October9,2016:SeniorspracticetaichiinLipingCounty,GuizhouProvince.In2017,newlyaddedChineseseniorsexceeded10millionforthefirsttime.VCGThisJune,Chinaannouncedapolicytoestablishacentraladjustmentsystemtocoverbasicpensionfundsofenterpriseemployees.ThenewpolicywentintoeffectonJuly1,2018,withtheaimtobalancepensionpaymentburdensoflocalgovernmentsandrealizesustainabledevelopmentofChina’sretirementinsurancesystem.
ReasonsbehindtheCentralAdjustment
Inrecentyears,reformsofChina’sbasicpensionsystemhavedelveddeepertoachievemajorprogress.Ingeneralterms,itsretirementinsurancesystemfeaturesstableoperationandstrongfundingsupport,guaranteeingtimelyandfullpensionpaymentstoretirees.In2017,thetotalrevenueofChina’spensionfundsreached3.3trillionyuan,andthetotalexpenditurehit2.9trillionyuan.Bytheendof2017,thecumulativeaccountbalancereached4.1trillionyuan.
However,hiddenbeneaththeoverallsteadyoperationofChina’spensionsystemarewideninggapsamongvariousregions.Thedependencyratiobetweenthepopulationtypicallynotinthelaborforce(childrenandseniors)andworking-ageadultsvariesgreatlyamongregions.Theimbalanceinregionalpensionfundshasbecomeincreasinglyglaringinrecentyears.Althoughnumerousfactorsmaycomeintoplayincludingdiversifyingemploymentandimbalancedeconomicdevelopment,theimbalanceisprimarilycausedbyanagingpopulationandincreasingpopulationmobility.
Bytheendof2017,Chinawashometo241millionseniorsaged60andabove,accountingformorethan17percentofitstotalpopulation.In2017,itselderlypopulationgrewbymorethan10millionyear-on-yearforthefirsttime.Thisenormousfigureandthemassivepopulationflowinthecountryexacerbatedtheregionalimbalanceofpensionfunds.Specifically,thesurplusofpensionfundshasmostlyoccurredineasternpartsofChina,whilesomewesternandnortheasternprovinceshavebeenhitwithgreatpressureontheirpensionfunds.AccordingtotheChinaSocialSecurityDevelopmentReport2016issuedbytheChinesegovernmentinNovember2017,fundrevenuesofsevenprovincial-leveladministrativeunitsincludingQinghaiandJilinfailedtocovertheirpensionexpendituresin2016.Amongthem,thenortheasternprovinceofHeilongjiangwasunderfundedby32billionyuaninitspensionfundin2016,anditscumulativefundshortagereachedmorethan23billionyuan.However,anothernineprovincial-leveladministrativeunitsincludingGuangdong,Jiangsu,andZhejiangeachreportedacumulativepensionfundsurplusofatleast100billionyuan.GuangdongProvincetoppedthelistwithasurplusofnearly726billionyuan.
Theimbalanceinpensionfundsattheprovinciallevelisadifficultissuetobeaddressed,soadjustmentacrossthenationisneeded.Thenewpolicycoversthefollowingaspects:First,thecentraladjustmentsystemwilldrawacertainportionfromprovincialpensionfundpoolsforredistributionlater.Second,funddistributionofthecentraladjustmentsystemwillbebasedonthescaleofthecapitalpool.Third,fundsraisedthroughthecentraladjustmentsystemwillbeallocatedtolocalgovernmentsforpensionpaymentsonly,andnotusedtobalancebudgets.Fourth,theexistingcentralfiscalsubsidypolicieswillcontinueandthecentralgovernmentwillcontinuesupportinglocalgovernmentsinpensiondistribution.
AddressingConcerns
Theannouncementofthecentraladjustmentsystemforbasicpensionfundshasgeneratedheateddiscussion.Whetherthenewpolicywillcreateburdensonenterprises,employeesandlocalgovernmentshasarousedgreatpublicconcern.
“Thecentraladjustmentfundiscomprisedofpensionfundspaidbyeachprovincial-levelregion,”explainsYouJun,China’sViceMinisterofHumanResourcesandSocialSecurity.“Establishingthecentraladjustmentsystemisprimarilyaimedatbalancingdeficitsandsurplusesinprovincialpensionfunds.Thetotalvolumeofthenationalpensionfundwillnotchange.Thenewpolicydoesn’traisethepaymentratioofenterprisesorindividuals,nordoesitchangeexistingmethodsofpensioncalculationandpayment.”Thus,thenewpolicywillnotcreateburdensforenterprisesoremployees,norwillithaveanynegativeimpactonthewelfareofretirees.
“Thecentraladjustmentsystemforbasicpensionfundswasdesignedtobalancethepaymentburdensoflocalgovernmentsandpromotefairsharingofsocialsecurityfundsamongthepublicatlarge,”opinesJinWeigang,headoftheChineseAcademyofLaborandSocialSecurity.
Duringtheimplementationprocessofthecentraladjustmentsystem,balancingtheinterestsofvariouspartieswillbetricky.Manyhavealsoweighedinonfairandreasonableturn-inanddistributionsolutionsforfundsraisedthroughthecentraladjustmentsystem.
Theseconcernscanberesolvedbyinstitutionaldesign.Forexample,intermsofincentiveandrestrictivemechanisms,thenewpolicystipulatedthatafterreceivingsubsidiesandfundsallocatedbythecentralgovernment,remainingprovincialfundinggapsneedstobecoveredbylocalgovernments.Thenewpolicyalsoproposedthatanevaluationsystembeestablished.Variousissuessuchaspensionpaymentandfundmanagementwillbeincludedintheworkevaluationlistforprovincial-levelgovernments.
NationwideCoordination
TheSocialInsuranceLawofthePeople’sRepublicofChinacalledforthecountry’sbasicpensionfundstobecomecoordinatednationwidegraduallytoachieveunifiedcollectionandallocationoffundsbythestate.Thereportdeliveredatthe19thNationalCongressoftheCommunistPartyofChinaplacednationwidecoordinationofpensionfundshighontheagenda.However,becauseregionaleconomicdevelopmentisstillunbalancedacrossChina,nationwidecoordinationofpensionfundsposesahugechallenge.Evenonlyahandfulofprovincescouldrealizeprovincial-levelpensionfundscoordinationinanyrealsense.MostChineseprovincial-leveladministrativeunitsaredoingprovincial-leveladjustmentorbuildingothermechanismstopromotereformoftheirrespectivepensionsystems.
Thus,thecentraladjustmentsystemisthefirststeptowardsnationwidecoordination.Asatransitionalpolicy,thesystemcaneasetheseriousimbalanceinpensionfundsamongdifferentprovincesandregionsandfacilitateasustainablebasicpensionscheme.Duringthetransitionperiod,thecentralgovernmentshouldcarefullyconsidereconomicdevelopmentdisparitiesacrossthecountry,increaseeffortstoformulatemethodsfortrans-provincialpensiontransfersandrenewals,andrationallydivideresponsibitiesbetweencentralandlocalgovernments.ThecentraladjustmentsystempresentsanopportunityforChinatoinvestgreatereffortstoplanandrealizenationwidecoordinationofthecountry’sbasicpensionfunds.
ForalargecountrylikeChinawitharapidlyagingpopulationandunbalancedregionaldevelopment,nationwidecoordinationofpensionfundshasbecomeanirresistabletrend.BuildingthecentraladjustmentsystemrepresentsChina’sresolutiontoaddresschallengesintherealmofsocialsecurity.“Thecentraladjustmentsystemenablesthecountrytoallocateanddistributepensionfundsfromanoverallperspective,”saysChuFuling,professorwiththeSchoolofInsuranceatChina’sCentralUniversityofFinanceandEconomics.“Inthiscrucialperiodmarkedbyanacceleratedagingprocessandrapidtransformationandupgradingofeconomicstructure,Chinafaceslong-termpressuresfrompensionpayments.ThecentraladjustmentsystemwillhelpstrengthenthesustainabilityofChina’spensionsystem.”
April15,2018:AseniorinawheelchairinJuluCounty,HebeiProvince,isaidedbyanurse.Inrecentyears,Chinahasplacedmoreattentiononaddressingtheneedsofitsboomingelderlypopulation.byMouYu/Xinhua
November19,2013:100-year-oldSuFengzhu(left)andher83-year-oldfriendZhangYunyinginspectascarftheyhavejustfinishedknitting,inYinchuanCity.VCG
September17,2010:Seniorsperformyangge,afolkdancefeaturingrichdancelanguage,exuberantgesturesandavividperformancestyle,inXi’an.VCG
October9,2016:HealthworkersperformphysicaltherapyonseniorsinYangzhouCity,JiangsuProvince.Bytheendof2017,Chinawashometo241millionseniorsaged60andabove,accountingformorethan17percentofitstotalpopulation.VCG
AnimportantoccasionforChinesepeopletoshowrespectandgratitudetotheelderly,DoubleNinthFestival,theninthdayoftheninthlunarmonth,fellonOctober8in2016.GrandcelebrationswereheldinLiuchengCounty,Guangxi.VCG