China is experiencing rapid ageing as a result of declines in fertility combined with significant increases in longevity. According to current UN projections, more than a quarter of the population will be over 65 years old by 2050, and the old-age dependency ratio is expected to triple to almost 40 per cent. In recent years, the Chinese government has introduced a number of initiatives to reform the pension system in an attempt to address the issues of profound population aging, social disparity and regional imbalance. However significant issues remain relating to uneven coverage, fragmentation, financing, investment strategy and legacy costs. As well, China faces broader economy-wide challenges due to rapid urbanisation, changes in family structure and globalisation. Using data from the China Household Finance Survey – a new nationally representative survey of 8,438 households we critically assess the Chinese pension system using both individual and economy-wide criteria. We advocate that the key to sustainable reform will be the establishment of a regulatory framework with well-defined governance structures for both publicly and privately managed pension assets.
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