estelle james consultant, world bank to be presented at the.pdfVIP

HOW CAN CHINA SOLVE ITS OLD AGE SECURITY PROBLEM? THE INTERACTION BETWEEN PENSION, SOE AND FINANCIAL MARKET REFORM Estelle James Consultant, World Bank To be presented at the Conference on Financial Sector Reform in China September 11-13, 2001 Draft August 2001 How Can China Solve its Old Age Security Problem? The Interaction Between Pension, SOE and Financial Market Reform by Estelle James Consultant, World Bank Prepared for Conference on Financial Sector Reform in China, Harvard University, September, 2001 1 Abstract Like most countries, China faces a rapidly aging population. In fact, China is aging more rapidly than practically any other country. In 1990 only 9% of China’s population was over the age of 65, but by 2030 this proportion will more than double, to 22%. More than a quarter of the world’s old people will live in China by 2030. And the absolute number of workers will actually decline, as fertility rates are below replacement levels. While population aging is a long run phenomenon, it has become apparent even in the short run, as social security deficits become larger and more widespread every year. Moreover, these rapidly expanding pension obligations are especially troublesome in China because, until recently, they were a liability of state enterprises and a major obstacle to enterprise restructuring. The Chinese government is