Caring for the Elderly

　　China faces an urgent need to reform its pension system and improve eldercare to deal with a rapidly aging population

　　China’s senior population， 60 or older， reached 200 million in September 2013 and nationwide an average of 24，800 people retire every day， equaling nearly one person every second， said Hu Xiaoyi， Vice Minister of Human Resources and Social Security， at a forum on China’s aging society in Beijing on November 2.

　　Driven by sustained increases in average life expectancy， low birth rates and accelerated urbanization， the aging of China’s population will become even faster in the future. Meanwhile， changing relationships and home duties caused by the family planning policy and population migration on an unprecedented scale mean that many older Chinese can no longer rely on support and care from their children like their parents or grandparents did.

　　China first introduced its family planning policy in the late 1970s to rein in the surging population， which allowed most urban couples to have only one child while allowing most rural couples to have two if their firstborn was a girl. In late 2011， couples across the country were given the option of having two children if both of the parents are themselves from one-child families. Last December， the Standing Committee of the National People’s Congress， China’s top legislature， decided to further relax birth control measures by allowing families to have a second child so long as at least one of the parents is an only child.

　　According to a report on the elderly issued by the China Research Center on the Aging in February 2013， China would have more than 100 million “empty nesters”—senior citizens in a family without children living close by—by the end of last year. Traditionally in China， children live with their aging parents and take care of them. However， this support model has become unrealistic， as many young couples are both only children and don’t have the time or energy to take care of four seniors. Meanwhile， not all young people can afford to provide their parents with income support due to their finances being used up buying increasingly expensive property， education for their children and the highly competitive labor market.

　　Recent discussions on an aging society in China focus on how to handle the various challenges it has brought upon the country.

　　At the same forum， Li Wei， Director of the Development Research Center of the State Council， said that it took China only 25 years to reach the same senior citizen balance that took Western countries 100 years. He added that China faces unique challenges as both an aging and a developing society.

　　The Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee， held on November 9-12， presented China’s decade-defining reform agenda， and it was decided that China would “build a fairer and more sustainable social security system.” This gives people new hope to better deal with challenges brought on by an aging population.

　　When to retire？

　　Over the past three decades， China has expanded its pension system to cover almost all senior citizens. “China has established the world’s

　　largest senior support system in a matter of years，” said Yan Qingchun， a senior official with the China National Committee on Aging. Yan said that China’s senior support system， consisting of pensions， old-age benefits and allowances for those with difficulty， faces the pressure of having to both achieve sustainable development and elevate the level of benefits.

　　On October 15-16， the Ministry of Human Resources and Social Security (MOHRSS) held a closed-door meeting for four pension insurance reform schemes produced separately by four academic institutions. Although the details of these schemes have not been disclosed， they received a lot of attention as they concern almost everyone in the country.

　　In August， a research team from Tsinghua University， and thus not included in the four MOHRSS-entrusted institutions， published its own reform plan for China’s pension insurance system. This document attracted a lot of criticism as it suggested delaying the collection of pension for retirees and most people interpreted it as raising the age of retirement.

　　Under China’s basic pension schemes， men retire at the age of 60 while women retire at 50 or 55， which is earlier than in many industrialized countries.

　　Professor Chu Fuling， with the Center for Social Security Studies of the Beijing-based Central University of Finance and Economics， said that China hasn’t changed its official retirement ages since the 1970s， and over the past four decades the average life expectancy in China has increased by more than seven years. He believes with significant demographic changes， allowing some flexibility for pension collection has become inevitable.

　　However， many people oppose raising the compulsory retirement age. Tang Jun， a senior research fellow of social policies with the Chinese Academy of Social Sciences (CASS)， warned decision-makers in one of his papers that raising retirement age would upset employees approaching the retirement age as well as young people who cannot find a job.

　　Professor Zheng Gongcheng with the School of Labor and Human Resources of the Renmin University of China in Beijing explained that delaying the retirement age is not targeted at offsetting pension funds’ deficits. Instead， this change is tailored to suit the profound social changes that have occurred， such as life expectancy increases， increase in the time spent being educated， the changes in population age distribution， and labor supply and demand balances.

　　Top-level design

　　China’s pension funds consist of two parts： the social pooling account funded by employers’ contributions and the personal saving accounts funded by individual employees’ deposits.

　　The most pressing problem facing China’s current pension insurance system is the segmentation of pension programs by localities and social groups， which results in two types of urban pensions. Government workers， totaling 10 million， and employees of government-affiliated public service institutions， totaling more than 30 million， do not make personal contributions to any pension programs； in the meantime they receive more generous retirement benefits than other people in the workforce， including retirees from urban enterprises， who must make compulsory contributions to pension funds.

　　As revealed by the China Pension Report 2012， the pensions of retirees from urban enterprises accounted for around 30 percent of their previous monthly salary while the proportion for retirees from government agencies and public service institutions was between 80 percent and 90 percent.

　　“The existence of ’two types of urban pensions’ is mainly due to the fact that pension reforms on these two groups of people did not begin at the same time，” Zheng said.

　　China launched the pension system for workers of urban enterprises in 1986. A rural pension insurance program was initiated in 2009， followed by a pension program for non-employed urban residents in 2011. However， participants of the latter two programs only enjoy low-level benefits.

　　Zheng said that the only solution to eliminating the unfairness caused by the “two-track” system is to establish a pension plan for employees of government and public service institutions that resembles that of enterprise employees. “Those working for government organizations and public service institutions should contribute to the same fund as their salaries all come from public money，” he added.

　　Pilot programs allowing existing pension funds to absorb employees from government organizations and public institutions were launched in five provinces and municipalities as early as 2008. However， these pilot programs were failures.

　　The less than satisfactory results of these trial reforms show great resistance to revoking the “two-track” system. Experts said that while any delay in reforms would increase the public’s frustration and make the prospect of reform bleaker， diminishing the retirement benefits of government and public service institution workers has been met with enormous resistance.

　　As reported by People’s Daily in August 2013， the MOHRSS stated it would not force employees of government agencies and public service institutions to join the existing pension funds for enterprise employees. Instead， similar pension programs will be established for the former to eventually abolish the “two-track” pension system.

　　Zheng Bingwen， a senior research fellow of social security policies with the CASS， said that most people who oppose raising the retirement age are also unsatisfied with the “two-track” pension system and the unfairness it represents. He said that the “two-track” system has become a barrier in many ongoing reforms. “Without the abolishment of the ’two-track’ system， China’s social security reform will not be able to move forward，” Zheng Bingwen said.

　　Furthermore， segmentation of pension programs in China presents barriers to the spatial and social mobility of labor， leading to an inefficient labor market and “shallow” urbanization.

　　Professor Zheng Gongcheng with the Renmin University of China said that the long length of time the “two-track” system has already been used is the largest source of unfairness in the current pension system.

　　“Rescinding it should become one of the top priorities in top-level design of China’s pension insurance system reforms，” Zheng Gongcheng said. He added that the reform’s most important tasks include reforming pension systems for government and public service institution employees， improving social pooling and national pooling， and increasing the support given to the elderly in rural areas. “The most urgent tasks are the first two，” he noted.

　　Zheng Gongcheng believes that any top-level design requires new guidelines， the removal of structural handicaps， guarantees of the new system’s fairness and equity， and the unity of the pension system.

　　“Reform of social programs and innovations in social management will become important areas for releasing reform dividends. Reforms on pension arrangements will ensure that the entire social security system becomes fairer， more sustainable and mature，” Zheng Gongcheng said.

　　One of the reform tasks listed by a decision adopted at the Third Plenary Session of the 18th CPC Central Committee is to achieve the national pooling of basic pension programs， which is regarded by experts as a measure for building an equitable society. The Social Insurance Law， effective from July 1， 2011， states that national pooling of basic pension funds will be gradually realized. China’s 12th Five-Year Plan (2011-15) also mandates achieving the national pooling of basic pension funds.

　　Professor Zheng Gongcheng said that efforts to achieve such a goal are primarily held back by the inaction of better-off localities， which are concerned with the possible redistribution effects of national pooling， and hence have little motivation to promote it.

　　“Realizing this goal has a bearing on overall reform of the pension system，” Zheng Gongcheng said. He believes that the national pooling of basic pension funds for urban enterprise employees could create a favorable environment for reforms on pension systems for government and public service institution employees.

　　Eldercare

　　The State Council， China’s cabinet， released a document on developing eldercare services on September 13 to encourage investment from the private sector， including the house-for-pension program. The plan allows senior citizens to deed their house to an insurance company or bank， which will then determine the value of the property and estimate the owner’s life expectancy， and then grant them a certain amount every month.

　　The program， while only a proposal， has drawn widespread concern and has been met with mixed opinions. In particular， it has been criticized by some people whose parents have property and fear losing their inheritance.

　　Meng Xiaosu， President of the Huili Investment Fund Management Co. Ltd.， is the first person to propose the program in China.

　　“In an aging society like China， while many older people don’t have a high pensions or big savings， they live in expensive properties， which makes it ideal for them to support a more decent lifestyle in their golden years，” Meng said. He said while a lot of elderly people live in apartments in big cities whose value has skyrocketed in recent years， they only paid a small sum as these apartments were distributed to them by the government as welfare under the planned economy.

　　Meng said that if a 70-year-old man owns an apartment worth 5 million yuan ($820，000) and is estimated to live another 14.8 years， he will be able to collect 27，000 yuan ($4，400) a month.

　　But Meng admitted that financial institutions planning to sell this product have concerns about its risk caused by possible drops in housing prices and its popularity being undercut by traditional ideas of passing down homes to children.

　　This scheme has already been launched on trial basis in some cities with few people showing interest. Experts said with the uncertainty over housing prices， life expectancy and interest rates dampens some people’s enthusiasm， people also put high expectations on a fairer and better pension system after government reforms.

　　Zheng Gongcheng said that while encouraging the house-for-pension program， the State Council is not shirking government’s responsibilities and the program can only be seen as a supplement to China’s multi-layer old-age support system.

　　Zheng Gongcheng explained that the State Council document also includes content concerning the government’s responsibilities to increase contributions to eldercare services and give more incentives to institutions and companies willing to enter the sector. “This signals that the government has attached greater importance to eldercare services in response to the accelerated aging of the population，” he said.

　　Dou Yupei， Vice Minister of Civil Affairs， delivered a speech at a forum on the sidelines of an eldercare exposition in May. He vowed that， by the end of 2015， eldercare services will be available in all urban communities and more than half rural communities and nursing homes will have 30 beds for every 1，000 senior citizens.

　　China now has more than 40，000 nursing homes with a total of 3.9 million beds and eldercare services and facilities cover 65 percent of communities. According to the Ministry of Civil Affairs， 18 provinces and municipalities have started to distribute special living allowances for seniors older than 80.

　　“Over the next two years， a national eldercare information database will be established and more IT technology will be applied to improve care for the elderly， whether they choose to live at home or institutions，” Dou said.

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