How can pension funds cope with the challenges in the economic downturn?

Apr. 29,2020
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Recently, in the face of the downward pressure of the economy, the calls for tax cuts and fee reductions in China have been rising, including the reduction of contributions to the basic pension insurance. It should be said that it is undoubtedly necessary to reduce taxes and fees as a means of countercyclical macro regulation, but if it is a policy measure to cope with the structural economic downturn, it must consider the long-term consequences it brings to the state finance.

How to reduce the burden of corporate contributions while ensuring the financial sustainability of the basic pension insurance scheme?

Challenges and countermeasures to the financial sustainability of the basic pension insurance system in China by ZHU Qing et al. put forward their views.

The results reveal that, 1 Challenges brought by population ageing to financial sustainability of basic pension insurance scheme. At present, the biggest financial problem faced by the basic pension insurance scheme for employees in China is that the scale of pension expenditure is getting larger and larger as the population ages. If the contribution rate of social insurance is further increased, Chinese enterprises may gradually lose their competitive advantage in the world because of the high labor cost.2 To quickly bring pension funds under national unified management. On the one hand, there are extensive financial subsidies, on the other hand, there is a large balance. The main reason for this phenomenon is that the basic pension insurance is financially under regional management. The pension burden also varies from region to region. If pension insurance funds are brought under national unified management, funds in surplus or deficit can be transferred between regions. At least from a static point of view, the situation of financial revenue and expenditure will be greatly improved, and a large amount of funds can be saved for the general public budget.3 To increase the general public budget subsidies for basic pension insurance funds. fiscal subsidy should increase in general public budget to diversify the burden between consumption and labor, while also improving the competitiveness of enterprises.

Corresponding Author: ZHU Qing
CNKI Press Officer: ZHONG Ming

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