China’s new rural pension scheme: practice and problems

ZHU Ling ¹, JIANG Zhongyi² , JIN Chengwu³  and WANG Zhen⁴ 

¹ Professor, Institute of Economics, the Chinese Academy of Social Sciences (CASS) ² Professor, Rural Economic Research Center, Ministry of Agriculture

³ Associate professor of the CASS

⁴ Staff economist of the CASS

Abstract:

The paper first describes the characteristics of the new rural pension scheme and then analyzes some problems emerging in its implementation based on a field in Anhui province’s Dangtu County and Jiangsu province’s Hongze County in April 2010. Unlike the urban pension system, the new rural pension scheme is of a voluntary nature, and unlike the old rural pension scheme, the government subsidizes participants using fiscal revenue. However, in its implementation there are some problems. The first involves the so-called “bundle scheme” that requires pensioners’ children to participate. Evidence from our field study shows that coverage is less than 80%, even with a “bundle scheme.” On the country, the “bundle scheme” increases social costs and it should therefore be replaced with legal regulations. Next, the paper explains why a majority of participants choose the minimum contribution level based on observations in the field study. This choice reflects the two-fold information asymmetry between the authority and rural residents. Based on the field study, we suggest that the new rural pension authority listen to village cadres and farmers to increase farmers’ awareness.

Key Words:

New rural pension scheme, bundle scheme, minimum contribution level

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