Edited by Donghyun Park, Sang-Hyop Lee and Andrew Mason
Chapter 6: Demographic change, intergenerational transfers, and the challenges for social protection systems in the People’s Republic of China
The People’s Republic of China (PRC) is going through a remarkable economic transition and a rapid demographic transition at the same time. The transition from a centrally planned economy to a market-based economy is widely acclaimed for recent unprecedented economic growth, but the social strains accompanying that growth have become more widely recognized, such as the lagging development of the social protection system as the population ages. Demographic change and its interaction with family behavior and social policies will strongly shape both future economic growth and the sustainability of social support systems. We analyzed the main challenges for the social protection system posed by the demographic transition in the PRC using the pension and healthcare systems as examples. Using estimates from the National Transfer Accounts (NTA) database for 1995 and 2002, we describe changes in economic lifecycle public transfers, inter-household transfers, and intrahousehold transfers. We discuss the three-way system of contributory basic pensions, individual accounts, and voluntary supplementary pensions in urban areas and the recently piloted pensions in rural areas, and we describe changing patterns in health expenditures using three waves of national health service survey data and discuss the relationship between those expenditures and healthcare systems compared with other NTA economies. We also explore some technical issues regarding how NTA health expenditure estimates compare with World Health Organization (WHO) estimates. In 1949, the population of the PRC totaled 450 million; at just over 1.3 billion, it is currently the world’s most populous nation. Demographic change has, however, been rapid. The total fertility rate (TFR) declined from around six in 1950–1955 to two in 1990–1995 (Banister et al., 2010), with a rapid decline in the 1970s prior to the beginning of the one-child policy (government policy switch from encouraging children to encouraging later marriage and fewer children). The TFR is now below replacement level, at about 1.7 births per woman.1 The total dependency ratio declined by 38 percent during the past 30 years, primarily because of a reduction in the youth dependency ratio from 72.5 percent in 1965 to 30.2 percent by 2005 (Wei and Hao, 2010). Health improved substantially, with dramatic declines in mortality even prior to the economic reforms that contributed to the improvement of public health conditions, the control of communicable diseases, and improvements in living standards and education (Banister, 1987; Miller et al., 2011). Life expectancy increased from 69.9 in 1990 to 76.7 in 2010 for women and from 66.9 to 72.5 for men.2
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