Navigating the Inequities: Addressing the Sectors’ Disparity Problem in Mainland China’s Pension Policy Reform

This report critically examines China's pension policy, starting with its evolution since 1955 and the major reforms introduced in 2015. In the early days of the regime, China's pension policy was limited to civil servants, but reforms in 1986 expanded the coverage to include employees of non-state-owned enterprises. The 2014 unification of the urban and rural pension system further aims to address inequality. Despite these advances, significant inequalities remain, particularly in the pension replacement rate between public and non-public sector employees, with recent data showing that the replacement rate for non-public sector retirees is 35.3 per cent, compared to 80.1 per cent for public sector retirees. This discrepancy highlights the shortcomings of the 2015 reform, which failed to effectively overcome inequalities in pension benefits. The report adopts Smith’s Model and combines literature review and data analysis methods to identify the policy problem, and then provides short-term, medium-term, and long-term policy recommendations based on the causes of the problem- the establishment of centralized compliance oversight, incentives for corporate annuities, the implementation of a unified pension framework, the ability to allow flexible retirement ages for non-public sector women, and transition from "pay-as-you-go" pension system to an "asset-based" system. These policy recommendations aim to promote a more equal and sustainable pension system and address China's urgent need for social justice.