A Long Financial March: Pension Reform in China

Abstract

In the context of rapid economic and demographic change, the People's Republic of China has attempted to reshape its public pension system. Although China's current pension system has drawn the attention of many policy analysts, no theoretically informed account on the politics of Chinese pension reform has yet been published. Grounded in a broad institutionalist perspective, this contribution analyses contemporary pension politics in China through the interplay of four main factors: (1) decentralisation and limited administrative capacity, which make it difficult to rationalise and transform the existing pension system; (2) feedback effects from previously enacted pension schemes that further complicate policy change; (3) liberalisation and economic reforms, which have created ‘vested interests’ in the newly established private sector, but which have lacked the strength to generate a mature financial system; (4) finally, the apparent dominance of the neo-liberal financial paradigm commonly associated with the World Bank. While this financial paradigm favours the adoption of new reform proposals, the economic and institutional factors mentioned above complicate their implementation.