I. Old-Age Insurance
China is now an aging society. As the aging of the population quickens, the
number of elderly people is becoming very large. This trend will reach its peak
in the 2030s. To guarantee the basic living standards of the elderly and
safeguard their legitimate rights and interests, the Chinese Government has
continuously improved the old-age insurance system and reformed the fund-raising
mode in an attempt to establish a multi-level old-age insurance system marked by
sustainable development. Promoting the Development of a Basic Old-Age Insurance
System for Employees in Urban Areas
-- Reforming the basic old-age insurance system for enterprise employees in
urban areas. In 1997, the Chinese Government unified the basic old-age insurance
system for enterprise employees in urban areas across the country by
implementing a social-pool-plus-personal-accounts scheme. Enterprise employees
who have reached retirement age as provided by law (60 for male employees, 55
for female cadres and 50 for female workers) and who have paid their share of
the premiums for 15 years or more shall be entitled to collect a basic old-age
pension every month after retirement. The basic old-age pension consists of two
parts: base pension and pension from personal account. The monthly sum of the
base pension is tantamount to about 20 percent of an employee's average monthly
wage in that area in the previous year. The monthly pension sum from the
personal account is 1/120 of the total accumulated sum in the personal account
(11 percent of an employee's wage being deposited every month in the pension
section). The state adjusts the level of the basic old-age pension with
reference to the price index of living expenses for urban residents and
employees' pay increases. In 2003, the monthly basic pension for enterprise
retirees covered by the basic old-age insurance scheme was 621 yuan on average.
-- Expanding the coverage of basic old-age insurance. Initially, China's
basic old-age insurance covered only state-owned enterprises and
collectively-owned enterprises in urban areas and their employees. In 1999, this
coverage was expanded to include foreign-invested enterprises, private
enterprises and other types of enterprises in urban areas, as well as their
employees. All provinces, autonomous regions and municipalities directly under
the Central Government can make provisions to include persons engaged in
individual businesses of industry or commerce in the basic old-age insurance in
accordance with the specific conditions in their localities. In 2002 China
expanded its basic old-age insurance coverage to all those who were employed in
a flexible manner in urban areas. In 2003, the number of people participating in
the basic old-age insurance scheme across China reached 155.06 million, 116.46
million of whom were employees.
-- Undertaking experimental reforms in selected areas to improve the basic
old-age insurance system. In 2001, the Chinese Government began to carry out
pilot projects along this line. The reform includes: gradually establishing
personal accounts so that funds can be accumulated, and probing ways of
preserving and increasing the value of the funds; changing the way the base
pension is calculated and paid, whereby the amount of base pension is more
closely linked to the length of time of the employee's premium payment, and if
an employee has participated in the basic old-age insurance program and paid the
premiums for 15 years, he or she will be entitled to a higher rate of pension
for every additional year of payment; unifying the procedures of premium payment
by those who are employed in a flexible manner, whereby the base of their
premium payment is uniformly set at 20 percent of the average wage of local
employees. The pilot project was first conducted in Liaoning Province, and has
been expanded to Jilin and Heilongjiang provinces in 2004.
-- Probing the reform of the retirement system of government agencies and
public institutions. In China the retirement and pension system in government
agencies and public institutions is different from that applied in enterprises.
In 2003, there were 670,000 retirees who had joined the revolutionary ranks
before October 1949 and 9,310,000 other retirees from these agencies and
institutions. In the 1990s, some localities in China began to probe the
procedures of reforming the retirement system in such agencies and institutions.
Pilot projects were conducted to raise the retirement pension funds through the
social pool program. By the end of 2003, some 11.99 million employees and 2.58
million retirees had participated in such pilot projects.
