.

Harbin "Mistakenly" Says Pension Payments Delayed, Provincial Pension Fund Exhausted

The Harbin government announced a delay in pension payments this week and then claimed it was a mistake. Payments were made on time according to current reports. This sparked widespread discussion online, not only because netizens wonder how such a mistake could be made, but also because Heilongjiang's pension fund is exhausted and has shifted into permanent deficit, currently at 23 billion yuan.

The economy of northeast China has grown slower than the rest of China in recent years. China's population is aging rapidly and the northeast is no exception, but it is also losing youth who leave for better economic opportunities in other provinces. This has caused a collapse in the dependency ratio from 2.4 to 1.3 in a little more than a decade.

This isn't a new concern. Back in 2016, the pensions were in deficit: China's Pension Bust: Number of Localities in Deficit Doubles, Surpluses Quickly Drained

In 2015: Local Government Revenues Slide, Govts Use Fees to Cover Pension Deficits

This first article asks how the Harbin government could make a mistake that causes a loss of confidence in the pension system.

Guangming: 养老金发放压力大，信息发布更不能乱

In response to the “Harbin Social Insurance Administration Bureau sent a “Description on Postponing the Disbursement of Pensions” to a local bank, the Heilongjiang Provincial Social Insurance Administration Bureau responded on July 25, saying that due to the work mistakes of the Harbin Municipal Social Security Bureau The wrong information has led to misunderstandings by the masses and is now corrected. According to the Heilongjiang Provincial Social Insurance Administration, at present, the pension has entered the normal issuance state, and the increase is stipulated and the pension should be issued in the same month.

According to pictures circulating on the Internet, the document entitled “Delay of Postponement of Pensions” (hereinafter referred to as “Description”) was issued by the Harbin Social Insurance Administration to the Harbin Field Sub-branch of the Industrial and Commercial Bank of China. . According to the "Description": According to the work arrangement of the Heilongjiang Provincial Social Insurance Administration, the pension was postponed in July 2018, and stressed that "this description cannot be posted. If the depositor consults, please explain it orally."

Although there may not be a truth in the picture, this black and white text has documents that are stamped and stamped with official seals. It is hard to see that there are flaws and it is hard not to be taken seriously. According to the relevant person in charge of the Heilongjiang Social Security Bureau, the "Description" was indeed issued by the Harbin Social Security Bureau, but "due to the work mistakes of the Harbin Social Security Bureau, the misinformation caused the masses to misunderstand and is now corrected."

Although the local social security department said that the current pension has entered the normal state of distribution, there seems to be no "deferred payment", but the content of the document and the subsequent response are still skeptical. On the one hand, why is it wrong? It stands to reason that such documents have strict issuance procedures, the possibility of wrong transmission is very small, the relevant wording is also clear, and emphasizes "unpostable". Then, in the end, which link has gone wrong, the relevant local departments should give more specific explanations; on the other hand, the Heilongjiang Provincial Social Security Bureau said that it is “the work mistakes of the Harbin Social Security Bureau”. What exactly is the “mistakes” here? Is the information of "postponed issuance" wrong, or is it a "mistake" to disclose this document? To put it another way, if the document is not made public, it does not cause public concern, can the pension in July be released normally?

Similar red-headed documents were accidentally exposed, and eventually the parties responded to news that was caused by "wrong" and "mistakes", which happened from time to time. One of the core focuses here is that some red-headed documents were not intended to be public, but they were exposed because of "accidents." However, as far as many documents are concerned, this is something that should have been made available to the public. Taking this incident as an example, if pensions really have to be postponed, why can't they explain them to the general public and become "only verbal explanations"? After a similar incident, it is even more intriguing to use the information to send a mistake to explain. Accurate information release is only the basic work of the public sector. If there is a "mistake", it is necessary to find out the truth and seriously blame it, otherwise how to prevent the next "mistakes".

Of course, the reason for this incident has attracted attention. In addition to the reason that the information is “wrong”, it is even more ridiculous. The more important thing is that the problem of pensioning the pension touches the core concerns of the society. Especially in the specific circumstances of Heilongjiang Province, it has touched the sensitive nerves of the people. Last year, some media disclosed that the “China Social Insurance Development Annual Report 2016” issued by the Social Insurance Business Management Center of the Ministry of Human Resources and Social Security showed that Heilongjiang became the first province in the country where the pension balance was spent, and “debt” was 23.2 billion yuan. Therefore, whether the pension can be paid in full or not on time is naturally of concern. The more such circumstances, the more the local government should do the relevant information release work, and avoid amplifying the public's anxiety about pensions.

Whether the pension can be paid in full and on time is not only related to the immediate rights and interests of the retired people, but also corresponds to the credibility of the social security system. The disclosure of relevant information should be timely and transparent to prevent unnecessary suspicion. In particular, in areas where some pensioners are under pressure, in addition to raising funds from multiple sources, docking central adjustments, it is necessary to address the actual balance of pensions and make timely contributions to the society. Say, it is likely to be counterproductive.

This article explains the financial situation as the dependency ratio skyrockets in a region rapidly aging and losing youth to other parts of China.

US China Press: 网传哈尔滨推迟养老金入不敷出 事实真相是……

Chinanews.com reported that social security has always been a sensitive topic. The population of the Northeast has been declining for many years and it has become an indisputable fact. According to statistics, as of the end of 2016, the population of China over 60 years old has reached 230 million, accounting for 16.7% of the total population, and the population over 65 years old has reached 150 million, accounting for 10.8%.

The delay in the payment of Heilongjiang pensions has caused public concern, or the pension crisis that has been repeatedly reported in Heilongjiang in recent years. Due to the deepening of aging, in 2005, Heilongjiang's dependency ratio was 2.44:1, and in 2016 it fell to 1.3:1, which means that on average less than one and a half of the employees need to support a pension for a retired employee.

Although the Heilongjiang government has taken many measures to alleviate the pressure on pensions, it is difficult to alleviate the shortage of funds. According to Shanghai Minsheng News, the income of employee pensions in the province in 2016 was 89 billion yuan (RMB, the same below), and expenditure was 121 billion yuan. The current balance of income and expenditure was a deficit of 32 billion yuan. As of 2015, the historical balance of pensions was a surplus of 8.8 billion yuan. After offsetting the balance of payments, there was still a gap of 23.2 billion yuan, making it the first province without pension accumulation.

An opinion article links old-age insurance scams with the Heilongjiang news. Chinese are concerned about their pensions and the pension system's solvency.

QQ: 黑龙江成全国首个养老金结余花光的省份 “负债”232亿元

In Huixian County, Henan Province, the police successfully detected more than 20 series of fraud cases based on retirement pension insurance, involving nearly 2 million yuan. After investigation, I learned that Hao Mou claimed to work in the sanitation department of Xinxiang City. He has indicators to run pension insurance. He can do it as long as he can pay the money. After he has finished, he can receive 1,500 yuan a month. Many people have handed over their savings for many years to Hao, ranging from 25,000 yuan to 100,000 yuan per person. After receiving the money, Hao Mou did not move, and constantly searched for various excuses. After the masses found that they were deceived, they called the police. Most of the victims were older, unemployed people. The savings accumulated over the years were deceived and their emotions were very exciting.

In Harbin, Heilongjiang, the Municipal Social Insurance Administration issued a notice saying that according to the work arrangement of the Heilongjiang Provincial Social Insurance Bureau, the pension in July 2018 will be postponed. Later, the Heilongjiang Provincial Social Insurance Administration responded that due to the work mistakes of the Harbin Municipal Social Security Bureau, the misinformation caused the masses to misunderstand and is now corrected. At present, the pension has entered the normal issuance state, and the increase and the pension for the current month should be adjusted. Also issued in place.

At first glance, it seems that they are all point-like social news, carefully combed, and have inherently consistent logic. The victim of the fraud case in Huixian County, Henan Province, it is reasonable to say that when there is a new type of rural social endowment insurance or basic old-age insurance for urban and rural residents, why do you still need to find a door to “care for the elderly”? What is the coverage and distribution of local pension insurance? In what context, is it possible to deliver the savings that have accumulated over the years?

The news of Harbin in Heilongjiang seems to be an accident. However, in the eyes of public opinion, it is soon linked to the background of the pension balance in the Northeast: "China Social Insurance Development Year released by the Social Insurance Business Management Center of the Ministry of Human Resources and Social Security" The report 2016 shows that Heilongjiang has become the first province in the country where the pension balance has been spent, and the “debt” is 23.2 billion yuan, which extends the meaningful interpretation and is also reasonable.

It is not difficult to see that the elderly in Huixian County of Henan Province and the extensive public opinion are filled with an old-age anxiety. Pensions should be the most basic part of social security. It is an institutional arrangement that is unavoidable and taken for granted. In the current public opinion field, this topic can easily harvest a lot of attention and become a common topic throughout the age group.

This anxiety stems from the public's intuitive feedback on the current state of pensions. Pensions, as the most fundamental guarantee for maintaining the state of life in the stage of life, is an important basis for constructing people's behavioral patterns and psychological states. If it is expected that there may be problems in the pension, the individual's economic behavior tends to shrink, and it will focus on saving, restraining consumption, and tending to help each other in the early decades; people's enthusiasm for the future will inevitably shrink, leading to social psychology, Anxious state.

From the reality, for the issue of pensions, measures at the national level continue. Not long ago, the central adjustment system for the basic endowment insurance fund for enterprise employees was officially implemented, marking an important step in the national overall planning of China's pension insurance. It also means that pensions will also be adjusted between provinces to ensure that the local pensions are paid in full and on time. .

When it is clear that alleviating the anxiety of old-age care requires a coping solution, it is also necessary to carefully sort out the key points of governance. Whether many social security, including pensions, is in place is in fact an important criterion for self-definition in modern society. It is also an important topic in relation to administrative ethics: living in a modern society, basic guarantees should be enjoyed without any doubt. When the basic guarantees are shaken, it will inevitably affect the individual's stable expectations of the state of life and the confidence in the social state in which they live. The stability of the human heart is also an indispensable psychological support for a mature society.

Anxiety for the elderly requires systematic measures to relieve the burden of the people's livelihood-based value

China IRAs

Recently, a large wedding capital market came news that a tax-deferred pension insurance scheme has been submitted to the State Council, the second half is likely to launch a pilot program. The brewing for eight years, during which repeated rumors of major policies introduced CHINA an insurance company executives on the "China Times" reporter said, "because it involves a wide range, such as the Ministry of Finance, the Commission, the SASAC, social security funds and other departments, considerations will be cautious. "

Tax-deferred pension insurance, the individual purchase of commercial pension insurance, this part of the premium tax exemption from wages until retirement collar again when the insurance payment. This is called the Chinese version of the IRA (Individual Retirement Accounts individual pension accounts) to establish the system, especially to make the capital market excited, because the US stock market but had this policy for years to get rid of the bear market, to enter the 20 years of the bull market. Today, the Chinese fund industry and for this big loud applause, "Chinese version of the IRA turned to the stock market will play a significant role in promoting." Before the open sea Fund Yang Delong, chief economist believes that individual pension accounts as a long-term, stable funding , the stock market is undoubtedly a big positive.

In fact, A-share market this reaction is not strong, is still the main shock. September 9, the Shanghai Composite Index closed down 0.55% reported 3078.86 points, the end of the 5th rising trend; week has risen about 0.4 percent after losing streak two weeks.

iFeng: A股爆破点？个税递延型养老保险方案或年内推出

75pc of Chinese Firms Not Complying With Social Security

Jinghua Times News (Reporter Zhao Peng) reporter learned yesterday, "Chinese enterprises Social Security White Paper 2016" released in Beijing, research shows that there are currently 74.89% of the base unit to pay social security non-compliance, against the interests of workers. Meanwhile, there are about 20% of the units according to the specified time for the employees insured.

iFeng: 七成企业社保缴费不合规 部分单位视领导安排办理

Related:
Pension Funds Shrinking in 21 Provinces, Some County Govts Not Even Paying Wages, Borrowing To Meet Pension Obligations
China's Pension Bust: Number of Localities in Deficit Doubles, Surpluses Quickly Drained

China's Pension Bust: Number of Localities in Deficit Doubles, Surpluses Quickly Drained

In addition to retraining workers and bailing out zombie firms, the government may need to step in and support pension payments in provinces hit by the slowdown in the industrial economy.

Recently, according to "Nanfang Dushi Bao" reported that the Social Insurance Administration Center Department who issued "China Social Insurance Annual Report 2015" (hereinafter referred to as the report), the report shows, urban workers and rural residents two pension accumulated surplus of nearly 4 trillion yuan.

The report shows that last year the enterprise employees pension fund yields 3.1%, the highest in nearly seven years. Corporate pension fund yields from 2009 to 2014 was 2.2%, respectively, 2.0%, 2.5%, 2.6%, 2.4%, 2.9%.

At the same time, report data show that since 2012, corporate pension insurance fund accumulated surplus continued to expand, however, may be paid by the number of months in 2012 decreased from 19.7 months to 17.7 months in 2015. Among them, Heilongjiang corporate pension can be paid only one month.

The number of provinces where income matches benefits doubled from three to six in the past year:

Urban enterprise workers pension insurance fund current period "ends meet" a rapid increase in the province by 2014, three in 2015 extended to six, namely: Heilongjiang, Liaoning, Jilin, Hebei, Shaanxi and Qinghai.

Aside from Qinghai, those provinces are a who's who of rust belt and commodity dependent provinces. Two more provinces have less than 10 months of surplus: Hubei and Tianjin.

Due to China's rapidly aging population, it swung from pension surpluses to requiring reform in only a few years:

Tsinghua University, Employment and Social Security Research Center Director Yang Yan Sui to the "Daily Economic News" reporter, 4 trillion yuan of personal account balances are a lot inside, pay-as-you-go pension system faced challenges with the dependency ratio, within two years transformation of the pension system must be addressed.

Yang Yan Sui said: "When the dependency ratio is 3: 1 the when pension insurance rates can not be lower than 17%, if below 2: 1, everyone would have to bear 25%, the lower the dependency ratio goes the larger and heavier the increase. "

Liaoning's working population is falling and the number of people paying into the system has collapsed along with the economy:

Late last year, the Academy of Social Sciences published "China Pension Development Report 2015" that the number of basic old-age insurance system for urban workers in various provinces continue to maintain growth, but negative growth in the number of workers insured provinces has emerged, in 2014, Liaoning Province ginseng Paul growth rate of -0.38%, the number of workers.

Meanwhile, the contribution insured situation is not optimistic, in 2006 and 2015, the number of enterprise payment sector accounted for the proportion of the number of insured workers declining, falling from 89.98 to 80.3 percent, about one in every five people did not pay.

The good news is this isn't the bad news. Health insurance is even worse:

It is worth noting that, in the health insurance Employee Retirement relatively low as the bigger problem.

Report revealed that as of the end of the country to 288.93 million insured workers basic medical insurance, where the number of service workers to participate in health insurance 213 620 000, accounting for 73.9% of the total number of insured, while the total number of retirees was 75.31 million, accounting for 26.1%. Last year, Medicare Employee Retirement ratio (the number of employees and the number of retirees ratio) of 2.84, the fourth consecutive annual decline.

iFeng: 养老金“入不敷出”省份翻倍 黑龙江只够支撑一个月

Don't Follow Japan! China Pension Plans $300 B Stock Buy

Bloomberg: China Pension Readies $300 Billion Warchest for Market Foray

The country’s local retirement savings managers, which have about 2 trillion yuan ($300 billion) for investment, are handing over some of their cash to the National Council for Social Security Fund, which will oversee their investments in securities including equities. The organization will start deploying the cash in the second half, according to China International Capital Corp. and CIMB Securities.

Chinese policy makers announced the change last year in a bid to boost yields for a pension system that has long suffered low returns by limiting its investments to deposits and government bonds. For the nation’s equity markets -- which are dominated by retail investors and among the world’s worst performers this year -- the state fund’s presence is even more valuable than its cash, said Hao Hong, chief China strategist at Bocom International Holdings Co.

The NCSSF has "such a good reputation in being a value investor that if they take the lead, the signaling effect is actually quite strong," said Hong, who had predicted the start and peak of China’s equity boom last year. "It’s almost like Warren Buffett saying he is buying a stock."

A Chinese article posted at iFeng says: Don't follow Japan! They lost $100 billion in pension funds.

iFeng: 别学日本！养老金入市炒股亏了近1000亿美元

ZH: After Losing $100 Billion On Terrible Stock Investments, The World's Largest Pension Fund Is Doubling Down

So with Abenomics careening off the cliff and headed for a traumatic death, and with Kuroda having become the laughing stock of central bank circles, has Japan finally learned its lesson? Will the GPIF rotate out of money-losing stocks and back into bonds which are currently trading at record high prices? According to Morgan Stanley, the answer is not a chance, for the simple reason that as a result of an upcoming asset rebalancing, the GPIF will have no choice but to buy even more money-losing stocks.

As Bloomberg reports, because shares held by Japan’s $1.4 trillion Government Pension Investment Fund have suffered such large losses, it will need to add to those holdings to meet targets for their weighting, while selling sovereign bonds whose value has soared. Assuming no re-weighting was done since Jan. 1, GPIF will need to buy 4.2 trillion yen ($41 billion) of local stocks and sell 9.8 trillion yen of Japanese government bonds to reach its goals. The brokerage didn’t give a time frame for this buying.

I don't know that this will be a money loser long-term. Depends on how long they can wait for the end of the yen.

Social Security Funds to Enter Market

A trillion yuan in social security funds will begin to flow into investments this year, with 300 billion expected to hit the stock market.

Supporting policies and measures after According to "First Financial Daily" reported last August promulgated and implemented the "basic pension insurance fund investment management approach", the relevant departments have begun to develop the basic pension investment approach, the Department who has made ​​clear that, basically pension market operations will start within this year.

According to 2015 statistics bulletin pension insurance, the national pension fund last year, a total of 3.2 trillion total revenue, total expenditure 2.8 trillion, the cumulative balance of 3.98 trillion (including urban and rural residents and urban workers). Department who had said it expects the country may imputation for pension fund investments of about 2 trillion.

"First Financial Daily" correspondent from stakeholders at a Department who learned that due to the current pension overall level is not high, in fact, the basic pension insurance for urban workers, mainly in the prefecture-level cities, urban and rural residents in the basic old-age insurance fund major located in the county area. In the process of fund collection will be affected by many factors, this year is expected to imputation of funds for investment operations around more than one trillion yuan.

"Basic pension insurance fund investment management approach" investment, the upper limit of basic pension fund to invest in stocks was 30%, which means that within a year, which means that there will be a maximum of 300 billion pension into the stock market.

Target date for funds to start hitting the market is Q3:

For the industry concerned about the pension time to market, Yin Weimin said the pension investment operations will start this year. Market participants expect the fastest pensions will be fully open in the third quarter of this year, investment trust, and time to market may delegate investment starting point 3-6 months later.

iFeng: 媒体称养老金入市最快有望三季度启动委托投资

Shanghai Cuts Pension, Healthcare Contributions

Caixin: Shanghai Cuts Amounts Companies Have to Pay for Employee Benefits

Shanghai's government said on its official social media accounts on March 21 that firms in the city need to pay an amount equal to 20 percent of an employee's gross salary into pension accounts, down from 21 percent.
The amount for health insurance was cut from 11 percent to 10 percent, and contributions for unemployment insurance were cut from 1.5 percent to 1 percent of an employee's salary.

...Workers contribute from 10 percent to 12 percent of their gross salary each month for the benefits. Shanghai is keeping the rates for employees unchanged.

...The costs of the benefits, which commentators have criticized as among the highest in the world, have been under intense scrutiny in recent years as businesses, particularly small private firms, feel the pinch of a slowing economy.

Interpreting the New Budget

First, the general public budget revenue growth is slowing down

2015, the national income of the general public budget 15.221665 trillion yuan, an increase of 5.8% over the same caliber in 2014, down 2.8 percentage points over the previous year. 5.8% revenue growth since 1988 the lowest growth rate of fiscal revenue, also lower than the beginning of the budget arrangements. Expected early next year mainly due to revenue growth is lower than the economic impact of downward pressure, in 2015 the national fixed asset investment, retail sales, foreign trade and other major economic indicators of growth were lower than expected early next year.

...Second, the state-owned land use right transfer income continued to decline, local government fund revenue greater impact

As the bulk of state-owned land use right transfer income growth in local government fund revenue related to the local government's financial resources. By 2015, the local government fund level income of 3.821812 trillion yuan, compared with last year dropped 17.7 percent, also lower than the budgeted number (4.450951 trillion yuan), mainly state-owned land use right transfer income of only 3.2547 trillion yuan, an decrease 884 billion yuan, down 21.4%

By 2016, state-owned land use right transfer income 2.82486 trillion yuan, and down 13.2% compared 2015, it has declined for two consecutive years. Two years ago, in 2014, state-owned land use right transfer income of up to 4.038586 trillion yuan.

As a benchmark the proactive fiscal policy, the central infrastructure investment gentle and orderly, slightly expanded than in previous years, but there has been no large-scale jumped, reflecting the central government does not pay attention to the macro-control has come from fixed asset investment and stimulate economic growth.

Table 3 Central govt infrastructure investment ($ billion)

Year 2013... 2014... 2015... 2016

Investment 4376....4576....4776...5,000

Social security budget is looking like a developed nation:

Social Insurance Fund budget situation is not optimistic about the long-term

According to the Ministry of Finance announced in 2015 the Social Insurance Fund budget, in 2015 China's social insurance fund includes seven funds: enterprise employees' basic pension insurance fund, urban and rural residents in the basic old-age insurance fund, basic medical insurance fund, basic medical insurance fund, work injury insurance fund, unemployment insurance fund and maternity insurance fund.

...In 2013, the National Social Security Fund's total income 3.5994 trillion yuan, an increase of 15 percent over the previous year; total expenditure of 2.8744 trillion yuan, an increase of 20 percent over the previous year.

In 2014, the National Social Security Fund's total income 4.0439 trillion yuan, an increase of 12.4 percent over the previous year; total expenditure of 3.3681 trillion yuan, up 17.2 percent over the previous year.

In 2015, the National Social Security Fund's total income of 4.466034 trillion yuan, an increase of 10.4 percent over the previous year; total expenditure 3.935668 trillion yuan, an increase of 16.9 percent over the previous year.

In 2016, the National Social Security Fund's total income of 4.714419 trillion yuan, an increase of 5.6 percent over the previous year; total expenditure 4.354653 trillion yuan, an increase of 10.6 percent over the previous year.

(2) increase in the rigidity of financial subsidies.

Financial subsidies to the social insurance fund rapid growth, need to be vigilant. State financial subsidies to the social insurance funds increased from 627.176 billion yuan in 2012 to 2013 of 737.15 billion yuan, 844.635 billion yuan in 2014, the number of 2015 budgetary arrangements for the 974.175 billion yuan, but the actual number was 1.019815 trillion yuan 2016 will reach 1.084804 trillion yuan.

EO: 2016年全国财政预算报告解读

Local Government Revenues Slide, Govts Use Fees to Cover Pension Deficits

Shanxi, Liaoning and Heilongjiang, along with Xinjiang and Qinghai, have seen their provincial government revenue fall from last year. The shortfalls are a significant problems due to many companies avoiding pension contributions, while at the same time SOEs accelerate retirements amid the economic slowdown.

The deficits aren't new: in 2013, Heilongjiang saw a ￥4 billion shortfall in pension cash flow, with the net figure dropping almost 1500% from a year earlier. The provincial governor blamed a surge in retirements from state-owned firms as the reason for pressure on the pension system.

At the national congress that year, Li Keqiang asked Heilongjiang governor Lu Hao:

"Is there a pension arrears problem?"

"This year there is no problem, but next year, the year after, difficulties may arise." Lu Hao replied.

Premier Li Keqiang on the spot promised pensions for normal gap, the state will try to support. "Many of our older workers, before retiring in state-owned enterprises, in particular the period for the development of the Republic of have made a special contribution." He said. "Now they retired, the state should protect their lives, should ensure that they are happy in old age!"

Currently, Liaoning and Heilongjiang have not yet announced the first three quarters of economic performance data. Data show that in the first half, Liaoning was at the bottom with 2.6% growth, Heilongjiang ranked third from the bottom with 5.1% growth.

Slowing revenue growth is biting especially hard in 2015:

Ministry of Finance data released by downward pressure on the economy, industrial producer prices (PPI) continued to decline and the impact of the implementation of structural tax cuts and lower fees universality of factors, from January to September, the national, central and local government budget income increases were 5.4%, 5.6% and 5.1%, respectively, down 2.7, 0.4 and 5 percentage points.

Weak growth is causing companies to shirk on their social insurance payments:

Yang Yongqi social security law expert, told reporters that "the economic downturn is seeing a large increase in legal disputes related to social insurance. There's already many cases in Beijing."

Currently, according to the pension fund to pay tagging, individual required to pay 8% wage base, companies pay 20%. In more cases occurred in the present, Yang Yongqi said, "appears to completely avoid payment of the various social security situation, including business owners and workers to sign false labor contracts." In addition, "There are companies in order to reduce the payment of pensions, only accordance with the minimum standards for the payment of pensions, that pensions paid less. "

As a result of slowing revenue growth, governments can no longer make up the difference. This has led to a surge in "unconventional fees" designed to plug the gap, but which also damage the local economy:

"In the past, the structure of financial subsidies, local financial subsidies less pension, mostly by the central government to make up, but now, under the new normal, the central government and local governments are subject to greater constraints. Perhaps, subsidies structure will be some dramatic changes. "ZhengBingWen said.

In addition, ZhengBingWen say, there will be a dramatic change, that is "unconventional payment," the proportion may have an upward trend for some places, it is clear that this is the place to alleviate financial constraints a way, this is our stakeholders It should be noted in advance, in fact, this is a "transfer" is not conducive to improving the competitiveness of enterprises, it is not conducive to ease the downward pressure on the economy.

iFeng: 地方财政收入吃紧 养老金或现非常规缴费

Related from ZeroHedge: The Ghost Cities Finally Died: For China's Steel Industry "The Outlook Is The Worst Ever Amid Unprecedented Losses" and here: Steel Industry May Finally Be Facing the End; Systemic Financial Crisis Looming?

Pension Heaven? No, Pension Reality

A mistake people make when reading this story is that they think these pensioners have lost 84 cents on the dollar. This is incorrect. What is happening is they are receiving 16 cents of every promised dollar in benefits. Since those benefits were impossible to pay, and also unfunded, the actual loss is far lower.

Detroit Pensioners Face Miserable 16 Cent On The Dollar Recovery

Here's an article from earlier in the year: How Underfunded Are Detroit's Pension Plans?

The actuaries hired by the city’s emergency manager say that the pensions are underfunded by 40 percent to 50 percent.

...Officials working for Mr. Orr said their estimates of a 7% rate of return on the funds' investments is more realistic than the 8% used by the funds, which they said was too high because it didn't account for demographic changes of pensionholders and the funds' investment mix.

... The actuary calculates funding status for three scenarios: 7 percent (what the city requested); 7.5 percent (to show sensitivity or results to changes in investment returns) and 6.3 percent (what the actuarial consultant thinks is the most likely actual market return.) By contrast, the unions are projecting an average market return of 8.4 percent before expenses.

By those estimates, it's likely Detroit was at best 50 percent funded. Suddenly, 16 cents on the dollar turns out to be 32 cents on actual monies. But wait, there's more.

Here’s the really interesting question, however: Why is the pension fund arguing about this? Heading into the bankruptcy, a pension fund would normally try to inflate the underfunding estimates as high as possible, not minimize them. That’s because the unfunded pension liability is treated as an unsecured debt; it has to assemble with other unsecured creditors to collect whatever’s left over after the secured creditors have been paid. The bigger the claim, the larger the amount you’re likely to collect.

Chapter 9 bankruptcy is a little different, of course. Still, it doesn’t seem possible that transforming a $3.5 billion claim into a claim for less than $700 million could be in their interest. So why are they fighting this estimate so hard?
One possibility is that they’re trying to keep from triggering a Michigan law that lets Governor Rick Snyder fire and replace the board of a public pension whose funding status goes below 80 percent. Snyder could then, in theory, replace the board with one that is a better negotiating partner. But I’m not sure how convincing I find this, because we’re well beyond the negotiating stage at this point. Why would the pension funds fear Snyder more than the bankruptcy judge?

The key point to understand here is that pensioners are getting 100 cents of every dollar they put into the system. What they are not getting are their promised benefits that are impossible to pay. They are getting 16 cents on every dollar of the $3.5 billion in pension under funding.

From the Reuters article linked in the ZeroHedge piece above: Detroit pension cuts 'function of mathematics' -investment banker

The city has said about half of its liabilities stem from retirement benefits, including $5.7 billion for healthcare and other obligations, and $3.5 billion involving pensions.

Detroit has $18.5 billion in debt and $9.2 billion of it is healthcare and pension liabilities. Detroit is like almost every other municipality that has declared bankruptcy: it is the pensions and healthcare benefits negotiated by unions and politicians. They made these crony deals together, an exchange of money for power and votes. Voters are to blame as well; most politicians that have tried to cut spending on education, for example, were targeting wages, pensions and benefits of teachers. Ever time a politician tried to cut spending that flowed to the unions, they were demonized in the media and voters bought the story. Everything was going good until reality hit: these huge benefits were never funded.

No money has been stolen. Promises by crooked politicians to crooked unions will not be kept; they are being tossed out by bankruptcy judges. The precedent is now clear: impossible to fulfill pensions and benefits promises will be scrapped.

And by the way, Detroit unions looted their own pensions. Orr proposes freeze for Detroit pension funds

In another move Wednesday, Orr ordered 21 pension officials — including City Council President Saunteel Jenkins — to turn over records relating to more than $1.9 billion in excess earnings paid to city retirees and employees.

Orr wants documents and records relating to the pension fund’s practice of issuing bonus checks to retirees and a savings plan for current employees. The excess earnings totaled $1.92 billion since the mid-1980s.

Any government retiree or worker near retirement needs to find out how much their pension is funded ASAP.

And everyone else take note. The promises of Social Security and Medicare have even less legal standing that these pensions. When the money runs out, benefits will disappear. In the end, the low tide reveals all lies.