China’s new rural pension scheme: can it be improved?

Purpose – This paper aims to describe China’s need for old-age pension coverage in its rural areas, to highlight the strengths and weaknesses of the new rural pension system currently being implemented, and to suggest some needed reforms. Design/methodology/approach – This paper’s analysis is based largely on evidence from Chinese government documents, newspaper reports, and research reports including those discussing related programs in rural areas of other developing countries. This evidence is supplemented with a small number of interviews with government officials, Chinese academics, and farmers living in rural China. Findings – China has recently started a major effort to bring old-age pension coverage to rural China. While it is too early to know how successful this effort will be, there are some structural issues that should be addressed. The paper’s major conclusion is that the current funded accounts component needs to be supplemented with a modest social pension scheme. Originality/value – To date next to nothing has been published for an academic audience about this major new and first ever countrywide old-age pension program for rural China. If successful, this program has the potential to stimulate efforts in many other developing nations around the world to provide pension coverage in rural areas. The paper analyzes the program, uncovers some serious limitations, and proposes changes to deal with those limitations.