Tackling China’s Pension Fund Payment Crisis: Will the “Two-Child Policy” Be the Answer?-An example with the basic pension insurance program for urban employees

Zeng Yi 1 and Yu Bin 2

1 Zhongnan University of Economics and Law, Wuhan, China
2 Shanghai University of Finance and Economics, Shanghai, China

Abstract: Based on the reality that 29 Chinese provinces have already implemented the policy allowing a couple to raise a second child if either parent is an only child, this paper provides an empirical study on the effect of this policy on the financial status of the social pooling fund of basic pension insurance for urban employees. Our study suggests the followings. First, under the previous unchanged family planning policy, current deficits and cumulative deficits will occur in the social pooling fund in the year 2047 and 2063 respectively. Second, if 10% to 50% of qualified couples choose to raise a second child, the financial status of the social pooling fund will improve; relative to the previous unchanged family planning policy, the contribution ratio can decrease from 20% to the range between 18.06% and 19.57% without causing any changes to the original financial status of income and expenditure. Third, if the percentage of couples choosing to raise a second child rises to 60% to 100%, the contribution ratio can even decrease to the range between 16.55% and 17.7% without causing any changes to the financial status as under the previous unchanged family planning policy. The above conclusions have all passed the sensitivity test. Therefore, the “two-child policy” for qualified couples is favorable to alleviating the payment pressures of pension insurance but the policy effectiveness is subject to fertility desire and the intensity of government implementation.

Keywords: “two-child policy”, pension insurance fund, payment crisis, actuarial models, policy simulation

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