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Abstract

Vol. 56, No. 4, pp. 289-303 (2005)

“Pension Reform of PRC―Incentives, Governance and Policy Options―”
Noriyuki Takayama (The Institute of Economic Research, Hitotsubashi University)

This paper identifies main pension issues of People's Republic of China (PRC). Incentives, governance/implementation and system design are its main concern. It argues that the widespread noncompliance and evasion of the existing system are mainly an outcome of strong disincentives placed in the current provisions. It is also demonstrated that the current 2nd-tier pension of PRC can be regarded as a special defined benefit plan on a pay-as-you-go basis, which was originally envisaged as a funded defined contribution plan. The administratively set low rate of return from investment to the 2nd-tier incurs a hidden tax on the pension assets, as well.