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How can China solve its old-age security problem? The interaction between pension, state enterprise and financial market reform

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  • JAMES, ESTELLE

Abstract

Like most countries, China faces a rapidly aging population and a looming social security crisis. Prefunding and unifying a fragmented system are at the heart of the government's projected reforms that are intended to prevent this crisis. The Chinese plan to set up individual accounts to deal with these problems is retarded by three key factors:1 transition costs must be covered in any move toward prefunding, and the Chinese government is still trying to figure out how to accomplish this;2 the current social security system is characterized by fragmentation and decentralized administration, which lead to principal–agent/ moral hazard issues that make it more difficult to cover transition costs, decrease early retirement and increase compliance;3 the funds that have accumulated have not been invested in diversified portfolios by competitive management and have not earned a high rate of return.This paper focuses on these three problems as well as the complex interactions between pension, financial market and state-owned enterprise (SOE) reform. We summarize the bold steps that the government has announced during second half of 2001 to link pension, financial market and SOE reform.

Suggested Citation

  • James, Estelle, 2002. "How can China solve its old-age security problem? The interaction between pension, state enterprise and financial market reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(1), pages 53-75, March.
    • Handle: RePEc:cup:jpenef:v:1:y:2002:i:01:p:53-75_00
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    Cited by:

    1. Halvor Mehlum & Ragnar Torvik & Simone Valente, 2013. "China s Savings Multiplier," Working Papers No 4/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    2. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2008. "Dynamic Globalization and Its Potentially Alarming Prospects for Low-Wage Workers," NBER Working Papers 14527, National Bureau of Economic Research, Inc.
    3. Wei Zheng & Zining Liu & Ruo Jia, 2019. "How private sector participation improves retirement preparation: A case from China," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(1), pages 123-147, January.
    4. Giles, John & Lei, Xiaoyan & Wang, Gewei & Wang, Yafeng & Zhao, Yaohui, 2023. "One country, two systems: evidence on retirement patterns in China," Journal of Pension Economics and Finance, Cambridge University Press, vol. 22(2), pages 188-210, April.
    5. Wang, Wen & Seifert, Roger, 2017. "Employee referrals: A study of ‘close ties’ and career benefits in China," European Management Journal, Elsevier, vol. 35(4), pages 514-522.
    6. Lijian Wang & Daniel Béland, 2014. "Assessing the Financial Sustainability of China’s Rural Pension System," Sustainability, MDPI, vol. 6(6), pages 1-20, May.
    7. Wang, Lijian & Béland, Daniel & Zhang, Sifeng, 2014. "Pension financing in China: Is there a looming crisis?," China Economic Review, Elsevier, vol. 30(C), pages 143-154.
    8. Feng, Jianxi & Dijst, Martin & Wissink, Bart & Prillwitz, Jan, 2013. "The impacts of household structure on the travel behaviour of seniors and young parents in China," Journal of Transport Geography, Elsevier, vol. 30(C), pages 117-126.
    9. repec:ilo:ilowps:391561 is not listed on IDEAS
    10. Mehlum, Halvor & Torvik, Ragnar & Valente, Simone, 2016. "The savings multiplier," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 90-105.
    11. Jianxi Feng & Shuangshuang Tang & Xiaowei Chuai, 2018. "The impact of neighbourhood environments on quality of life of elderly people: Evidence from Nanjing, China," Urban Studies, Urban Studies Journal Limited, vol. 55(9), pages 2020-2039, July.
    12. repec:wsr:wpaper:y:2009:i:022 is not listed on IDEAS

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