Challenges and countermeasures to the financial sustainability of the basic pension insurance system in China

ZHU Qing1 LIU Yang1

(1.School of Finance, Renmin University of China)

【Abstract】Reducing the employers’ contribution rate of the basic pension insurance is of vital importance among the current tax cuts and fee reductions policies in China. However, due to the severe problems of population ageing, the fiscal sustainability of basic pension plan is facing up to critical challenges. Nowadays, the contribution rate of basic pension plan in China is much higher than that in most of the developed countries. Owing to its low pooling level of the basic pension fund, mostly managed at the municipal level, adding up to different support ratio among different regions, financial deficit of basic pension fund has appeared in some regions. One of the most important measures to solve the problem is to achieve the goal of “quickly bringing pension schemes under national unified management” set up at the 19th National Congress of the Communist Party of China. Only that can eliminate the contradiction of high fiscal subsidy and generous surplus of pension fund, meanwhile supporting to reduce the contribution rate. Moreover, fiscal subsidy should increase in general public budget to diversify the burden between consumption and labor, while also improving the competitiveness of enterprises.

【Keywords】 pension insurance; financial sustainability; national unified management;

【DOI】

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    Footnote

    [1]. ① http://www.xinhuanet.com//health/2018-07/20/c_1123151851.htm [^Back]

    [2]. ② They are calculated according to the statistics provided by the website of the National Bureau of Statistics of China. [^Back]

    [3]. ③ The contribution income data do not include financial subsidies, but include interest income. [^Back]

    [4]. ④ They are calculated according to the data in the social insurance funds revenue of the Ministry of Finance. [^Back]

    [5]. ⑤ https://home.kpmg/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/social-security-employer-tax-rates-table.html [^Back]

    [6]. ① Source: social insurance funds revenue of the Ministry of Finance in 2017. [^Back]

    [7]. ② It should be pointed out that the current financial situation of China’s basic pension insurance funds is actually to use part of the financial revenue for investment in the capital market. Whether this is necessary in the case of very tight financial funds is debatable. [^Back]

    [8]. ① OECD, Tax Database. [^Back]

    [9]. ② IMF, “Government Statistics Yearbook”, 2008, 2017. [^Back]

This Article

ISSN:1003-2878

CN: 11-1077/F

Vol , No. 04, Pages 75-78

April 2019

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Article Outline

Abstract

  • 1 Challenges brought by population ageing to financial sustainability of basic pension insurance scheme
  • 2 To quickly bring pension funds under national unified management
  • 3 To increase the general public budget subsidies for basic pension insurance funds
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