China’s pension system

Towards equity and sustainability? China’s pension system reform moves center stage

In this paper, Li Yang reviews 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), the 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, based on international experience and including Chinese feature, have been proposed and piloted at the regional and national levels, there is an incremental pressure for further reforming the system.

Key Findings

• Pension reform is a top priority in current policy making of the Chinese government
• Pension reform important not only for economic development but also for welfare of Chinese citizens and thereby for social stability.
• Reforms have already come a long way and cover today almost 1 billion adults with increasing benefit levels. Yet, large gaps in terms of benefit levels remain between different pension schemes. To achieve a more equitable system the government could introduce non-contributory social pensions or implement an integration of urban-rural pension systems.
• Moreover, the current public pension system is still not sustainable in the long run. Possible solutions are extending retirement age, injecting state capital, land compensation schemes, social pensions

Figure: Enrollment and recipients in China’s pension system

This figure shows the evolution of enrollment and recipients of China’s pension system over the past 30 years.

Contacts

Author

• Li Yang (World Inequality Lab, INSEAD): li.yang@psemail.eu

Media inquiries

• Olivia Ronsain: olivia.ronsain@wid.world; +33 7 63 91 81 68

Acknowledgements

The author is grateful to Mikko Huotari for useful comments.