Rethinking Pension Reform in China
摘要
In line with advice from international financial institutions, China introduced a three-pillar pension system in 1997. However, it performs badly, with high contribution levels, the ‘funded' contributions being used for current expenditures, and delays in pension payments. The problems are often ascribed to the remaining elements of pay-as-you-go (PAYG) present in the system. This paper, however, argues that the advantages of a fully-funded system (FF) have been exaggerated. The higher relative return of the PAYG system in China justifies a PAYG pension system for China. It is argued that the problems of the Chinese pension system are not caused by the use of PAYG but by the need to finance transition costs and conditions particular to the pension system in China, notably incomplete contribution coverage, a low pension age, and a high replacement rate. It is these factors, and the rate of growth of output, which determine the viability of the Chinese pension system.