Foreword
This report is the first policy study of the China Economic Research and Advisory Programme, in which eminent economists from China and abroad have participated. The report focuses on the problems faced by China in the reform of its social security system.On the basis of economic principles and drawing on the most recent international experience, the report offers practical policy recommendations.The report analyses issues raised by the reform of China's social security system from a very broad perspective, thus avoiding the limitation of simply addressing the question of how to overcome the financial crisis in the pension system. Taking account of actual conditions in China today, the report compares the feasibility and implications of various
pension models and suggests that China adopt the 'Notional Defined Contribution Account' (NDC or 'Notional Individual Account') system, which has been implemented in several European countries. The paper considers that this model would not only maintain the benefits of individual accounts, but could also avoid some of the drawbacks of the funded system. The report includes a number of policy recommendations, including the establishment of a unified national social security management system, raising the retirement age, transferring state assets, increasing coverage, improving the capital markets,
and enhancing social equity.The report was prepared by an international. research team. The foreign team included Professor Mukul Asher (National University of Singapore), Professor Nicholas Barr (London School of Economics), Professor Peter Diamond (Massachusetts Institute of Technology), Dr Edwin Lim, and Professor James Mirrlees (University of Cambridge).Professor Stanley Fischer, Professor Nicholas Stern, and Professor Salvador Valdes-Prieto(Pontifical Catholic University of Chile) reviewed the draft report and provided comments.On the Chinese side, Li Jiange and Gao Xiqing were responsible for the study. Chinese experts included Zheng Silin, Xiang Huaicheng, Zhou Xiaochuan, Liu Zhongli, Wu Jinglian. Li Jiange, Gao Xiqing, Guo Shuqing and Yu Yongding. In addition, Hou Yongzhi, Li Shaoguang, Zheng Bingwen, Jiang Shiming, Wang Ruichao, Mao Na, Huang Bihong, Cheng Yonghong, Xia Dan, Lu Meng, Liu Xiangdong and Hu Xiang all did a lot of work for the completion of the report.. We would also like to express our appreciation for the support of the Ministry of Labor and Social Security, the National Council for Social Security Fund, and the Development and Research Center of the State Council. We are grateful, too, for the financial support of the East Asian Institute of the National University of Singapore and the UK's Department for International Development. Issues of social security system reform cut across many disciplines and involve long time horizons. Given that China is both a transitional economy and a large developing country going through an ageing process, the issues are particularly complicated. There are very divergent views about social security reform and there is no consensus even within our expert team. As this study brings together the wisdom of many top experts within and outside China who have deep understanding of Chinese conditions as well as of economic theory, we hope the report will have significant relevance for those scholars conducting research on related issues as well as for the concerned government departments. Above all,we hope it will serve to promote social security system reform in China.
Li Jiange
2004-11-4