Fulfilling promises

China is beginning to face up to its pension problems

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Sad but the truth hurts a lot The family of a senior partner at Deloitte has called for answers after he apparently committed suicide days after the auditing firm was linked to the Standard Chartered Iran dollar trades’ scandal. China's currency is facing strong downward pressure this year as the country's once surging growth rates slow amid a stalling global economy and signs of capital flight after years of inflows. It is a new development for the Yuan, once on a steady upward trajectory on the back of expectations that China's impressive economic strength made the currency a one-way bet. After Standard Chartered Bank, government agencies in the US are investigating dealings of Deutsche Bank and many other global banks over accusations of funnelling billions of dollars through their branches in New York for sanctioned nations like Iran and Sudan, a media report said. The investigation into Deutsche Bank is the latest in a series of cases against global financial firms since 2009, a report in the New York Times said. Earlier this week, Global banking giant Standard Chartered agreed to pay $340 million to New York's top banking regulator, settling allegations that it hid about 60,000 transactions worth $250 billion with the Iranian government and exposing the US financial system to terrorists, weapon dealers and drug kingpins. It suggests the practice of transferring money on behalf of Iranian banks and corporations flourished under a loophole in US policy that ended in 2008, the report added. I thank you Firozali A.Mulla DBA


Are we still on the past when we ought to be looking at the future . From 1950s we have this and we have lived will live with this like it or not As you probably know, the Bush tax cuts are scheduled to expire at the end of 2012. Assuming that Congress does nothing in the meantime, tax rates on long-term capital gains will increase substantially in 2013 (see attached chart).

For high-income taxpayers, most capital gains will also be subject to a 3.8% Medicare surtax in 2013, raising the rate for high-income taxpayers to 23.8%. Thus, the capital gains rate for taxpayers in the lowest ordinary income tax bracket would increase by 10 percentage points (0% to 10%); the rate for middle income taxpayers would increase by 5 percentage points (15% to 20%); and the rate for high-income taxpayers would increase by 8.8 percentage points (15% to 23.8%).

This suggests that taxpayers should harvest all long-term capital gains (LTCGs) on publicly traded stock in 2012 before rates go up. The taxpayer would immediately reinvest the sale proceeds in the same stock and sell it whenever he would have sold the original shares. Thus, from an economic perspective, the only change is that the stock is sold, and gain is triggered in 2012. Under the wash-sale rules of Internal Revenue Code Sec. 1091, losses on the sale of stock or securities are denied if the taxpayer acquired substantially identical stock or securities during the period beginning 30 days before the sale and ending 30 days after the sale. Because there is no comparable provision for gain recognition, a seller who harvests gains can repurchase immediately, eliminating the risk that the value of the stock or security will increase significantly while he or she is out of the market.However, deciding whether to use the strategy is not as simple as it might first appear, for two reasons. First, the lower rates must be weighed against the loss of tax deferral. The taxpayer is paying tax at a lower rate but paying it sooner. In addition, the economic substance doctrine might apply, delaying the repurchase or requiring the taxpayer to buy different stock. I thank you Firozali A.Mulla DBA


China has two huge advantages ... A society that respects the elderly and an autocratic government that can enact reform from on high!

I think the US has more to worry about.

american 648 in reply to jjupels

Does the oridnary people get heard in the middle?? if they don't then whats the point in enacting policies. Leave USA aside as people have the power to throw their governments away every 4 years, do the people in China have any voice???


From the Gold medals to politics all talk now as BRIC too falls , crumbles slow In the 80s and early 90s, many government officials and professors went into business to make money. Now, many people don't have that courage. Popular opinion, the capital environment, institutions, all are more complementary to the development of big firms than small, entrepreneurial ones," Wang Jianlin, chairman of real estate conglomerate Dalian Wanda, told journalists at the signing ceremony for his company's purchase of US cinema chain AMC Entertainment in May. Wang, a self-made man who now flaunts a 24-metre yacht and a private jet, said he's seen many successful Chinese entrepreneurs sell their companies and emigrate in recent years. "When most of our entrepreneurs no longer have the motivation to strive, they just sell their businesses to go enjoy themselves... then this country is done for," Wang's comments offer a glimpse into a debate quietly raging in China: whether the country's economic structure is crushing private industry. As usual in the country, at the core of the concern is a snappy, codified slogan: guojin mintui, meaning "the state advances, the private retreats." Control over the commanding heights of key industries has always been one of the Communist Party's defining political philosophies, but China has slowly liberalised, shifting in fits and starts from a stagnant economy dominated by state enterprises in the 1970s to a booming mix of free-market capitalism and state-run businesses today. However, this tide of reform has shifted in the past decade, said Mark Williams, chief Asia economist at Capital Economics in London."We nave seen the emergence of very powerful industrial groups with strong links to the state," said Williams. "That trend only intensified in 2008, when the government shifted its focus entirely to securing growth, and did that by channelling funds to the state sector to invest." Meanwhile, private firms have been left out in the cold, buffeted by declining demand from the developed world, rising wages and limited access to credit within China. Some Chinese view state-owned enterprises (SOEs) as a cornerstone of the economy while others see their growing dominance as a dangerous departure from the reform legacies of Deng Xiaoping and Zhu Rongji. "There's a real kind of clash of perceptions here about the way forward," said Patrick Chovanec, an associate professor at Tsinghua University's School of Economics and Management in Beijing. "Is the Chinese model of market socialism or state capitalism not just successful but actually dominant in the world? Does that symbolise the future? Or is there something deeply wrong with it - is it unsustainable, does it desperately need to be changed?" Economic research suggests that the model does need to be changed. Many economists agree that China's era of rapid growth fuelled by exports and investment - a period in which SOEs thrived - is drawing to a close, and that Beijing needs to cultivate other sources of growth, in the form of individual consumers and private enterprise. Thank you for bringing us all together last night. It was very transformative for me and brought back many cherished memories of our fire walk."


I'm sorry to say that private cancer clinics will be an enormous growth market in China in coming years

XiaoMu in reply to binggege7890

The good news is that Chinese people will live longer. As people live longer they are less likely to die from a heart attack at 60 and more likely to die of cancer at 80.
China has a particular problem because of the pollution we live with. Pollution in my home city of Beijing is much worse than any other comparable developed city and this tends to increase the risk of cancer. Also the education in China about smoking is MUCH worse than other middle income countries. 67% of Chinese men smoke and less than 10% of Chinese doctors will try to persuade their patients to stop smoking.
I mention private clinics because unfortunately China's public health system has been allowed to fall behind developments in other areas of society. Now wealthy Chinese people save large amounts of money to pay for private health and so greedy foreign capitalists are likely to spot the opportunity and build private cancer clinics.

lowerspace in reply to XiaoMu

Since pollution is so huge a problem as you mentioned, I see no advantage in opening private clinics in China. Why does not the rich emigrate to other countries and try to get a much better health care there?

PL123 in reply to Cute Dog

The question is, is the CEO worth 1,000 times more than a worker, while he just came in to a company to cut cost by firing staffs, cut un-profitable branches or products, close not-money-making-factories etc. When it is successful he get so and so much money plus Bonus, when not he still got all his money plus less bonus. He doesn't have to take responsiblity of other people's life/job, just his balance sheet and his own Bonus.

This is so-called legal legitimate profit in capitalism, in fact no more than just rob.


Another headwind the article does not mention is that China, unlike Japan and other older countries, is nowhere near developed status. This means there will be considerable inflation over time, which will erode real pension value.

Yikai Wang in reply to edwardong

Yes, inflation will erode the real value if it's a fully funded system and pension benefit depends on the nominal return on the saving. But in a pay-as-you-go system, the inflation will not matter, because in each year hte contribution in real term is used for the pension benefit.


I am a Chinese Citizen who will be 65 be year 2050. If the forecast of workforce labor are solid. Then this is absolutely a bad news for me.

PL123 in reply to Baiyi

It is not your choice but government policy. If you are rich enough then you don't need to work, when not I am afraid you have to. In Germany the retirement year is 67 years old, it can only go higher, but not lower because we don't have enough babies to support the social system.

Baiyi in reply to PL123

I have considered about those population policy causing the shortage of labor population.And I think when it comes ,it would be forty or fifty years.Before it comes,something important must have happened.

hmmmmmmm in reply to guest-ioeliwl

Don't worry, you can retire any time you want as long as you have the money to retire. There is talk right now to convert current pension system into a sort of 401k/IRA system where government matches contribution up to a point.

PL123 in reply to hmmmmmmm

Well as long as the retirement fund is still intact (not stolen by some Princelings), China still have time to tackle problems.

In any case don't follow the German way, the money MUST follow the payer, not in a big pot for everyone.


Yes, China should have the same kind of pension system as Greece.

BobLee1974 in reply to Baiyi

Taken unfunded obligations into consideration, US has already reached Greece level of public debt. The public debt is even higher for Japan. The economies of the two countries are also stagnant, so there is little hope for the two to grow out of their debt problems.

China wants to be the next Greece? Take a ticket and wait in line.



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