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Sustainability 2014, 6(8), 5049-5064; doi:10.3390/su6085049

Social Security Individual Accounts in China: Toward Sustainability in Individual Account Financing

1
Centre for Social Security Studies, Wuhan University, Wuhan 430072, China
2
Pension Policy Center, Washington, DC 20016, USA
*
Author to whom correspondence should be addressed.
Received: 12 June 2014 / Revised: 20 July 2014 / Accepted: 1 August 2014 / Published: 7 August 2014
(This article belongs to the Section Social Ecology and Sustainability)
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Abstract

China has both mandatory and voluntary individual account pensions that are provided through the government. The experience of China makes a particularly interesting case study concerning the functioning of individual accounts in that its mandatory individual accounts have been defunded to pay for benefits in the associated pay-as-you-go system, while its voluntary individual accounts are fully funded. This paper examines three questions. First, it analyses why the mandatory individual accounts have become defunded and converted largely to notional accounts generally holding little in financial assets, while the voluntary accounts have been fully funded. Second, it examines the merits of funding versus pay-as-you-go financing of pensions in the context of China’s economic and demographic situation. Third, it discusses a policy change to insure the sustainability of financing for the defunded individual accounts. The experience of China, with its two types of individual accounts, and with different outcomes for those accounts, may provide lessons for other countries. View Full-Text
Keywords: social security; individual account; implicit pension debt; China social security; individual account; implicit pension debt; China
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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Chen, T.; Turner, J.A. Social Security Individual Accounts in China: Toward Sustainability in Individual Account Financing. Sustainability 2014, 6, 5049-5064.

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