Interim Report IR-01-004/January Key Issues of Aging and Social Security in China

Interim Reports on work of the International Institute for Applied Systems Analysis receive only limited review. Views or opinions expressed herein do not necessarily represent those of the Institute, its National Member Organizations, or other organizations supporting the work. Abstract In China the problem of aging is only now emerging, however, when the population does start to age, it will do so faster than any population in history. In this largely descriptive paper, we look at the challenges faced in the areas of old-age pensions, health care and disability services. First, we identify the main institutions involved. Then we present ad hoc projections of pensions and health spending and the number of disabled persons. Our conclusion is that, unchecked, rising demand in these sectors has the potential to give China the social insurance spending profile of a developed country while it is still at the level of development of a poor one. Demography makes some increases in spending inevitable. However, the most important variables such as coverage of the pension system and the "underlying" rate of medical spending growth are responsive to policy. The paper concludes with an appeal to policy makers to adopt forward looking strategies now, while there is still time to develop appropriate policies and institutions.