Author:

Publisher: World Bank Publications

Published: 1997-01-01

Total Pages: 184

ISBN-13: 9780821339237

China is in the throes of two transitions: from a command economy to a market-based one and from a rural, agricultural society to an urban, industrial one. So far, both transitions have been spectacularly successful. China is the fastest-growing economy in the world, with per capita incomes more than quadrupling since 1978, achieving in two generations what took other countries centuries. Although swift growth and structural change have resolved many problems, they also have created new challenges: employment insecurity, growing inequality, stubborn poverty, mounting environmental pressures, rising costs of food self-sufficiency, and periods of macroeconomic instability stemming from incomplete reforms. Unmet, these challenges could undermine the sustainability of growth, and China's promise could fade. China 2020, a seven-volume set, examines China's recent history, where it is today, and the path it should follow during the first two decades of the 21st century. The volume in the set entitled, Old Age Security: Pension Reform in China highlights two severe difficulties with China's current pension system: the urgent and immediate problem of the pension burden placed on state-owned enterprises, and the longer-term predicament arising from a rapidly aging population. State enterprises inherited heavy pension obligations from the central planning era. With the transition to a market economy, employment in the state enterprise sector is declining, while the number of pensioners is rising rapidly. The study recommends a unified pension system that includes both mandatory funded individual accounts and a social insurance scheme. It also endorses a sustainable contribution rate that attaches considerable importance to long-term financial viability (more than 60 years) and examines the risks associated with low compliance rates and low interest rates.