The elderly and old age support in rural China: challenges and prospects

Although average incomes in China have risen dramatically since the 1980s, concerns are increasing that the rural elderly have not benefited from growth to the same extent as younger people and the urban elderly. This book explores the evolution of the rural pension system in China over the past two decades and raises a number of issues on its current implementation and future directions.

Key findings are that:

• the demographic transition is accelerating and ageing is far more pronounced in rural than in urban areas
• families will be subject to further strain to support future generations of the rural elderly
• the rural elderly have been consistently more vulnerable than the urban elderly in China, and they mostly cannot save money despite the fact that they work as long as they can
• nevertheless, there is significant difference in saving behaviours between households with and without social security benefits

The document suggests several issues need close attention in the funded portion of the rural pension system, including incentivising sustained participation of rural workers, the challenges of investment rules on funded pensions, and the low retirement ages. Moreover, it recommends the following:

• considering a stronger role for the matching subsidy as the pension system evolves
• combining funds from localities into a single pot of money to generate economies of scale in fund management
• retaining the basic benefit/social pension in order to strikes a sensible balance between poverty and incentive concerns
• building a common rural-urban design framework for pensions to help facilitate portability between systems
• harmonising fund transfer and pension disbursement procedures on the long run

In addition, the author underlines that a social pension approach should be ultimately broadly consistent with the design of the basic benefit provision under the rural pension pilot.