From “selective two-child policy” to universal two-child policy: will the payment crisis of China’s pension system be solved?

Abstract

Background: With the rapid population aging, the payment crisis of China's pension insurance fund is increasing yearly. The government adjusts fertility policy to alleviate population aging and improve the solvency of pension insurance fund. On January 1, 2016, China's fertility policy was adjusted from "selective two-child policy" to universal two-child policy. Methods: This paper establishes actuarial models to analyze how fertility policy adjustment influences the pension insurance fund.Results: (1) if the "one-child policy" were still employed, the accumulated deficit of pension insurance fund would appear in the year of 2076; (2) if all couples that satisfy the rules of "selective two-child policy" bear the second child, the time of accumulated deficit of pension insurance fund would be postponed by about 9 years; (3) after implementing the universal two-child policy, the time of accumulated deficit of pension insurance fund would delay under different situations of fertility intentions, if more than 54% of the qualified couples bear a second child, the accumulated deficit of pension insurance fund would not appear before 2090. The above conclusions have passed the sensitivity tests. Conclusion:Therefore, "two-child policy" can alleviate the payment pressure of pension insurance fund. If the government wants to solve the payment crisis of pension insurance fund, fertility intentions should be improved.

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

“…The projection results indicate that the NRPP would be challenged by an increasing pension payment burden under the one-child policy. The occurrence of the current and accumulated pension deficits would happen in 2030 and 2042, respectively, which is also supported by previous research findings [9,55]. After that, the pension gap would expand yearly at a faster pace.…”

“…For example, by developing an overlapping generation model, Coeurdacier et al [32] suggested that relaxing or abandoning fertility restrictions would not offer much help to finance the urban pension system, particularly when children are considered the main source of old-age provision. In addition, Zeng et al [9,33] argued that relaxing population control would relieve the pension burden, but fertility intention plays an essential role which should be improved. Applying a comprehensive risk assessment model, Zhao et al [7] concluded that the urban pension fund would have a gap around 2045, while the accumulated pension deficits would expand to CNY 2270.59 trillion in 2088.…”

“…In 2015, China's urban pension fund went into the red in 25 of 31 provinces [5]. Recent research shows that the current urban pension deficit is expected to reach CNY 42.02 trillion in 2050 and CNY 74.23 trillion in 2070 [6], indicating an inevitable trend towards imbalance of the pension fund [7][8][9]. However, China's rural pension plan gets much less attention than the urban pension scheme, particularly within international academia.…”

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

“…A few studies have considered the fertility policy reform in China. Using actuarial models, Zeng et al [18] demonstrated that the selective two-child policy would delay the pension deficits occurrence by nine years and reduce China's pension gap by 71.85% in 2090. Indeed, according to pension shortage, households would change their behavior at a microeconomic level.…”

Aging and economic growth: is there a role for a two-child policy in China?

“…In 2013, China put forward a selective two-child policy that specified that if either the husband or the wife had come from a single-child family, they could have a second child. Three years later, in 2016, another policy change allowed all couples to have a second child (i.e., a universal two-child policy) (Zeng, Zhang, & Liu, 2017). Since the implementation of the two-child policy, China's birth rate has increased (Zhai, Zhang, & Jin, 2014).…”