Sustaining pension reform in China
Peter Whiteford and Xin Yi
Social Policy Research Centre
Contact Email:   p.whitefordunsw.edu.au

China is continuing the process of developing a pension system through a time of unparalleled economic and demographic transition. The situation is further complicated by the global financial crisis, which can be viewed as calling into question many of the basic assumptions of the model adopted in China.

Since 1997 many significant reforms have been implemented and the framework and direction for a national unified system has been set out. In spite of this significant progress, the scope of the system remains limited, as the coverage rate among urban employees remains below 50%. The rural population remains largely outside the national pension system, and it currently seems likely that the majority of the population will remain dependent on old age provision through family support for many years to come. The system must also deal with the situation of migrant workers, where the problems range from those associated with low coverage to those associated with guaranteeing equitable treatment to persons retiring in different parts of the country and subject to differing conditions of entitlement.

The current situation provides a "demographic window" until around 2015 to address these short-comings. Extending coverage through improved compliance by employees and companies as well as the continuing financial commitment towards the National Social Security Fund are crucial to create the financial and institutional basis that can cushion the effects of a much older population, starting in about 20 years time.

This paper analyses how far the process of creating a national old age insurance system has proceeded. It provides an assessment of to what degree the pension system has achieved "its primary goal of social security for more people" (Chinese Government, September 2006), and looks at the challenges in building a national system.

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