Pension plan for China: Application of dynamic modeling
Lu, Weili
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Permalink
https://hdl.handle.net/2142/23369
Description
Title
Pension plan for China: Application of dynamic modeling
Author(s)
Lu, Weili
Issue Date
1996
Doctoral Committee Chair(s)
Bryan, William R.
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
History, Asia, Australia and Oceania
Economics, Finance
Sociology, Public and Social Welfare
Language
eng
Abstract
This study assesses the adequacy of China's current pension system in light of alternative assumptions regarding the growth of population and the growth of real economic activity.
First, the demographics of the Chinese population and the existing pension system are introduced. Three major problems of the current pension system are discussed. Then, a population projection with three different fertility rates is presented and analyzed. The projection shows that under the one child policy, an imminent decrease in the working population and a dramatic increase in the elderly population presage the critical need for the pension system reform. Further, the current Chinese pension system is assessed in terms of its adequacy. The findings signal a warning for the pay-as-you-go system in the next ten years. Finally, some important suggestions are provided. Although raising the current retirement age may postpone the funding problem in the short-term, establishment of the proposed multi-tier pension system based on projected economic growth is shown to be the most feasible solution in the long-term.
In conclusion, the pension supply and demand problem caused by an aging population and the shrinking of the workforce can be adjusted properly provided that economic growth in China is maintained at a reasonable and stable level.
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