The authors discuss key choices policy makers face about China's pension system in the face of a rapidly aging population. They describe the problems the current pay-as-you-go system faces in the near and long term and simulate policy options for solving those problems. They find that simple design changes are necessary but not sufficient conditions for making the pension system sustainable. Partial funding is necessary to avoid large increases in future contribution rates. They investigate the impact of the old-age system and economic growth of a multipillar system that includes a modest mandatory tax-financed- basic benefit plus a mandatory fully-funded defined- contribution scheme. Implementation of a partially funded multipillar pensions system must go hand in hand with reform of the financial sector and restructured investment procedures that emphasize the "right" mix of competition, diversification, and regulation. Otherwise, China's pension reform will ultimately fail.
Details
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Author
Friedman, Barry James, Estelle Kane, Cheikh Quei
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Document Date
1996/10/31
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Document Type
Policy Research Working Paper
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Report Number
WPS1674
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Disclosure Status
Disclosed
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Doc Name
How can China provide income security for its rapidly aging population?
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Keywords
contribution rate;retirement age;benefit rate;replacement rate;defined benefit;pension system;payroll tax rate;township and village enterprise;extended family support system;labor force participation rate;real wage;financial market;wage indexation;defined benefit plan;defined contribution plan;real wage growth;price indexation;normal retirement age;state enterprises;early retirement;average wage;
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Citation
Friedman, Barry James, Estelle Kane, Cheikh Quei
How can China provide income security for its rapidly aging population? (English). Policy, Research working paper,no. WPS 1674 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/915731468770462733/How-can-China-provide-income-security-for-its-rapidly-aging-population