Chinese Urban Basic Old-age Insurance Reform And Financial Sustainability Study Mode Selection

Since the1990s, China began to implement the reform of pension system andestablished the basic pension system of social pooling and individual accounts forurban employees. However, due to the transition costs not resolved, the imperfectionsof this pension system, increasing aging population and other factors, the justifiabilityof this regime has been widely discussed since then. In this paper, based on thedetailed reviews of previous research and the analysis on current system’s operation, ituses rigorous economic methods to analyze the following three key issues in-depthand draw the appropriate conclusions.The first issue is about the nature of Chinese current basic pension system for urbanemployees with empty personal accounts. Unlike the general ideas which classifiedthe basic old-age insurance system for urban employees as partial-funded pensionsystem by most domestic scholars, this paper based on detailed comparative analysisof the three most typical pension systems in the world, i.e. PAYG system, full-fundedsystem and partial-funded system, comes to a conclusion that Chinese basic pensionsystem of social pooling and individual accounts for urban employees belonging tothe PAYG system in nature under the conditions of the current individual accountempty. More precisely, it belongs to the PAYG system combined the social poolingaccounts of defined benefit with the personal accounts of nominal definedcontribution.The second issue is the reform direction of Chinese basic pension system for urbanworkers. Focused on the most controversial problem whether small complements orradical reform is needed to Chinese current pension system for urban employees, thisarticle exploits the methods of Pareto improvement and reform costs analysis, toconclude that the practical rationality of the current pension system combining socialpooling and empty individual accounts, taking into account the current rapiddevelopment of China’s urbanization and the fast growth of pension population.The last issue is the sustainability on the basic old-age insurance system for urbanemployees in China. While affirming the reasonableness of the current system, thelong-term sustainable development of the system has become the focus of this thesis.On the basis of previous research results at home and abroad, this thesis makes asimulated calculation on the contributions and expenditures of basic old-age insurancefor urban workers in2013-2070, and finds out that if the current pension parameters do not make timely adjustments, this pension system will be difficult to cope with thechallenges of an aging population. On this basis, this thesis analyzes the impact ofparameters adjustments such as appropriate to extend the retirement age, theallocation of state-owned assets, increasing financial support and other measures tosolve the problem of pension payments imbalances. By simulation calculations, thethesis found out that timely adjustment of population policy, appropriate extension ofthe retirement age and complemented by other measures, the current basic pensioninsurance system can cope with the challenges of aging, to promote the sustainabilityof this pension system and improve the welfare of the retired population.