Assessing the Financial Sustainability of China’s Rural  Pension System

Wang, Lijian; Béland, Daniel

doi:10.3390/su6063271

Cited by 14 publications

(11 citation statements)

References 40 publications

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“…According to the 2015 1% mini census, 0.14 billion members of the population in China were aged 65 and over, which accounts for 10.47% of the total population; this proportion is 4.1% higher than less-developed regions [1]. An increasingly aging population exerts an upward payment pressure on China's pension system, particularly the Urban Employees' Pension Plan (UEPP) [2][3][4]. In 2015, the cash flow of the UEPP fund was negative in 25 of 31 provinces [5].…”

Section: Introductionmentioning

confidence: 99%

Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay

Wang

Huang

2019

Sustainability

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Population aging is creating serious challenges for the sustainability of China’s pension system. To mitigate the adverse impact of the demographic shift, China has recently introduced fertility and retirement policy reforms. The research presented in this paper primarily evaluates the impacts of recent reforms on the financial sustainability of China’s Urban Employees’ Pension Plan (UEPP). By using the Leslie matrix and actuarial models, the financial sustainability of the UEPP from 2019 to 2070 is projected and evaluated under a set of assumed policy reform scenarios. The results indicate that an imbalance in the pension fund would occur in the early 2020s and then expand under existing policies. Fertility adjustment, retirement delay, or combination reforms would not fundamentally solve this financial crisis in the long term. When 100% of couples have a second child and the retirement age is increased to 65, the current and accumulated pension deficits would drop by 50.05–67.56% and 35.88–54.23% between 2040 and 2070, respectively. Supplementary policy measures should be designed to encourage childbearing and retirement delay, including family support policies and top-designed pension system reform policies.

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Section: Introductionmentioning

confidence: 99%

Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay

Wang

Huang

2019

Sustainability

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“…Williamson et al [34] showed that along with low contribution level and lack of adequacy, China's rural pension system would have sustainability issues in decades due to population aging and rural-urban migration. Applying actuarial models, Wang and Béland [35] demonstrated that to ensure the sustainability of rural pension system, the state budget is supposed to transfer CNY 3.28 trillion in 2049. Meanwhile, they pointed out that creating dynamic adjustment mechanisms, improving investment practices, and designing a national pension redistribution mechanism are possible policy options.…”

Section: Literature Reviewmentioning

confidence: 99%

Assessment of the Financial Sustainability of China’s New Rural Pension Plan: Does the Demographic Policy Reform Matter?

2019

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Rural China is experiencing a rapid aging process caused by low fertility and large-scale rural-to-urban migration, which will place an increasing payment burden on the rural pension plan. To allay the negative impact of the aging transition, China has recently carried out a demographic policy reform, replacing the famous one-child policy with the two-child policy. This paper evaluates the impacts of the demographic policy reform on the financial sustainability of China’s New Rural Pension Plan (NRPP). By applying the cohort component population projection method and building actuarial models, the solvency sustainability of the NRPP between 2019 and 2080 is estimated under six demographic policy scenarios, followed by sensitivity analysis. The simulation results show that under the one-child policy, the current and the accumulated pension fund would run deficits in 2030 and 2042, and then the pension deficits would expand rapidly. The two-child policy would relieve the pension pressure moderately before 2075, but thereafter, the pension deficits would become much worse. Sensitivity analysis of a series of demographics and pension parameters on the financial sustainability of the NRPP are displayed. On average, the long-term pension gap may not be avoided for the NRPP, regardless of raising the contribution rate, delaying the retirement age, or encouraging people to have more children.

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“…Although China has not yet formed an official long-term financial, actuarial reporting system for basic pensions, the Chinese government and scholars have conducted extensive research on the financial sustainability of basic pensions. These studies have helped to understand the long-term financial sustainability of China's basic pensions, to accelerate the formation of China's official long-term financial, actuarial reporting system, and to demonstrate China's experience in solving the pension crisis brought about by its aging population [13][14][15][16].…”

Section: Introductionmentioning

confidence: 99%

Stochastically Assessing the Financial Sustainability of Individual Accounts in the Urban Enterprise Employees’ Pension Plan in China

Xiao-hua

Yang

2019

Sustainability

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Various countries are paying increasing attention to the long-term financial sustainability of pension plans, and the self-balancing ability of such plans is an important index to measure their long-term financial sustainability. This paper explores the financial self-balancing ability of the individual accounts of China’s urban enterprise employees’ pension plan (UEEPPI). In the particularly serious scenario that the individual accounts’ previous accumulated funds are zero, the bookkeeping rate and the investment return rate are considered as stochastic variables in the in-depth analysis of the self-balancing ability of individual accounts, and the effects of two different bookkeeping behaviors are compared. The results indicate that if the government adopts the fixed bookkeeping rate, the individual accounts have an excellent self-balancing ability. If the government adopts a stochastic bookkeeping rate, it can further improve the self-balancing ability of individual accounts. Sensitivity analysis finds that the increase in the wage growth rate can improve the self-balancing ability of individual accounts, but the impact of contribution rate of individual accounts and the contribution wages of recruits create uncertainty. Based on the conclusions, some policy implications are proposed.

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Assessing the Financial Sustainability of China’s Rural Pension System

Cited by 14 publications

References 40 publications

Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay

Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay

Assessment of the Financial Sustainability of China’s New Rural Pension Plan: Does the Demographic Policy Reform Matter?

Stochastically Assessing the Financial Sustainability of Individual Accounts in the Urban Enterprise Employees’ Pension Plan in China

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