IDEAS home Printed from https://ideas.repec.org/p/euf/ecopap/0412.html

The Chinese pension system - First results on assessing the reform options

Author

Listed:
  • Heikki Oksanen

Abstract

The aim of this paper is to analyse options for reforming the fragmented Chinese pension system that covers only 55 % of urban employees and a very small part of the rural population. After a brief history of pensions in China we present recent reform proposals and then discuss principles of pension reforms, with particular attention to reducing the pension contribution rates so that compliance could improve and coverage increase. As the Chinese population is ageing fast, we are presenting transition to a notional defined contribution (NDC) system as a model for adjusting the pension rules for increasing longevity. Transforming the accrued pension rights into NDC accounts and starting to apply the new NDC-inspired rules on indexation is not necessarily a jump into the unknown for the Chinese pensions system. Rather, it could be a useful and long-awaited clarification to the rules and a way to move towards a more uniform system nationwide. With the help of a simulation model based on Chinese data we produce scenarios for a range of pension reforms and assess their properties.

Suggested Citation

  • Heikki Oksanen, 2010. "The Chinese pension system - First results on assessing the reform options," European Economy - Economic Papers 2008 - 2015 412, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0412
    as

    Download full text from publisher

    File URL: https://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp412_en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Heikki Oksanen, 2010. "Setting targets for government budgets under the EU Stability and Growth Pact and ageing populations," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(1/2), pages 87-111.
    2. Whitehouse, Edward, 2009. "Pensions at a glance: Asia/Pacific," MPRA Paper 36134, University Library of Munich, Germany.
    3. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    4. Heikki Oksanen, 2004. "Pension Reforms: An Illustrated Basic Analysis," CESifo Economic Studies, CESifo Group, vol. 50(3), pages 569-625.
    5. Heikki Oksanen, 2004. "Pension reforms: an illustrated basic analysis," European Economy - Economic Papers 2008 - 2015 201, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. repec:ilo:ilowps:391561 is not listed on IDEAS
    7. A. J. Auerbach & M. Feldstein (ed.), 2002. "Handbook of Public Economics," Handbook of Public Economics, Elsevier, edition 1, volume 4, number 4.
    8. Feng, Jin & He, Lixin & Sato, Hiroshi, 2009. "Public pension and household saving : evidence from China," BOFIT Discussion Papers 2/2009, Bank of Finland, Institute for Economies in Transition.
    9. Salvador Valdés-Prieto, 2005. "Securitization of taxes implicit in PAYG pensions [‘The Hungarian Pension System Before and After the 1998 Reform’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(42), pages 216-265.
    10. Yu-Wei Hu & Gregorio Impavido & Xiaohong Li, 2009. "Governance and Fund Management in the Chinese Pension System," IMF Working Papers 2009/246, International Monetary Fund.
    11. Alessandro Cigno & Martin Werding, 2007. "Children and Pensions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033690, December.
    12. Richard Herd & Hu-Wei Hu & Vincent Koen, 2010. "Providing Greater Old-Age Security in China," OECD Economics Department Working Papers 750, OECD Publishing.
    13. Zheng Bingwen, 2007. "The Origin of China's Partially Funded Social Security Scheme and Its Future Direction," Chinese Economy, Taylor & Francis Journals, vol. 40(4), pages 6-28, July.
    14. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
    15. Feng, Jin & He, Lixin & Sato, Hiroshi, 2011. "Public pension and household saving: Evidence from urban China," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 470-485.
    16. Robert Holzmann & Edward Palmer, 2006. "Pension Reform : Issues and Prospects for Non-Financial Defined Contribution Schemes," World Bank Publications - Books, The World Bank Group, number 6983, April.
    17. Mr. Steven V Dunaway & Mr. Vivek Arora, 2007. "Pension Reform in China: The Need for a New Approach," IMF Working Papers 2007/109, International Monetary Fund.
    18. A. J. Auerbach & M. Feldstein (ed.), 2002. "Handbook of Public Economics," Handbook of Public Economics, Elsevier, edition 1, volume 3, number 3.
    19. 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.
    20. Roel Beetsma & Heikki Oksanen, 2008. "Pensions under Ageing Populations and the EU Stability and Growth Pact ," CESifo Economic Studies, CESifo Group, vol. 54(4), pages 563-592, December.
    21. Felix Salditt & Peter Whiteford & Willem Adema, 2007. "Pension Reform in China: Progress and Prospects," OECD Social, Employment and Migration Working Papers 53, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Halvor Mehlum & Ragnar Torvik & Simone Valente, 2013. "China s Savings Multiplier," Working Papers No 4/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    2. Rose Gilroy, 2012. "Physical Threats to Older People's Social Worlds: Findings from a Pilot Study in Wuhan, China," Environment and Planning A, , vol. 44(2), pages 458-476, February.
    3. Narottam Gaan, 2021. "Twenty-First-Century Hyper-power, China or USA: Is Demography the Determinant?," Jadavpur Journal of International Relations, , vol. 25(2), pages 143-166, December.
    4. Yue Guo & Lailei Lou & Tailai Guo & Zuwei Yu, 2017. "Valuing The Chinese Reimbursement System Of The Retirement Pension Insurance For Urban Employees," Eurasian Journal of Social Sciences, Eurasian Publications, vol. 5(2), pages 34-52.
    5. Iris Claus & Les Oxley & Yong Cai & Yuan Cheng, 2014. "Pension Reform In China: Challenges And Opportunities," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 636-651, September.
    6. Qiushi Feng & Wei-Jun Jean Yeung & Zhenglian Wang & Yi Zeng, 2019. "Age of Retirement and Human Capital in an Aging China, 2015–2050," European Journal of Population, Springer;European Association for Population Studies, vol. 35(1), pages 29-62, February.
    7. Zhenhua Zheng & Ning Sun & Liu Yang & Wanting Liu & Yingchen Lu & Yusu Chu & Hong Chen, 2023. "The socioeconomic status of adult children, intergenerational support, and the well-being of Chinese older adults," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    8. Jiamin Lim & Arianna Cowling, 2016. "China’s Demographic Outlook," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 35-42, June.
    9. Li, Zhigang & Wu, Mingqin, 2018. "Education and welfare program compliance: Firm-level evidence from a pension reform in China," China Economic Review, Elsevier, vol. 48(C), pages 1-13.
    10. Peter J. Stauvermann & Jin Hu, 2018. "What can China Expect from an Increase of the Mandatory Retirement Age?," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 229-246, May.
    11. Mehlum, Halvor & Torvik, Ragnar & Valente, Simone, 2016. "The savings multiplier," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 90-105.
    12. Shuo Ding, 2022. "A Comparative Analysis of Vulnerability to Poverty between Urban and Rural Households in China," Economies, MDPI, vol. 10(10), pages 1-28, October.
    13. Holzmann, Robert & Jousten, Alain, 2010. "Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing," IZA Discussion Papers 5296, IZA Network @ LISER.
    14. Anping Chen & Marlon Boarnet & Mark Partridge & Bin R. Chen & Mingqin Wu, 2014. "Industrial Agglomeration And Employer Compliance With Social Security Contribution: Evidence From China," Journal of Regional Science, Wiley Blackwell, vol. 54(4), pages 586-605, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chamon, Marcos & Liu, Kai & Prasad, Eswar, 2013. "Income uncertainty and household savings in China," Journal of Development Economics, Elsevier, vol. 105(C), pages 164-177.
    2. Guonan Ma & Wang Yi, 2010. "China’s High Saving Rate: Myth and Reality," International Economics, CEPII research center, issue 122, pages 5-39.
    3. Iris Claus & Les Oxley & Yong Cai & Yuan Cheng, 2014. "Pension Reform In China: Challenges And Opportunities," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 636-651, September.
    4. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2011. "Current Account Imbalances: can Structural Reforms Help to Reduce Them?," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-44.
    5. Riccardo Cristadoro & Daniela Marconi, 2012. "Household savings in China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 10(3), pages 275-299, November.
    6. Hui He & Lei Ning & Dongming Zhu, 2019. "The Impact of Rapid Aging and Pension Reform on Savings and the Labor Supply," IMF Working Papers 2019/061, International Monetary Fund.
    7. Rickne, Johanna, 2013. "Labor market conditions and social insurance in China," China Economic Review, Elsevier, vol. 27(C), pages 52-68.
    8. Oksanen, Heikki, 2014. "Public finance sustainability gap and raising the retirement age, abstract and full summary," Research Reports 177, VATT Institute for Economic Research.
    9. Heikki Oksanen, 2009. "Setting targets for government budgets in the pursuit of intergenerational equity," European Economy - Economic Papers 2008 - 2015 358, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    10. Hagen, Johannes, 2013. "A History of the Swedish Pension System," Working Paper Series, Center for Fiscal Studies 2013:7, Uppsala University, Department of Economics.
    11. Bénassy-Quéré, Agnès & Carton, Benjamin & Gauvin, Ludovic, 2013. "China and global rebalancing: A two-country approach," China Economic Review, Elsevier, vol. 26(C), pages 118-139.
    12. Morgan, Peter J., 2012. "The role of macroeconomic policy in rebalancing growth," Journal of Asian Economics, Elsevier, vol. 23(1), pages 13-25.
    13. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2010. "The Impact of Structural Policies on Saving, Investment and Current Accounts," OECD Economics Department Working Papers 815, OECD Publishing.
    14. Atella, Vincenzo & Brugiavini, Agar & Pace, Noemi, 2015. "The health care system reform in China: Effects on out-of-pocket expenses and saving," China Economic Review, Elsevier, vol. 34(C), pages 182-195.
    15. repec:hal:pseose:hal-00825239 is not listed on IDEAS
    16. Bairoliya, Neha & Canning, David & Miller, Ray & Saxena, Akshar, 2018. "The macroeconomic and welfare implications of rural health insurance and pension reforms in China," The Journal of the Economics of Ageing, Elsevier, vol. 11(C), pages 71-92.
    17. Calista Cheung & Davide Furceri & Elena Rusticelli, 2013. "Structural and Cyclical Factors behind Current Account Balances," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 923-944, November.
    18. Tran, Chung & Wende, Sebastian, 2021. "On the marginal excess burden of taxation in an overlapping generations model," Journal of Macroeconomics, Elsevier, vol. 70(C).
    19. Montalvo, José G. & Piolatto, Amedeo & Raya, Josep, 2020. "Transaction-tax evasion in the housing market," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    20. Nikolov, Plamen & Adelman, Alan, 2019. "Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    21. Magda Iga & Kiełczewska Aneta & Brandt Nicola, 2020. "The effect of child benefit on female labor supply," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-18, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0412. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ECFIN INFO (email available below). General contact details of provider: https://edirc.repec.org/data/dg2ecbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.