Pension System In China Research Articles

An Analysis of the Chinese Pension System Pointing to the Urgent Need for Reform

The pension system in China exhibits variations in the level of benefits provided to the elderly, influenced by their residential and employment status. This article applies the welfare-state typology commonly used in developed countries to analyze the Chinese pension system. The analysis reveals that the amount of pension received by individuals is determined by their place of residence and the employer type, resembling the characteristics of the conservative type in international welfare-state typology. For instance, in 2015, former public servants received approximately four times the pension income compared to those from the nonstate sector. These disparities result in rural elderly individuals who retired from the private sector facing meager income during their retirement phase. Consequently, immediate measures are needed to establish a basic safety net for retired individuals lacking a basic pension, while medium- to long-term reforms are required to instill fiscal sustainability akin to the liberal Western model. This research highlights the necessity of addressing the inequities within the Chinese pension system, calling for both short-term and long-term reforms to ensure adequate support for the retired population. By drawing upon insights from international welfare-state typologies, this study provides valuable recommendations for policymakers to establish a more inclusive and sustainable pension system in China.

Driving factors and micro-mechanism of residents’ participation intention in individual pension system

The introduction of an individual pension system is crucial to improve the current pension system in China. To increase the rate of participation of individuals in this new pension system and to give full play to its pension security effect, in this study, we built a conceptual model of participation intention of residents based on the theory of planned behavior considering seven new factors. Data were obtained through a questionnaire survey, and empirical tests and analyses were conducted using methods such as structural equation modeling. According to the results, 77.8 % of residents were willing to participate in the individual pension system. The internal driving factors such as perceived usefulness, trust, family burden and policy support directly influenced the residents’ participation rate. Participation attitude was a key variable, with a partial mediating effect on participation intention. Thus, it is recommended to increase publicity and policy support, improve laws, regulations and the regulatory system, regulate market operations and enhance service quality for boosting residents' recognition and enthusiasm to participate and reducing their burden in old age.

URBANIZATION, FINANCIAL SOURCE, AND PLACE OF DEATH AMONG CHINESE LONGEVITY OLDER ADULTS

Abstract The research on place of death among Chinese oldest adults is scare. This study explored the associations of urbanization and financial source on the places of death among Chinese longevity older adults. The sample consists of 21,920 decedents (female=60%, died at home=89%, mean age at death=95) from 2000-2018 Chinese Longitudinal Healthy Longevity Survey (CLHLS), conducted by Peking University. Places of death were divided into two categories: home and other sites (including hospitals, institutions and others). Urbanization was measured by residential areas: rural or city. Financial source consisted of family financial support and retirement wage. Chi-square test showed that older adults living in rural areas and getting family finance support were more likely to die at home. Results from binary regression models show that controlling for covariates, decedents living in cities were 6.2 times more likely to die in other places than at home and those received retirement wage were 3.1 times respectively. Notably, older adults who lived in cities and also had retirement wage were 17.7 times more likely to die in other places comparing to those living in rural areas with only family finance support. Findings suggest that more older adults will choose to die at hospitals or institutions as the process of urbanization and the development of social pension system in China, which will put enormous pressure to the hospital-centered healthcare system. Improving the quality of healthcare in grassroots areas might be a feasible attempt to relive the pressure of hospital-centered healthcare system in cities.

The effect of population aging on pension enforcement: Do firms bear the burden?

AbstractPopulation aging is widely assumed to have detrimental effects on economic development, especially through an increased social security burden. This paper starts with the potential problems of the pension system in China. We investigate how local governments respond to population aging and the impact of population aging on the firm pension contributions using administrative data from the period 2008–2015. We present three findings. First, population aging increases the pension contributions of firms. Second, fiscal pressure is the channel through which population aging affects pension enforcement. Last, the pension administration system could affect the net impact of population aging.

The effect of retirement on the health of elderly people: evidence from China

AbstractThe low retirement age has imposed a heavy economic burden on the pension system in China, leading to an ongoing debate about raising the retirement age. To understand the potential costs of raising the retirement age, we need to consider the health effects of retirement policies. Using the China Health and Retirement Longitudinal Study (CHARLS) from 2011 to 2015, this study employs the statutory retirement age as the exogenous variable of retirement and applies a fuzzy regression discontinuity design (RDD) to examine the effect of retirement on the health of Chinese elderly people. We find that retirement has a non-significant effect on health with respect to a series of health indicators, different bandwidths of RDD and sub-sample groups. The finding is also robust across different retirement definitions and retirement ages. This result may be attributed to the minimal changes in income and lifestyles before and after retirement. Moreover, the findings of this study provide important evidence for policy makers to increase retirement ages in China.

The impact of demographic changes on the unbalanced development of the national public pension system in China’s provinces

The impact of demographic changes on the unbalanced development of the national public pension system in China’s provinces

Relationships between migration and the fiscal sustainability of the pension system in China.

There are a few existing studies on whether domestic migration improves China’s pension system’s fiscal sustainability in the context of rapid urbanization and industrialization. In this paper, we systematically investigate the impact of migration on the solvency of the worker’s old-age insurance for urban employees by constructing actuarial and econometric models. We use panel data from 2002 to 2018, collected from 31 provinces in China. The results show that the association between migration and the solvency of pensions is an inverted-U shape along the urbanization process. Further regional comparison showed that the above-stated inverted-U curve is more pronounced in the central and western regions. We also established that the number of participants and the contribution base are the main contributors to these results. Our conclusions are important for future population policies and public pension systems in China.

Towards Equity and Sustainability? China’s Pension System Reform Moves Center Stage

In this paper I review the latest development of China's public pension system. Last several decades saw China's tremendous achievement in various public pension reforms. Especially since the 11th Five-Year Plan (2006-2010), reform has accelerated. By 2019, the public pension system in China has covered almost one billion adults, which makes it the biggest pension system in the world. Together with the expansion of Dibao (Basic living allowance) and the eradication of poverty, the development of pension system has become the top agenda in current policy making of the Chinese government. Yet, challenges exist: unequal distribution of pension resource and the long-run unsustainability of the pension system are waiting to be addressed with increasing urgence. Although potential countermeasures, both based on international experience and with Chinese feature, has been proposed and piloted in both regional and national level, there are incremental pressure for further reforming the system. In the latest Five-Year Plan (2021-2015), the government has vowed to construct a unified, equitable, and sustainable pension system with full coverage. This is a very challenging yet exciting goal to achieve not only for the policy makers, but also for academic researchers and general public.

Decreased Contribution Rates Increase Public Pension Fund Revenue: Evidence from China

ABSTRACT The basic pension plan for urban enterprise workers (PPUEW) is the primary form of public pension system in China and is managed by provincial governments. Although the federal government requires that employers contribute 20% and individuals 8%, provincial governments have the right to adjust the rate. As different rates apply in different provinces, this study assesses the effect of rates on enterprises’ incentive to participate in the PPUEW, using data from the 2011 China Annual Survey of Industrial Firms. As rates increase, employers and employees pay more; however, once the contribution ratio reaches a tipping point, they try to reduce deductibles. The findings suggest that a lower contribution rate motivates enterprises to participate in the PPUEW and boosts the fund’s revenue.

Pension System in China: The View of an Economist-Sociologist

The article analyzes the China pension system from the perspective of economic sociology. The history of the formation of the Chinese pension system is considered, two stages are distinguished in the evolution of the Chinese pension system. Differences in pension provision for various social groups in China are analyzed from the perspective of the economic sociology.

Nonparametric Time-Varying Coefficient Models for Panel Data

The collection rate of contributions to public pension (CRCP), expressed as the ratio of the actual contributions to the expected contributions from insurers, is a key component of the public pension system in China. Recent years have seen various patterns of change in CRCPs at the provincial level. In order to study the drastic changes in a short time and understand their underlying implications, we propose a nonparametric time-varying coefficients model for longitudinal data with pre-specified finite time points, also known as panel data. By utilizing a penalized least squares method, the proposed method enables estimation of a large number of parameters, which can exceed the sample size. The resulting estimator is shown to be efficient, robust, and computationally feasible. Furthermore, it possesses desirable theoretical properties such as $$n^{1/2}$$ -consistency, asymptotic normality, and the oracle property.

Evaluation on the Sustainability of Urban Public Pension System in China

Against the background of population aging and economic downturn, the sustainability of pension systems has aroused great concern for governments across the world. To better reflect the pressure of pension payments in the changing context, the paper aims to forecast the annual pension gap of the public pension system for urban employees in China. By the use of Cohort-component population projections and stochastic projection models, the distribution of flow-based annual pension gap in the next fifty years are estimated under basic assumptions. The results show that the pension gap continues to exist from 2017 and keeps expanding until 2070 without any policy reform. Sensitivity analyses of demographics and various combinations of policy parameters on the distribution of future pension gaps are displayed. Wider pension coverage with lower policy threshold is more likely to face larger long-term pension gap.

Pensions and social inclusion in an ageing China

ABSTRACTThe inclusive development strategy proposed by the Chinese government embraces social inclusion for older people. In line with most developing countries, China's policy on social inclusion for older people focuses almost exclusively on material security in the form of pensions. This paper examines the impact of pensions on social inclusion for older people across four dimensions: family interaction, social support, social participation and self-assessment using data from the 2014 China Longitudinal Ageing Social Survey. The results demonstrate that pensions improve dramatically the relationships between older adults and their family members and friends, and therefore their social inclusion in the life world. The exception is social participation which seems to be immune to material income effects. However, the stratified pension system in China generates complex and hierarchical effects on social inclusion among different sub-groups. Social inclusion among older people with high exclusion risks but low pensions is very sensitive to pension levels. Conversely, most pensions are distributed to those with the lowest exclusion risks as a result of the disappearance of their impact on social inclusion. We argue that future social inclusion policies for older people in China should focus first on achieving greater equality in pensions.

VALUING THE CHINESE REIMBURSEMENT SYSTEM OF THE RETIREMENT PENSION INSURANCE FOR URBAN EMPLOYEES

This study investigates the funding and implementation of China's reformed pension system, particularly the impact of population aging on the system and the government’s recessive debt on pensions. We performed a literature review of relevant publications on the pension system in China as well as similar systems abroad. We also performed an in-depth analysis of the pension insurance fund in China’s Zhejiang province, based on available data from 2001 through 2014. Using a time series ARIMA forecasting model and a comprehensive prediction model, in conjunction with theories from economics, statistics and sociology, we tried to establish the implicit pension debt (IPD) for Zhejiang and determine the pension payment feasibility for the next 15 years. We use our findings to explain the current problems with the pension system in Zhejiang and offer suggestions for improvement.

POPULATION AGING AND PUBLIC PENSION: THE CASE OF BEIJING ANALYZED BY AN OLG MODEL

This paper employs an overlapping-generations (OLG) model with altruistic motive and lifetime uncertainty to investigate the urban public pension system in China. Focusing on the case of Beijing, we examine the effects of the individual contribution rate, firm contribution rate, life expectancy and population growth rate on the capital-labor ratio, savings, per capita consumption and pension benefits. By controlling the firm contribution rate to adjust the capital-labor ratio of the market economy to the modified golden rule level, we find the optimal firm contribution rate. We also discuss the optimal firm contribution rate in Beijing under three cases: risen life expectancy, fallen population growth rate and the joint case of risen life expectancy and fallen population growth rate, and estimate the optimal firm contribution rate in 2020s. Integrating the established effects and the current economic goals, it is concluded that it will do more good than harm to strictly implement Beijing municipal population policy, improve the living and medical conditions, reduce the firm contribution rate, and raise the individual contribution rate.

Assessing the Financial Sustainability of China’s Rural Pension System

Considering the rapid growth of China’s elderly rural population, establishing both an adequate and a financially sustainable rural pension system is a major challenge. Focusing on financial sustainability, this article defines this concept of financial sustainability before constructing sound actuarial models for China’s rural pension system. Based on these models and statistical data, the analysis finds that the rural pension funding gap should rise from 97.80 billion Yuan in 2014 to 3062.31 billion Yuan in 2049, which represents an annual growth rate of 10.34%. This implies that, as it stands, the rural pension system in China is not financially sustainable. Finally, the article explains how this problem could be fixed through policy recommendations based on recent international experiences.

Mark W. Frazier: Socialist Insecurity: Pensions and the Politics of Uneven Development in China

Mark Frazier offers a great example of how to do comparative political science well with this book on the development of the pension system in China. He analyzes the development of the pension system in China in light of the existing literatures on institutional change and the welfare state, and also uses his analysis of China to add to our understanding of welfare policy development especially in other large, uneven developers. In addition to this explicitly comparative approach, Frazier uses both process tracing and household surveys to provide evidence of how existing institutions helped shape the nature of the pension system. He argues that historical institutionalism is the appropriate lens through which to understand why pension reform after the collapse of the danwei system took the path it did despite other available options. Specifically, for local state officials facing the loss of state-owned enterprise revenues, using the fiscal decentralization inherent in the governing structure to design a fragmented and localized pension system allowed for the retention of a taxation mechanism and the use of pensions to avoid unrest caused by the privatization of local SOEs. While the institutions of fiscal decentralization shaped local officials’ choices for a new pension system, Frazier finds through household surveys that both the former danwei system and the experience of privatization helped influence workers’ perceptions of responsibility for pensions. Overwhelmingly, different types of laborers all expect the state to provide for retired workers. Frazier makes a very strong case about how institutions shape preferences for pensions, and also highlights the dangers of the way the system has developed. These pension benefits now account for the single largest source of spending for local governments, and many of the taxes taken from employers and employees to fund these accounts have been misappropriated by local Social Insurance Agencies (SIAs) for development or other corrupt purposes. These missing funds create the danger of unrest and loss of trust in the government in the event that retiring workers cannot be paid the funds that were taken from their salaries throughout their working lives. As J OF CHIN POLIT SCI (2012) 17:337–338 DOI 10.1007/s11366-012-9207-1

A Comparative Analysis of Pension Expenditure Level

In the last twenty years, China’s pension system underwent great changes. The two-tier pension system was introduced in 1998, and was significantly revised in 2006. The purpose of this paper is to analyze the development of pension expenditure level the ratio of pension expenditure of GDP in cross-national context. At present, the urban pension system is the mainly pension system in China. This paper first analyzes China’s urban pension spending from 1997 to 2010, then compares pension expenditure level of 31provinces in 2008, finally draws a comparison with OCED countries. The national and international comparisons demonstrate that China’s pension expenditure is relatively low and the elderly share less economic development.

Les retraites en Chine : organisation et défis futurs

The pension system in China remains, to a large extent, to be built, in particular for the rural populations who represent approximately two-thirds of the total population. This is the main challenge that the Chinese government must face over the coming years. Moreover, the rate of coverage of the urban salaried populations is still relatively low, less than 50%, and progress is also needed in this regard. Despite a demography which is similar to that of the most developed countries and should lead to quite a rapid “aging” of the Chinese population, the needs for funding appear to be highly bearable and should absorb only a very small share of Chinese growth. In China, as in other countries on the planet, pension funding is much more a societal choice than an economic constraint.

The rate of return on capital for pension system in China

The rate of return on capital is a key parameter in pension reform policy making. While evaluating pension reform, the method Feldstein proposed to measure the rate of return on capital is widely adopted. Here we calculate the rate of return on capital in China by this method. The calculation demonstrates that the rate of return on all the industrial enterprises is around 6.5 percent from 1996 to 2000, and the average rate of return on state-owned industrial enterprises is lower than the above figure by 1.5 percent during the same period. Finally, we draw a conclusion that the rate of return ranging from 5 to 7 percent is appropriate for the pension reform in China.