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МИРОВАЯ ЭКОНОМИКА И МЕЖДУНАРОДНЫЕ ЭКОНОМИЧЕСКИЕ ОТНОШЕНИЯ
П Р О Б Л Е М Ы О Р Г А Н И З А Ц И И С О В Р Е М Е Н Н О Й П Е Н С И О Н Н О Й С И С Т Е М Ы К И Т А Я1
Чжан Дюнь Юн
доктор экономических наук, заведующий кафедрой экономики Национального университета путей сообщения (г. Шицзячжуан, КНР). Адрес: Национальный университет путей сообщения, 050043, КНР, Шицзячжуан, Ист Роуд, 17. E-mail: zhjy@ruc.edu.cn
В статье рассматривается модернизация пенсионной системы в Китае, эволюция подходов к решению проблем пенсионного обеспечения с учетом демографических трудностей. Существующая нормативно-правовая база накопительных пенсий, подходы к наполнению пустых счетов, таких как отсрочка выхода на пенсию, а также отмена политики «одна семья - один ребенок» находятся в фокусе исследования. По данным ООН, группа населения в возрасте 60 лет и старше - самая быстрорастущая в мире. В настоящее время Китай - одна из наиболее быстро стареющих наций. К 2030 г. в Китае население старшего возраста будет составлять почти четверть. Старение населения, по прогнозам, окажет существенное влияние на численность рабочей силы, а также пенсионеров, порождая проблемы адаптации национальной пенсионной системы к этим изменениям и увеличения фискального и политического давления, с которым сталкивается система социальной защиты людей старшего возраста и система здравоохранения.
Ключевые слова: Китай, пенсии, дефицит, покрытие, пустые счета.
C H I N A' S P E N S I O N S Y S T E M A N D I T S C H A L L E N G I N G I S S U E S
Junyong Zhang
Doctor of Economics, Head of the Department of Economic Science Shijiazhuang Railway University.
Adress: Shijiazhuang Railway University, 17# East Road, Second North Ring, Shijiazhuang, Hebei, PRC, 050043. E-mail: zhjy@ruc.edu.cn
1 Статья подготовлена при поддержке Департамента науки и техники провинции Хэбэй (КНР), а также при финансовой поддержке по проекту № 1545766^ «Исследование долга государственного местного правительства: риски и пути их снижения».
The article examines pension systems modernization in China; the evolution of the approaches to solving pension security problems in view of demographic challenges. The existing regulatory framework of funded pensions, the approaches to refill the empty accounts such as delaying retirement ages as well as abolishing one-child policy are in focus of the research. Population aged 60 or over is the fastest growing cohort, globally, according to the UN data. Currently having of its population aged 60 or over, China is one of the most rapidly ageing nations. By 2030, China will have nearly a quarter of their populations aged 60 or over. Population ageing is projected to have a profound effect on the number of workers as well as pensioners, posing the problem of underscoring the national pension systems' adaptation to changing conditions; increasing the fiscal and political pressures that the old-age and social protection systems, health care systems are facing.
Keywords: China, pension, deficit, coverage, empty accounts.
hina has been undergoing a very rapid economic growth over the
past nearly four decades. The reform of China's social security
system is a critical component of China's overall economic reform. Pension system is the most important constituents of social security system. Some other systems, such as Medical Insurance, Unemployment Insurance, Maternity Insurance and Work-related Injuries Insurance are combined to build up an all-round social security net. By the end of 2015, 858,33 million people are covered by pension system, with 665,7 million by Medical Insurance, 173,26 million by Unemployment Insurance respectively. All in all, the income from all kinds of social security in 2015 amounted to 4 593 billion Yuan, with pension fund had a share of 64%. To study China's social security, one should first have a clear profile of how pension system is
No one can deny the fact that China has made great strides in expanding pension coverage for its population over the past nineteen years [7]. China has established a contributory pension system, which covered 353 million urban workers as well as 504 million individuals' pension accounts with government subsidized (urban self-employed, rural workers, rural peasants all fall into this category). While a causal glimpse of the data of coverage and fund amount can easily find that urban workers' pension income monthly last year is almost ten times of their counterpart, while pension expense is almost 12 times accordingly.
There are many problems and challenges in the current Chinese pension system. China is experiencing a rapidly ageing population. The one-child policy and significant improvement in living standards make
operated.
China's ageing problem more severe than any other countries. China faces a monumental challenge to support its ageing population, a strain that its dynamics might be undermined if such issue can not be tackled in an appropriate method [2].
In 2015, China made the decision to end the compulsory one-child policy for most couples. The purpose was aimed at balancing population development and solving the ageing population. China's economic success in large part should be attributed to its abundance of cheap labor force when it joined the global economic system. Statistics are showing that the working-age share of the Chinese population peaked in 2010 and declined afterwards for many years to come. The median age has been at a rising trajectory. According to a report released by the United Nations, the median age in China is 37,0 in 2015, while it will be up to 49,6 in 2050 [5]. Clearly China's population is ageing quickly, which will have a strong impact within one generation. This change is, in large part, intended to mitigate the adverse demographic trend plaguing China's social security system: the rapidly declining ratio of active to retired workers. According to China's National Bureau of Statistics, the absolute working-age population of China declined by 3,45 million in 2012 [8]. It is the first time the country has recorded an absolute drop in the working-age population in a considerable period of time. Experts take the view that China's working-age population is to decrease steadily and gradually over a long period of time or at least before 2030. The causes lie in China's low fertility rate. Even one-child policy has been abolished, it is not expected that there would be another baby boomer. China has in fact fell into low fertility rate trap with no sign of rebounding even the ease of one-child policy. With the generation of baby boomer coming into retirement, these demographic pressures will put severe strains not only on the government-run pension system, but also on informal family support of retirement.
The Chinese state-run pension system is undergoing a top-level redesign to push reforms in the sector, so as to ensure that pension funds remain sustainable in an ageing society. Issues such as excessive fragmentation, insufficient funds as well as low returns from fund investment aroused many policy debates as well as proposals.
Structure of Pension System in China
The Chinese pension system, as currently constituted, actually has four main subsystems. The Urban Enterprise Pension System covers urban workers, who in practice are mainly employees of large private enterprises and SOEs. The recently established Rural Pension scheme allows rural workers to make voluntary contributions to individual accounts that are subsidized by local and central government. The forth is scheme carried out
only from last year, targeting civil servants and government-related employees such as teachers.
As the fourth subsystem had just joined in the contributory pension system, there is no definite participants numbers and funds amounts contributed. For a long time, civil servants and other government employees such as teachers are not required to pay their own pension contributions and were entitled to a generous government-subsidized pension on retirement. It will be an obvious fact that there seems no necessity to study issues surrounding the most newly developed subsystem as it is publicly financed even though participants are also required to contribute as in others. Without consideration of this regard, China's pension system now covered 850 million people. Excluding students and pre-school children, about 1 billion shall be covered by the system. That means a 85% of coverage rate (Figure 1).
100
Yearl990 Year 2000 Year 2014 Year 2015 Figure 1. Pension Coverage Numbered People (million people)1
Pension reform has long been tied to the reform of China's state-owned enterprises, and stemmed in part from the new requirements of the market-based mechanisms introduced under Deng Xiaoping starting in the late 1970s. Before that, there was no distinction between salary on the job and benefits after retirement. There was an implicit guarantee that Danwei (working units, under socialism there was no employment contract) will support its workers to end at the expense of low salary. This is what had been called the «iron rice bowl», an all-encompassing social security system for workers in state-owned enterprises. The benefits were equal to roughly 80% of the last annual provincial average wage income in the province where a worker retires. In this sense, the pension system before 1997 can be viewed as a huge pay-as-you-go (PAYG) framework that the government taxes workers. With China's opening-up further, it found that not only
1 China Statistical Yearbook and Press Release by Ministry of Human Resources and Social Security. - URL: http:/ /www.mohrss.gov.cn
overstaffing but also rigid labor employment were bringing an unfavorable edge in international competitiveness. Creating a new system in which both employers and employees could make their own decisions on who hire and where to apply for work also meant the old system's top-down assignment of lifelong employment and social security became increasingly untenable. But while new employees began being hired under a new contract labor system, permanent workers at state firms retained their old benefits, marking the first of many schisms in China's pension plan.
In 1997, the Chinese government decided to introduce the basic parameters of a multi-pillar system. At the heart of the new system is so-called «three-pillar» system. The first pillar consists of two parts: a mandatory pay-as-you-go pillar which is called «social pool», and a mandatory fully funded pillar which is called «individual account». A new social security system based on employment contracts was created, with the employee and the employer contribute separately to pensions accounts. Both employees and employers are required to make contributions to the pension system. Workers contribute based on their individual wage, at a rate of up to eight percent, while employers contribute 20 percent. It ensures that all the employees who has worked and paid the contribution for more than 15 years would receive the basic pension benefit, targeting to a fixed replacement rate at retirement and afterward of 35% of the local average wage. The target replacement rate for individual account is 24,2%, based on the assumption of 15 years of continuing contribution and a monthly payment formula of dividing the accumulated amounts plus investments by 120 after the retirement. Therefore the total target replacement for the first pillar is around 60%. The general pension payments are determined by the number of years of employment, the average wage in the locality, and life expectancy.
In 2004, the Enterprise Annuity system was created, which is a voluntary occupational pension system. It is fully-funded defined contribution accounts. They are established as trust that can take the form of either an internal or external trustee model. Employer contributions are limited to a twelfth of employee salaries, and the combined employer/employee contribution should not exceed a sixth of total wages. This is the second pillar, and the third pillar is voluntary saving. Until now, Enterprise Annuity schemes have primarily been adopted by large, profitable, mostly state-owned enterprises. As many as 75,000 enterprises had set up their annuity fund, with 23,17 million employees joining the scheme and accumulated balance of the fund reaching 952,6 billion Yuan, by the end of 2015. In spite of the significant progress, there is still plenty of room for improvement in view of the huge number of enterprises and employees. When analyzing pension system, one should also need to know something about China's household saving rate. Since the mid-1990s, the
saving rate has increased markedly due to rising income uncertainly as well as distrust on pension China. According to data released by the World Bank, China is one one of the few countries that has the highest saving rate as high as 49% in 2014. While the saving rate in Russia is 24%1.
The above mentioned pension system is mainly related to employees in enterprises in urban, either public-owned or privately-owned ones. Later, the system began to be extended to self-employed in urban and rural population. Sources of pension fund are different even though they are put into the same category statistically. Either contribution or benefit differ greatly. From the Tables 1, 2 one can easily get a rough understanding of China's pension system balances:
T a b l e 1
National Pension Fund Balance* (billion Yuan)
Income Expenditure Balance of the year
2010 1 387,29 1 075,53 311,76
2011 1 800,48 1 336,32 464,16
2012 2 183,02 1 671,15 511,87
2013 2 473,26 1 981,87 491,39
2014 2 761,99 2 332,58 429,41
* Source: China Human Resource & Social Security Statistical Yearbook 2015.
T a b l e 2
Pension Fund Balances in Subsystems* (billion Yuan)
Urban Workers' Pension Income Urban Workers' Pension Paid-out Residents' Pension Income Residents' Pension Paid-out
2015 2 925,04 2 579,86 295,18 223,04
2014 2 525,23 2 175,24 238,69 165,67
* Source: Statitical Briefing by Ministry of Human Resource & Social Security. - URL: http://www. mohrss.gov.cn
By the end of 2015, people covered in the urban workers' pension system amount to 353,60 million, corresponding to fund expenditure of 2579,86 billion Yuan. While people covered in the another system reach as high as 504,7 million, the funds either collected or distributed are rather lower.
Nationwide, it seems bright for China's pension system with regard to cumulative surpluses when no demographic trend is considered. The accumulated surpluses have been increasing from 2008 to 2014 (Table 3). The ratio of pension asset to GDP also indicates the same trend. When compared to other countries, the scene seems not so optimistic.
1 URL: http://data.worldbankorg/mdicator/NY.GNS.ICTRZS?name_desc=fals
T a b l e 3
Accumulated Surpluses and GDP* (billion Yuan)
2008 2009 2010 2011 2012 2013 2014
Balances 993,10 1 252,61 1 578,78 2 072,78 2 624,35 3 127,48 3 564,45
GDP 31 951,55 34 908,14 41 303,03 48 930,06 54 036,74 59 524,44 64 397,40
Ratio, % 3,1 3,6 3,8 4,2 4,9 5,3 5,5
* Data Source: China Statistical Yearbook 2015.
In 2005, there was further reform on the distributed pension benefit, a shift from static to dynamic one. The retiree's benefit is calculated on the weighted average of local average wage and his life average wage. It encourages workers to contribute to the pension fund not just the 15 years as previously stipulated. With more months' payment to the system, the more benefit one will get on retirement. In 2011, the Social Insurance Law was adopted to supplement piecemeal Labor Law and Labour Contract Law. The basic principles of China's social security system, as outlined in the Social Insurance Law, are as follows: All employees, including rural migrant workers, should be covered by the social insurance system. Both employers and employees are required to make contributions (at different rates) to a pension fund, unemployment insurance fund and medical insurance fund, as well as the Housing Provident Fund, Employers, but not employees, are also required to contribute to the work-related injury and maternity insurance funds. The pension funds are composed of pooled components, which can be used to benefit any eligible employee, and personal accounts that benefit the individual employee concerned, when they become eligible.
Before 2015, civil servants and public-related employees need to contribute to their pension fund. Now the sub-system will be paid in to by 8 million civil servants and 32 million public institution employees who will also now pay 8% of their salaries and the employers will contribute 20%. No one will worry about there will be problem in this subsystem. When the reform is carried out, a large number of funds have been compensated for the contribution. This means that not any participant in this regard suffers a loss as a result while their pension can also be guaranteed on retirement, possibly based on their salary as well as locality.
Problems Related to Pension System
China's pension system, as currently constituted, faced a number of urgent challenges that will, in time, make the present arrangement unsustainable [3]. In author's view, «empty accounts» in the first pillar (Urban Workers' Pension System), ageing demographic, disparity of pooling and reluctance to be engaged in the system, low return on
investment, lack of confidence and trust - all these might undermine efforts carried out by China in recent decades.
Unbelievable «Empty Accounts» in China's Pension System
When the mandatory pension system was being carried out, for those workers near to retirement age or having been retired, there should be a fund reserve for their pension to be available for them. In fact the government did not disburse any fund, where they would be paid out was unsettled. From the beginning, there existed the issue of pension deficit. In the pay-as-you-go account, there was almost no fund at the initial stage. Only new workers had to contribute, these pools soon became unable to deal with the increase in pension demands that accompanied an influx of retirees.
The administrator had to «borrow» from individual accounts as the contributors will get the benefits in a much later time. In particular, it fails to bring in new contributors to the social pools. As local authorities use account contributions to cover current cash shortfalls, the overall system is gradually running out of money. By 2010, there was only 203,9 billion Yuan in the individual accounts, rather than the supposed figure of 1,96 trillion Yuan, creating a gap of a total of 1,76 trillion Yuan for the government to fill. Anyway in China, the government is legally obligated to cover the shortfalls. A more recently released figure from official source indicated that the accumulated value of empty personal accounts was more than 3,5 trillion Yuan at the end of 20141. Pension reform had been listed as one of the six key reforms for this year by China's top decision-makers.
Ageing Demographic
Demographic trends are straining social welfare resources and the capabilities of officials to provide for ageing populations. A vigorous debate is now playing out among experts over how the country can best support a rapidly swelling population of senior citizens. This rapid ageing phenomenon creates a severely increasing burden on old-age support. As shown in Figures 2 and 3, the ratio of aged 65 and above to working age (1664) population had been increasing significantly.
The proportion of China's population over 65 is currently high enough compared to other countries, but is projected to grow to 24% by 2050. China will become the world's most aged society in 2030. Ageing populations set to impact China dramatically by 2050 with the number of people aged 65 and over will be rising by almost 200m, from 132 m in 2015 to 331m in 2050.
A report published in December last year by the Chinese Academy of Social Studies (CASS) said that without adjustments, pension deficits would appear in 2030, and that by 2050 the accumulated shortfall would amount to
1 URL: http: / /www. chinadaily.com. cn/opinion/2016-01/08/content_22990307. htm
6,8 trillion Yuan [1]. It can be recalled that ageing population was not the main concern when the pension system was being designed.
13,5*
12,5^
11,5*
njn%
1Q5*
l(y)%
Figure 2. The Ratio of aged 65 and above to working age (16-64) population1
14,5% 13,5* 12,5% 11,5* 10,5% 9rj% s,5% 7,3%
Year 2005 Year 2003 Year 2011 Year 2014
—*— Dependency !Raho —Share
Figure 3. Share and Ratio of aged 65 and Above2
Robust economic growth over the past decades has been associated with increased average life expectancy in China from 68 in 1981 to 74 today. The generation of baby boomers (those Chinese born in the 1950s and 1960s) has started to join the older population. Third, the draconian population control policy, introduced in the early 1980s, resulted in an extremely low fertility rate, further increasing the proportion of the older population.
1 China Statistical Yearbook 2015.
2 Ibid.
In view of the possibly unsound pension system, China set up the National Social Security Fund, aiming to alleviate the financial impact of demographic development. Strictly speaking, it is not part of the pension system. Its functions is to build up capital for public pension deficits resulting from upcoming demographic development.
Disparity of Pooling
Today, pension pooling operates at the provincial, county or municipal level. Administration is decentralized, meaning that local discretion is considerable. Pension fund revenue currently exceeds expenditure in most provinces, particularly in coastal provinces like Guangdong, which has a yearly surplus of 77 billion Yuan at the end of 2014.
However, provinces in the northeast of China that have an excess of retirees and a shortage of young people are already feeling the stain. In Heilongjiang, for example, pension pay-outs exceeds revenue by more than 10 billion Yuan in 2014, with the overall account balance standing at just 32,3 billion Yuan (Table 4). Within a very short period of time, the province will run out of money.
T a b l e 4
Аacts about Urban Enterprises Pension System in 2014*
Covered People, million Current Contributors, million Retirees, million Fund Income, billion Fund Expend iture, billion Accumulated Amount, billion
Nation Total 341,24 255,31 85,93 2 530,97 2 175,47 3 180,0
Beijing 13,926 11,637 2,289 133,13 84,17 216,08
Heilong jiang 10,901 6,467 4,434 92,22 102,83 32,33
Guangd ong 48,095 43,636 4,459 205,94 128,91 544,42
* Source: China Human Resource & Social Security Statistical Yearbook 2015.
From 2009, China began to expand its pension system to rural population. Those aged 60 or over are entitled to get the monthly benefit of 55 Yuan. The fund is totally transferred from the central government and provincial government, while those aged under 60 are required to contribute a small portion as their individual accounts whereas a much larger part is to be subsidized by the government. Monthly pay-outs for rural residents are generally very low, with yearly benefit still far less than average monthly benefit for urban retirees (Table 5).
T a b l e 5
Facts about Residents' Pension System in Rural and Urban*
Covered People Number, million Pensioner Number, million Fund Income, billionYuan Fund Expend iture, billionYuan Accumulate dAsset, billion Yuan
Nation Total 501,075 143,127 231,02 157,12 384,46
Beijing 1,863 0,351 3,67 2,13 11,68
Tianjin 1,061 0.713 4,16 2,03 12,77
Hebei 34,044 8,853 10,04 6,44 16,93
Jiangsu 23,479 9,878 21,54 17,57 37,99
* Source: China Human Resource & Social Security Statistical Yearbook 2015.
Note: for statistics purpose, citizen pension in Urban and in Rural is quiet different, even though they are combined together.
Portability
Social insurance benefits should remain with workers when they move. However this provision has proved very difficult to implement because of the highly localized nature of the social welfare system in China. Getting different jurisdictions to share information is fraught with bureaucratic and technical difficulties, especially for workers coming from rural areas of China. The flow of pension contributions and benefits through local governments not only undermines funding of the current pension, but also erects barriers to labour mobility. An individual moving to a new city is likely to face significant barriers to pension portability. First, he or she is typically forced to surrender a portion of the accrued pension benefits. Second, the pension system of the new city may have different rules or rule interpretations. Third, the move could restart the vesting clock-meaning that the individual would need to work longer in order to receive guaranteed benefits. All of these consequences could dissuade an individual from moving to obtain better employment.
Rural migrant workers in urban areas, of which there are approximately 150 million, are not generally covered by the urban pension system. Participation is allowed, but not compulsory. Both employers and rural migrant workers try to dodge the involvement. Migrant workers are more interested in immediate wages than in pensions. What's more, their high mobility across regions impedes participation. In order to encourage employers and employees to participate, local governments have started experimenting reducing contribution rate.
A key point to note is that the migrant worker population is getting older: More and more workers are middle-aged and already planning for their retirement. The annual survey of migrant workers in China showed that the proportion of workers aged 16 to 30-years-old fell from 42 percent
to 33 percent in 2015, while the proportion of workers over 40-years-old has jumped from 34 percent in 2010 to 45 percent in 2015. Over the last few years, many of these older workers have been at the forefront of workers' demands for payment of social insurance. As the migrant workforce continues to age, those demands will only get louder.
Low Return on Investment
State pensions lack adequate funding to support the country's rapidly ageing population, and investing in assets with higher returns could help make up the shortfall. There have been strict rules on how to management pension funds such as saving, bond, stock, trust. Low yields earned from bank accounts or bonds will not meet the increasing demands of a rapidly growing elderly population. From another angle, even if pension can be allowed to flow into stock market, its return can not be indexed as its volatility.
Debates and Policy Options
To be or not to be? How to make the pension fund sustainable is a thorny issue to be tackled with. Compared to other countries, it is not a easy task to have such a large population covered by pension system. Once it had been fully set up for the whole populace, fairness and equality are still being considered except for the sustainability. The future retirement system in China is facing a rapid population ageing as well as the drawback of pension system design, demographic dividend will soon disappear. When it has a large working-age population and relatively few retirees, there is no pension crisis looming. This demographic dividend has allowed China to finance pension benefits to retirees from current pension contributions. But this favorable situation will shortly come to an end, as the population ages. China, as one of the world's most populous countries, once adopted draconian one-child policy for most of young couples. Even it has been relaxed, the low fertility rate as low as 1.6 per couple can not make a shift. The new two-child policy is not likely to have a big impact on the worker-retiree ratio, so China's retirement system will remain under stress.
How to Centralize the Fund Pool
Nationally, there seems no pension deficit at present. As the pension fund is managed locally, some provinces have more surpluses than others, while some provinces will suffer deficit nearly. An estimated 40 million retirees in China are victims of a highly fragmented, under-funded patchwork of local pension funds. To sustain social security, China needs to implement other reforms - moving from a local to a national system and expanding the permissible investment for Chinese pensions. To centralize so much a pool, there will be many issues to be dealt with. The pension system is to be coordinated at the national level unlike at present, where it is coordinated at the provincial level. With national-level coordination, risks
will be lowered because there will be more room to iron out surpluses or deficits in different parts of the country.
Raise Retirement Age
At present, China's official retirement age for most men is 60. For women, it is 55 for civil servants and employees for state enterprises, and 50 for others. This rule has been implemented since the founding of New China in 1949. At that time, the life expectancy was not very high, setting a relatively young retirement age seemed sensible. Robust economic growth over the past decades has been associated with increased average life expectancy in China from 68 in 1981 to 76 today (Table 6). When the PAYG is operating still at the present situation, there will be sure of deficit ahead. One of the policy options is to raise the official retirement age in a gradual manner.
T a b l e 6
Life Expectancy in China*
2015 2010 2005 1990
Male 73,64 72,38 70,83 66,84
Female 79,43 77,37 75,25 70,47
Average 76,34 74,83 72,95 68,55
* Source: China Statistical Yearbook 2015.
The right way to overhaul the system is to guarantee basic coverage rather than increasing superannuation payments. At the same time, the age of retirement eligibility should be postponed to mirror lengthening life expectancy.
Raise Contribution Rate or Lower it
The majority of workers are still denied the social security benefits they are legally entitled to. The government has sought to resolve this issue, not by enforcing the law, but rather by introducing new schemes based on individual contributions from urban and rural residents, and by seeking to encourage compliance of the Social Insurance Law by gradually reducing the contributions employers and employees have to make to the various insurance funds [4]. In mid-2016, several provinces and cities, including Beijing, started to reduce employer contributions by one percentage.
The burden related to employment contract include not only pension, but also others such as unemployment, medical, work-related injury and maternity insurance. In addition, the government established a housing fund designed to help employees, who no longer had housing been provided for them, buy their own house. The housing fund is also contributed by both employer and employee. In some enterprises, the contribution rate is from 19 to 27% of the employee's salary compared to the 28% in pension system.
Concluding Remarks
China's pension system has seen far-reaching structural reforms in recent years. It is apparent that China is making efforts to have the entire population to subscribe to pension, every one can be entitled to have the basic right, no matter in what subsystem. In that case, China can deepen its reform to upgrade its economy. It will very be likely that the government needs to lend its hand to refill the empty accounts as the last resort. Raising retirement age abruptly is not feasible without the consultation and consensus from the staked. It is widely agreed that it might be too late for China to change its strict one-child policy. The relax might be aimed at balancing population development and solving the aging population problem. But the reform is not likely to make a big change in the trend of negative population growth. China will still face severe population challenges, including short of working-age population distortion in population structure. What is more challenging - China will have to face the shift of its economic structure from low-skilled dependent to a knowledged one. In that case the pension pool might be not sufficient without the support from the central government.
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