Pension Reform in China: The Need for a New Approach
IMF Working Papers, May 1, 2007
Source details
- Canonical URL
- Pension Reform in China: The Need for a New Approach
Other formats
Bibliographic details
- Authors: Steven V Dunaway, Vivek Arora
- Published: May 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451866735.001
Context and problem statement
- Rapid aging of China's population over the next few decades makes it important for a new pension system with broad and adequate coverage to be put in place quickly.
- Pension reforms, first initiated in 1997, have become bogged down in difficulties over dealing with the "legacy costs" associated with the relatively more generous benefits provided under the old system.
- The paper argues that the legacy problem should be separated from the problem of setting up a new pension system.
Key findings
- The legacy costs of the old system are a major impediment to reform and have stalled progress since reforms began in 1997.
- A new pension system should aim to cover both urban and rural workers.
- The need for timely action is emphasized given demographic pressures from rapid population aging.
Concrete proposals and policy recommendations
- Separate legacy liabilities from the institutional design and financing of a new pension system.
- Design and implement a new pension system that:
- Provides broad coverage across urban and rural populations.
- Delivers adequate benefits while taking into account fiscal implications of legacy costs.
- Address legacy costs through mechanisms distinct from the operational framework of the new system (the paper suggests separating the legacy problem from system design).
Content in this bundle
- 1. Demographics