A Fair Share
China will unify pension plans for urban and rural residents across the country
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Balancing out Pensions
Cover Stories Series 2014> Balancing out Pensions
UPDATED: February 24, 2014 NO. 9 FEBRUARY 27, 2014
A Fair Share
China will unify pension plans for urban and rural residents across the country
By Lan Xinzhen

According to Yang, unifying the pension system is also an important measure to implement the Party meeting's decision to integrate urban and rural development. It is also a supporting policy in reforming the household registration system and establishing a unified labor market.

Pension, education and healthcare are the three most prominent areas of inequality brought about by China's household registration system, which discriminates between urban and rural areas.

After a unified pension system is set up, pension standards for citizens will no longer be decided by the type of their household registration, but by the price levels and cost of living of the place where they are living. Integrating the basic pension systems for urban and rural residents will accelerate the end of China's dual household registration system that has existed for over 60 years.

Li said an integrated pension system will also help raise Chinese people's spending power. Since China's social security system is still weak, many people, both in cities and the countryside, have to save more money for healthcare and their old age. This has reduced potential consumption, and that's why household consumption has not increased significantly in spite of the Chinese Government's efforts to stimulate domestic demand.

Li said among the country's 1.3-billion people, 70 percent are rural residents. After the pension systems are integrated, rural areas will receive more support. With fewer worries for their old age, rural residents may be willing to save less and spend more.

To stimulate consumption with an integrated pension system may be the wish of China's top leaders. The State Council executive meeting particularly pointed out that establishing a unified basic pension system for urban and rural residents so as to make all the citizens enjoy equal basic old-age security is vital to China's economic and social development and is a prerequisite to advancing industrialization, IT applications, urbanization and agriculture modernization. This is conducive to boosting labor flow and ensuring that public expectations on the steady improvement of living standards are met. It will also play a significant role in stimulating consumption and in encouraging people to start up their own businesses.

Wang Zhenyao, Director of China Philanthropy Research Institute affiliated to Beijing Normal University, said integrating the pension system will encourage future reforms. It is actually laying the foundation for the realization of equal basic public services by 2020.

Besides pensions, there are also insistent appeals for unifying medical insurance systems for urban employees, unemployed urban residents, government employees and public institution staff, as well as allowing the free transfer of medical insurance between different regions.

Based on the ethos of boosting social equality, wider and deeper reforms are also worthy of expectation. "A unified pension system breaks through the separated systems between urban and rural areas, and more systematic barriers should be broken in the future," said Wang.

Challenges remain

Li said the accumulated fortune brought about by the reform and opening up serves as a support for unifying social welfare between urban and rural areas. However, this does not mean China has enough financial strength to eliminate the urban-rural gap immediately. Ensuring timely payment of pensions will be the biggest challenge in implementing a unified basic pension system for urban and rural residents.

China has been facing serious financial pressure on its pension funds in recent years. The regions which have, since 2009, been subject to pilot programs for a unified basic pension system have been unable to solve problems such as low pension levels. A shortage of money has been the major reason.

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