China's Pension System : A Vision

China is at a critical juncture in its economic transition. A comprehensive reform of its pension and social security systems is an essential element of a strategy aimed toward achieving a harmonious society and sustainable development. Among polic...

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Bibliographic Details
Main Authors:	Dorfman, Mark C., Holzmann, Robert, O'Keefe, Philip, Wang, Dewen, Sin, Yvonne, Hinz, Richard
Format:	Publication
Language:	English en_US
Published:	Washington, DC: World Bank 2013
Subjects:	ACCOUNTING ACCOUNTING FRAMEWORK ACTUARIES AGE SUPPORT ANNUITIES ANNUITY BANK DEPOSITS BANKRUPTCY BARRIER BASIC BENEFIT BENEFICIARIES BENEFICIARY BENEFIT ADJUSTMENT BENEFIT ADJUSTMENTS BENEFIT FORMULA BENEFIT LEVEL BENEFIT LEVELS BUSINESS DEVELOPMENT BUYBACK CASH FLOW CENTRAL GOVERNMENT FINANCING CONFLICTS OF INTEREST CONSUMER PRICE INDEX CONTRACTUAL SAVINGS CONTRIBUTION RATE CONTRIBUTION RATES CREDIBILITY DEBT RELIEF DEFICITS DEFINED BENEFIT DEFINED-CONTRIBUTION PENSION DEMOGRAPHIC DEMOGRAPHIC CHANGE DEPENDENCY RATIO DEPENDENCY RATIOS DEPOSITS DEVELOPING COUNTRIES DISBURSEMENT DISBURSEMENTS ECONOMIC REFORM ECONOMICS ELDERLY EMPLOYEE EMPLOYEE BENEFITS EMPLOYMENT EXPENDITURES FAMILY SUPPORT FERTILITY FERTILITY RATE FINANCIAL ASSET FINANCIAL FLOWS FINANCIAL MARKET FINANCIAL MARKET DEVELOPMENT FINANCIAL SERVICES FINANCIAL SUSTAINABILITY FINANCING ARRANGEMENTS FISCAL BURDEN FISCAL CAPACITY FISCAL CONSTRAINTS FUNDED PENSION FUTURE PENSION GLOBALIZATION GOVERNMENT REVENUES GOVERNMENT SUBSIDIES GROSS DOMESTIC PRODUCT HOUSEHOLD INCOME HOUSEHOLD SAVINGS HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES IMPLICIT PENSION DEBT IMPLICIT TAX INCOME GROUPS INCOME INEQUALITY INCOME SECURITY INCOMES INDIVIDUAL ACCOUNT INDIVIDUAL ACCOUNTS INFLATION RATE INFORMAL SECTOR INFORMAL SECTORS INFORMATION FLOWS INSTITUTIONAL ARCHITECTURE INSTITUTIONAL CAPACITY INSTITUTIONAL INFRASTRUCTURE INSTRUMENT INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL LABOUR ORGANIZATION INVESTING INVESTMENT MANAGEMENT INVESTMENT RISKS JOB CREATION LABOR ECONOMICS LABOR FORCE LABOR FORCE PARTICIPATION LABOR INCOME LABOR MARKET LABOR MARKETS LABOR MOBILITY LABOR SUPPLY LABOUR LIFE EXPECTANCY LIQUIDITY LOCAL FINANCES LOCAL FISCAL CAPACITY LOCAL GOVERNMENT LOCAL GOVERNMENTS MANDATORY SCHEME MARKET DISTORTIONS MARKET EFFICIENCY MARKET INTERMEDIARIES MARKET REFORM MARKET RETURNS MINIMUM BENEFIT MINIMUM BENEFIT GUARANTEE MINIMUM INCOME MONETARY FUND NATIONAL DEVELOPMENT NATIONAL PENSION NOTIONAL ACCOUNT NOTIONAL ACCOUNTS OCCUPATIONAL RETIREMENT OCCUPATIONAL SCHEMES OLD-AGE INCOME OLD-AGE PENSION OLDER PEOPLE OWNERSHIP STRUCTURE PENSION PENSION ADMINISTRATION PENSION ARRANGEMENTS PENSION ASSET PENSION BENEFIT PENSION BENEFITS PENSION CONTRIBUTIONS PENSION COSTS PENSION COVERAGE PENSION DEBT PENSION ENTITLEMENTS PENSION FINANCING PENSION FRAMEWORK PENSION INCOME PENSION INDICATORS PENSION LIABILITIES PENSION PLAN PENSION POLICY PENSION POLICY REFORM PENSION PROGRAMS PENSION PROVISION PENSION PROVISIONS PENSION REFORM PENSION REFORMS PENSION RIGHTS PENSION SAVINGS PENSION SCHEME PENSION SCHEMES PENSION SYSTEM PENSIONS PERFORMANCE RISK PERSONAL PENSION PERSONAL PENSIONS PRIVATE EMPLOYER PUBLIC POLICY RAPID GROWTH RATE OF RETURN RATES OF INFLATION RATES OF RETURN REFORM PROGRAM REGULATORY FRAMEWORK REMITTANCE REPLACEMENT RATE REPLACEMENT RATES RESERVE RESERVE FUNDS RESERVES RETIREE RETIREES RETIREMENT RETIREMENT ACCOUNTS RETIREMENT AGE RETIREMENT AGES RETIREMENT BENEFIT RETIREMENT INCENTIVES RETIREMENT INCOME RETIREMENT SAVINGS RETIREMENT SAVINGS ACCOUNT RETURNS RISK MANAGEMENT RISK POOLING SAVINGS RATES SECURITIES SERVANTS SMALL ENTERPRISES SOCIAL ASSISTANCE SOCIAL INSURANCE SOCIAL PENSION SOCIAL PENSIONS SOCIAL POLICY SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SECURITY REFORM SOCIAL SECURITY SYSTEM SOCIAL SECURITY SYSTEMS SOCIAL SERVICES SUPERVISORY FRAMEWORK SUPPLEMENTAL BENEFIT SUPPLEMENTARY PENSION SUSTAINABLE DEVELOPMENT TAX TAX COLLECTION TAX TREATMENT TERM DEPOSITS TRANSPARENCY TRUSTEE URBANIZATION VOLUNTARY PENSION VOLUNTARY PENSIONS WAGE GROWTH
Online Access:	http://documents.worldbank.org/curated/en/2013/01/17406669/chinas-pension-system-vision http://hdl.handle.net/10986/13102

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Summary:	China is at a critical juncture in its economic transition. A comprehensive reform of its pension and social security systems is an essential element of a strategy aimed toward achieving a harmonious society and sustainable development. Among policy makers, a widely held view is that the approach to pension provision and reform efforts piloted over the last 10-15 years is insufficient to enable China's economy and population to realize its development objectives in the years ahead. This volume suggests a national pension system that no longer distinguishes along urban and rural locational or hukou lines yet takes account of the diverse nature of employment relations and capacity of individuals to make contributions. This volume is organized as follows: the main text outlines this vision, focusing on summarizing the key features of a proposed long-term pension system. It first examines key trends motivating the need for reform then outlines the proposed three-pillar design and the rationale behind the design choices. It then moves on to examine financing options. The text continues by discussing institutional reform issues, and the final section concludes. The six appendixes provide additional analytical detail supporting the findings in the main text. The pension system design can play an important role in supporting or constraining such economic and demographic transitions: 1) fragmentation and lack of portability of rights hinder labor market efficiency and contribute to coverage gaps; 2) multiple schemes for salaried workers, civil servants, and, in some areas, migrants similarly impact labor markets; 3) legacy costs that are largely financed through current pension contributions weaken incentives for compliance and accurate wage reporting; 4) very limited risk pooling and interurban resource transfers limit the insurance function of the urban pension system and create spatial disparities in old-age income protection; 5) low retirement ages affect incentives and benefits and undermine fiscal sustainability; and 6) relatively low returns on individual accounts result in replacement rates significantly less than anticipated while at the macro level, are likely to inhibit wider efforts to stimulate higher domestic consumption.

China's Pension System : A Vision

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