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Sun
Jian Yong,
Deputy
Director
General,
Ministry of
Labor and
Social Security
China
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JC: Mr. Sun, would you give us a brief historical review
of the development of pension systems in China?
SJY: Due to some historical reasons specifically the difference
in the economic structures in the urban area and that of rural areas,
different retirement security systems and different practices have
been catered to address the issues of many senior citizens in regards
to the retirement security.The retirement security system for employees
in the urban area has been set up much earlier in the 70s. Such
system reform began in the early 80s, up till the mid 90s a prelimary
understanding on the subject matter has been shared. In 2000, the
central government has executed the reform plan.
Before the 80s pension plans were provided mostly by enterprises
and organizations, or in another word, each individual enterprise
may have liability that might be too big for them to afford. So
in order to resolve the problem of the imbalanced distribution of
pension, the government consolidated the pension liability at various
levels in order to strengthen its management /support ability of
fund. In thelate 90s, the government has introduced the practice
of individual account plans and a mulitpillar pension system has
therefore been established.
JC: With China's dynamic shift from state planning economy
to a market economy is a new set of challenges facing pension systems,
right? If so, what are they?
Yes, structural reforms have been carried out in various industries,
enterprises and products. So some employees become unemployed, some
retired early, life expectancy is expanded and the population is
aging, policy not not mature, inexperience in management, all these
factors contributed to emerging problems that is the lack of balance
between the pension income and payment.
Overall, pension management in enterprises in the urban areas has
achieved an annual overall balance between the payment and income.
There is even a small surplus each year. However, some enterprises
in certain poor areas did not fulfill its financial goal and there
are sometimes a lack of funds for the pensions. So the central government
provides assistance to the poor areas in order to ensure the benefits
of those in the poor regions.
JC: What are some of the specific measures to correct such imbalances?
SJY: In order to resolve the financial imbalance of the current
system, the government reduced the very high replacement ratio thatıs
in the pension benefit calculation and has established a perpetual
new system which has the following four features.1/ Complete the
mechanism of personal account management and the government regulated
pension plan. 2/ To redefine the role of government and the limited
responsibility in order to issue pension fund. 3/ To increase the
responsibility to protect the individual, to increase the governmental
involvement and support to the personal account-based pension. 4/
To re establish the corporate benefit plan, to set up and standardize
occupational pension.
JC: How does this multipillared pension system help to encourage
investment in China's Capital market?
This multipillar pension system practiced in the urban enterprises
will create a new structure for pension management and operation.
On one hand, the operation and procedure of pay as you go will be
further standardized. Any surplus that comes from pay as you go
program will be invested in the government bond market. On the other
hand, the government will use the international standard to manage
the pension fund that derived from the National social security
fund, the pension fund resulting from the mandatory personal account
and the private industry and employee pension fund. New operational
mechanism will be set up: trustees and asset management companies
will gradually manage funds. The goal is to reduce risk and improve
return.
All this will increase the investment in the capital market. The
new pension system will help China develop its capital market and
insurance market.
JC: In terms of the quality of life of the senior or retired citizens,
what's the difference between life 10 years ago and now?
SJY: The living standard, the quality of life has been greatly
improved.
JC: What is some of the evidence to support that statement?
SJY: According to a recent report, life expectancy is extended
to 73-75 years of age. It was very low, almost half of that of today,
during the period when PRC was just founded in the early 50s. The
living standard has been raised.
JC: How has the living standard of the senior citizen been raised
? Have they improved their life themselves or have their children
helped them out? As a result of China's transition to market economy,
the traditional family structure must have in someway loosened up,
am I correct?
SJY: The economic structure has changed. The pace of life
is much faster, single children are too busy working to take care
of their parents. So many are now living in the senior citizens
homes. They are also enjoying a better quality of medical care.
JC: When is the best opportunity for the foreign companies to
come to invest in the China market?
SJY: As soon as regulations meeting WTO's standard are complete
and ready for the market, then foreign companies can come in. Now
we are in the process of setting up the rules and regulations now.
JC: It might take sometime?
SJY: It wonıt take too long. If foreign companies donıt participate
in the market research and do some preparation work together with
us, how can they do business with us later?
Interview and translation by Joanne Cheng,
with support from Henry C. Hsiang, Senior VP,AIG
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