China’s Urban and Rural Old Age Security System: Challenges and Options

This paper reviews the development of the urban and rural old age security system in China, and discusses the challenges in the process of constructing a sustained old age security system. Although funding gaps and empty individual accounts have imposed a heavy burden on the sustainability of China’s urban pension system, there is a relatively high coverage rate of 35.3 percent for urban workers. However, China’s pension system provides low coverage rate for rural farmers. The more rapidly aging population and lower incomes in rural areas pose challenges to the vulnerable rural household support system. The separation of the old age security system between rural and urban areas also puts great pressure as a result of urbanization on farmers who lose their farmland. Therefore, it is urgent for China to speed up the reform of its old age security system to provide an institutional support for its economic and social transition.