Chronic. The Chinese pension system is highly segmented according to the categories of workers and their places of residence, the result of a historical construction in stages. This segmentation has become problematic, due to the rapid aging of the population and the economic downturn, which has exposed deep inequalities and fueled strong popular discontent.
This is why in 2015 the government launched a reform intended to formally unify the pension systems. But this reform did not reduce the gaps between the different categories, due to the structural characteristics of the system which reproduce labor market inequalities at the time of retirement (Huan Wang and Jianyuan Huang, “How Can China’s Recent Pension Reform Reduce Pension Inequality? Journal of Aging & Social Policy2021).
The starting point for the 2015 reform was a proposal by the Chinese Communist Party to raise the legal retirement age. But the massive opposition of the population (more than 70% unfavorable opinions, according to several surveys) led the government to change its tune…
A new source of inequality
The system had indeed reached its limits. To sum up, there was a basic funded system for all citizens (but differentiated between rural and urban), with participation paid on a voluntary basis in exchange for a very low amount of pension (about 10 euros per month before 2015).
Added to this was a compulsory participation scheme for urban employees of private companies, the financing of which was based on a contribution from companies and employees, with a level of pension indexed to past income. Finally, a pay-as-you-go system guaranteed civil servants a fairly generous level of pension, financed by the general state budget, without contributions.
The heart of the 2015 reform was the transformation of the civil servants’ pension system into a partially funded system, thus making it formally converge with the other two systems. But the inequality between civil servants and other workers remains de facto.
While coverage by a pension system is officially compulsory, only about 70% of non-staff are covered, in particular because of job instability. In addition, the introduction of a supplementary pension for civil servants and company employees in certain sectors (finance, transport, etc.) has created a new source of inequality.
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