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Further Reform of China’s Pension System: A Realistic Alternative Option to Fully Funded Individual Accounts


  • Wei Zhang

    (Faculty of Oriental Studies, University of Cambridge, Sidgewick Avenue, Cambridge CB3 9DA, United Kingdom)


China's newly established three-pillar pension system consists of: basic pension; fully funded individual account; and voluntary commercial pension insurance. The second component faces immense financial difficulties caused by transitional costs in the short term and demographic changes in the long term. In addition, the inefficiency of the current capital market and the lack of fund management skills mean that these financial problems are unlikely to be solved within the existing framework of the fully funded individual account. This paper suggests another option-changing the fully funded individual account to a notional defined contribution individual account that operates on a pay-as-you-go basis. This change will keep the advantages of the individual account and avoid the huge risks caused by China's immature capital market. (c) 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Wei Zhang, 2007. "Further Reform of China’s Pension System: A Realistic Alternative Option to Fully Funded Individual Accounts," Asian Economic Papers, MIT Press, vol. 6(2), pages 112-135, Spring/Su.
  • Handle: RePEc:tpr:asiaec:v:6:y:2007:i:2:p:112-135

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    References listed on IDEAS

    1. Jacob Gyntelberg & Guonan Ma & Eli M Remolona, 2005. "Corporate bond markets in Asia," BIS Quarterly Review, Bank for International Settlements, December.
    2. Mitchel Y. Abolafia (ed.), 2005. "Markets," Books, Edward Elgar Publishing, number 2788.
    3. William R. White, 2004. "Are changes in financial structure extending safety nets?," BIS Working Papers 145, Bank for International Settlements.
    4. Robert N McCauley, 2003. "Unifying government bond markets in East Asia," BIS Quarterly Review, Bank for International Settlements, December.
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    1. repec:taf:applec:v:49:y:2017:i:7:p:702-721 is not listed on IDEAS
    2. Anping Chen & Nicolaas Groenewold, 2017. "An increase in the retirement age in China: the regional economic effects," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 702-721, February.

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