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Comprehensive reform of China s pension and social security system
is an essential element of achieving its objectives of a harmonious
society and sustainable development. Over the past few years, the
Government has considered various options and initiated several
significant measures. In 2009 the authorities established a
national framework for rural pensions, the Rural Pension Pilot
Program (RPPP) and in 2011 a Pilot Social Pension Insurance for
Urban Residents announced. In this process, it has articulated
principles for a reformed urban pension system (indicated by 12
Chinese characters ) which are broad coverage, protects at the
basic level, is multi-layered, and sustainable while the principles
for the rural system (indicated by 12 characters ) are broad
coverage, protects at the basic level, flexible, and sustainable.
These principles underpin the commitments made at the 17th Party
Congress towards a comprehensive and integrated social security
system by 2020. Although substantial reforms of the pension system
have been undertaken over the past two decades, some policymakers
have suggested that additional reforms are needed to meet the needs
of China s rapidly changing economy and society. Issues such as
legacy costs, system fragmentation and limited coverage have not
been fully addressed. At the same time, many new challenges have
emerged such as rapid urbanization, increased income inequality and
urban-rural disparities, greater informalization of the labor
force, changes in family structure, and the effects of increased
globalization. This report has been prepared at the request of the
Ministry of Finance to develop a medium term vision of a holistic
framework that could be realized by 2040 for strengthening old age
income protection in China which is consistent with the principles
outlined in the 12 characters and design options towards achieving
it. The main body of this report outlines this vision summarizing
the key features of a proposed medium-term pension system while the
annexes provide the deeper analysis and context which underpins the
recommendations contained herein."
This volume first examines projected demographic changes that will
affect the economic well-being of China s rural elderly over the
next twenty years, taking into account both China s sharp
demographic transition and the continued migration of young adults
into cities. The projected old age dependency ratio of 34 percent
in China s rural areas by 2030 suggests that support of the elderly
is likely to be an increasing burden on China s families over the
next twenty years. The book next documents the sources of financial
support, poverty incidence and vulnerability of the rural elderly
since the early 1990s. China s rural elderly have been consistently
poorer and more vulnerable to poverty than both working age
households and the urban elderly. In contrast to the urban elderly
who frequently have pension support, the rural elderly typically
rely either on their own labor income or financial support from
adult children. A substantial share of China s rural elderly
continue to work well beyond the age 70, but labor as a primary
source of support falls sharply during their 60s. Additional
evidence suggests that the rural elderly work well beyond 60 out of
necessity and only stop working when physically incapacitated.
While average transfers from adult children to elderly parents are
sufficient to keep them out of poverty, adult migrant children with
uncertain income create the risk that transfers will not be
sufficient to keep some rural elderly out of poverty. The final
sections of the book review experiences with rural pensions during
the 1990s and 2000s and draws out the lessons which have informed
the design of a new national rural pension scheme. Among the many
issues discussed, the report highlights the importance of providing
incentives for participation in the pension scheme and important
issues related to the portability of pensions for a mobile
population."
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