Abstract
Promoted by the previous government, China has gradually established and improved the social pension system in recent years. In 2005, the Decision of the State Council on Improving the Basic Old-age Insurance System for Enterprise Employees established and improved the mixed old-age insurance system framework that features social pooling plus personal accounts.
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Notes
- 1.
For example, due to the risk of investment return, if the failure in pension fund investment causes dramatic shrinkage of pension, then the government might subsidize pensions for humanitarian consideration.
- 2.
The funded system is essentially to realize the smoothing of the income of individuals in the life cycle through this system and safeguard their old-age income and living through compulsory savings. The PAYG system is essentially tax collection and transfer payment of the incomes of people of different generations so as to achieve the purpose of income smoothing.
- 3.
That is, assuming that the mortality rate of all ages reduces by x times in the same proportion, and then find the value of x that makes the calculated life expectancy equal to the predicted life expectancy, and finally adjust the mortality rate.
- 4.
It should be noted that the actual population sampling ratio is not exactly equal to 1 or 0.1%.
- 5.
According to the document Guo Fa No. [2005] 38, an individual who has achieved the legal retirement age, but contributed less then 15Â years, would not be entitled the basic pension, the accumulate savings of pension in his personal account can be defrayed one-off and the relationship of insurance will be terminated.
- 6.
Meanwhile, we have combined the predicted population data for cities and towns into the predicted urban population data.
- 7.
According to the international experience, even if the developed countries where there is a sound old-age insurance system, the coverage of old-age insurance is only about 90% (Holzmann 2009). In the past, the proportion of China's urban employment maintained at a level close to 90%, so even the old-age insurance coverage reaches 90%, the proportion of the population covered by the old-age insurance to the total population is less than 81%.
- 8.
The industries used include 7 industries where state organs and public institutions are concentrated in, namely state organs, Party organs, the CPPCCs, the democratic parties, education, health, research and experimental development. In the meanwhile, the retirement age for female cadres in state organs and public institutions is 55, the age range for men and women in the calculations here is 20–59 and 20–54 respectively.
- 9.
Affected by the economic crisis, the estimates made by the latest studies more were more conservative, the estimate of per capita GDP of the US in 2050 US is lower. Citigroup (2011) and ADB (2011) estimated that the per capita GDP of the US in 2050 would reach approximate to $100,000, while PricewaterhouseCoopers (2013) and Goldman Sachs (2012) estimated that it would be $85,000–90,000, but many studies considered that China’s per capita GDP would reach about 50% of that of the United States.
- 10.
The result was converted to 2011, but as the discount factor is the nominal GDP growth rate, this ratio should be the same in theory in 2011 and 2050.
- 11.
One t factor that must be taken into account is China’s fiscal revenue to GDP ratio is significantly lower than those in the developed countries. The revenue and expenditure to GDP ratios in the developed countries are mostly about 40%.
- 12.
The current year nominal GDP growth rate is used as the discount factor. It is convenient to use the nominal GDP as a deflator because although the absolute amount changes after discounting, the ratio of a certain amount to GDP will remain unchanged, thus avoiding a significant impact of the setting of a discount factored on the analysis results.
- 13.
Please note that the implicit debt here is net debt because it has excluded the expenses the old-age insurance can cover.
- 14.
Some scholars were opposed to this. For example, Sun (2001) believes that the transition costs should be borne the government rather than individuals and enterprise. On the one hand, it is unfair for individuals and enterprises to bear the transition costs. On the other hand, this would diminish the enthusiasm of individuals and enterprise to participate in the old-age insurance and thus lead to decline in contribution rate.
- 15.
This was partially because at that time there were only the old men, the old men did not have any accumulated money in their personal accounts, so a considerable part of the pension fund exists in the form of transition costs and paid through misappropriation of the funds in personal accounts.
- 16.
The stock of transition costs, i.e. the discounted transition costs that still need to be paid in the future. The transition costs that have been incurred have already been reflected in the empty accounts of the personal accounts of old-age insurance.
- 17.
But the old-age insurance management agency guarantees the minimum rate of return, and even in the event of the investment risk, it must guarantee the payment at the minimum rate of return.
- 18.
Like the previous studies, the pension payments calculated here included the original subsidized by government at all levels.
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© 2017 China Social Sciences Press and Springer Science+Business Media Singapore
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Li, Y., Zhang, X. (2017). Pension Gap and Implicit Debt Forecast. In: China's National Balance Sheet. China Insights. Springer, Singapore. https://doi.org/10.1007/978-981-10-4385-7_15
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DOI: https://doi.org/10.1007/978-981-10-4385-7_15
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