Abstract

By the end of 2017, the total population of mainland China had reached 1.39 billion, an increase of 7.37 million people as compared with that at the end of 2016. Among them, the population of people aged 60 and above was 240.9 million, which accounted for 17.3% of the total population; the population of people aged 65 and above was 158.31 million, which accounted for 11.4% of the total population. However, China just became an ageing country at the end of 2000. As the 5th national census data showed, the total population of mainland China was 1.27 billion. Among them, the population of people aged 60 and above was 129.98 million, which accounted for 10.27% of the total people and the population of people aged 65 and above was 88.11 million, which accounted for 6.96% of the total population. This fully shows that China's ageing population is huge and growing rapidly and that ageing population continues to deepen. This has caused much attention to many problems such as the gap between incomes and expenses of China's pension funds.

In recent years, there have been an increasing number and a prevalence of news reports and academic papers about the pension gap in China. As was pointed out in the research report on the gap between incomes and expenses of pension funds by the World Bank, the gap between incomes and expenses of China's basic pension insurance will reach 9.15 trillion yuan between 2001 and 2075. According to the research report by Cao Yuanzheng（2012）On Solving Medium and Longterm Risks of National Assets and Liabilities, the gap of China's pension funds will reach 18.3 trillion yuan in 2013. On the basis that the current pension system remains unchanged, the gap will be wider and wider subsequently year by year. Assume that the annual growth rate of GDP is 6%, then the pension gap will have reach 68.2 trillion yuan by 2033, accounting for 38.7% of GDP. From 2017, fiscal subsidies required for pension will keep rising and by 2050, the gap would have accounted for over 20% of the fiscal expenditure of that year. Compared with the size of GDP, the present value of the cumulative total pension deficit over the next 38 years（nominal GDP growth is used as discount rate for measurement）is equivalent to 75% of current GDP. Zhou Yanli, the director of PBC School of Finance, Tsinghua University（2017）had already mentioned that pension funds had a huge reserve deficit and he also predicted that in the next 5 to 10 years, the deficit of pension funds in China would be about 8 trillion to 10 trillion yuan. By calculating social pooling and personal accounts, Zhang Cong（2014）concluded that the deficit would have reached 45.82 trillion yuan in the case of sharing implicit debts and the deficit would have reached 64.73 trillion in the case of not sharing implicit debts.

Yue Gongzheng and Wang Junting（2016）established a model of predicting incomes and expenses for the pooling pension accounts of urban workers in China based on factors influencing incomes and expenses of pension, including its contribution rate, replacement rate, the salaries of workers, the growth rate of salaries and the retirement age, and predicted that the deficit of pension funds would have reached 1.26751 trillion yuan by 2035. By establishing a model of predicting incomes and expenses for pension, Liu Xueliang（2014）analyzed the gap between incomes and expenses of whole-caliber pension and the issue of implicit debts. The results show that implicit debts of pension deficit in China would have accounted for 143% of the year 2010's GDP by 2050, among which the implicit debts formed by pension for town workers would be the majority. By using the pension reform simulation software of the World Bank, Sin（2005）calculated the deficit of China's pension insurance between 2001 and 2075 and concluded that the total deficit in the 75 years would reach 95% of the year 2001's GDP. China's Labor Social Security Development Report（2016）showed that by the end of 2007, the amount of“empty personal pension accounts”had broken 1 trillion yuan for the first time and reached 3.5973 trillion yuan by the end of 2014, which was approximating 3.6 trillion yuan. In the case of only considering income collection, the deficit of income funds was 132.1 billion yuan. As a report in the 11th Summer Davos in 2017 showed, by the year 2050, by adding the pension savings of 6 countries including the United States, Britain, Japan, the Netherlands, Canada and Australia and those of two populous countries including China and India, the pension deficit would have reached $400 trillion, which is equivalent to 500% of the current global economy. Between 2015 and 2050, the annual growth rate of China's pension deficit is 7%. According to China's Pension Development Report 2013 released by the Global Social Security Research Center of the Chinese Academy of Social Sciences, if there were no financial aids, the basic pension funds for town workers in 19 provinces would have been in a situation that“incomes failed to cover expenses”in 2012. This Report showed that in 2012, the amount of“empty personal pension accounts”owned by town workers had reached 2.95 trillion yuan and the deficit of“empty accounts”had increased by about 24 billion yuan compared with the year 2011. As was shown in Recommendations and Tutoring Questions for the 5thPlenary Session of the 18thCPC Central Committee by the Party Building Books Publishing House and the Learning Press, in 2014, there were 22 provinces whose basic pension funds for enterprise employees were in a situation of incomes failing to cover expenses after fiscal subsidies were deducted. According to the data released by the Ministry of Human Resources and Social Security, in 2014, there were 3 provinces suffering from pension deficit. In 2014, with regards to the gap between incomes and expenses, fiscal subsidies included, there was a deficit of 10.5 billion yuan in Heilongjiang, a deficit of 900 million yuan in Hebei and a deficit of only 100 million yuan in Ningxia. Yin Weimin, the minister of the Ministry of Human Resources and Social Security, expressed in press conference of the Information Office of the State Council that according to the statistics of the year 2015, there were 7 provinces in China suffering from incomes failing to cover expenses in pension funds due to multiple influencing factors such as the population structure. Minister Yin Weimin did not specifically point out what these 7 provinces were and he believed that these 7 provinces could draw upon balance of past years, so there did not exist a problem of hard deficit. By the end of 2016, as was mentioned in Report on China's Pension Development 2017 by Zheng Bingwen, the amount of“empty personal accounts”for town workers had reached 4.71 trillion yuan in 2015.

The above news reports, research reports and academic papers about China's pension deficits arrived at conclusions by studying from different perspectives and using different methods, so they were reasonable to some extent. Besides, the statistics they used were a little stale, so they could not reflect new situations or new changes. Therefore, the prediction results were hugely different and the deficits were generally small, which required to be predicted in a more systematical and reliable way. This is also the most fundamental goal of this research.

The main reasons why they are reasonable are as follows. First, fiscal subsidies have been increasing year by year. Second, in recent years, China's social pension insurance has been very successful in its expansion. Even for those approaching retirement, they could also pay the overdue pension to participate in the pension insurance. Third, China's ageing population has just experienced rapid growth and is in the early stage of rapid growth, so the elderly population is not too large and the pressure of pension payment is not too great. What's worth noticing is that there are very great regional differences in ageing population in China, as the population is flowing to large cities and to the coastal developed areas. It slows the ageing speed of population in regions the population is flowing to, which means that the pension funds have a relatively great balance in these regions. The regions the population is flowing out of are on the very contrary. For example, Guangdong and Zhejiang have great balance of pensions while incomes have failed to cover expenses for a long time in the 3 provinces Liaoning, Heilongjiang and Jilin of China. The general trend of the development of China's pension insurance in the future is expected to be that incomes of a few provinces will not be sufficient to cover expenses and then more provinces will follow this tendency. At the beginning, there would be some balance, but deficits would appear and turn greater at later stages. It is necessary to keep increasing fiscal subsidies and reforming China's pension system to increase incomes and reduce expenses, including increasing rates（not excluding the possibility of reducing rates in the short term），reducing basic pension insurance benefit, delaying retirement, delaying benefit adjustment, reducing the growth rate of pensions and making increased efforts to develop the 2nd pillar and the 3rd pillar, etc.

Whenever it comes to reform, the introduction of measures and the adjustment of interests, China's national conditions must be taken into account. The most basic and important national condition is that China has a large population with a large size of elderly population and a rapid tendency of ageing population. Meanwhile, it is also necessary to take into account the fact that China's economy is in a transitional period of entering a new normal of economic growth and per capita income is relatively low. Under the new-era background of socialism with Chinese characteristics, it is of great significance to develop and improve China's pension system but it is also arduous and onerous to accomplish this task. It is imperative to learn from the experience and lessons of the pension system in developed countries and build a sustainable socialist pension system with Chinese characteristics.

Therefore, this thesis first of all, analyzed the population ageing and the evolution of the pension system in China. Then, it measured and calculated China's basic pension deficit and made sensitivity analysis. Afterwards, it analyzed the experience and enlightenment of developed countries in coping with pension deficit. Finally, it analyzed the causes of pension deficit and proposed corresponding solutions at the peak of population ageing in China.

This research consists of 5 chapters.

Chapter Ⅰ is about population ageing and its development trend. This chapter is divided into three sections. Section 1 is about the population ageing and its causes, which mainly analyzed population ageing, aging of the aged and its related measurement indicators and then the major causes of population ageing. Section 2 is about the review and prospect of the world's population ageing. It pointed out that population ageing could be traced back to the middle and late 19th century, became popular in the second half of the 20th century, is ongoing throughout the whole 21st century and would certainly extend to the 22nd century. Population ageing is developing from local to global, the degree of ageing is develop from a low one to a high one and the trend of ageing is increasing day by day. This section studied the general trend of population ageing in the world. It, first of all, analyzed the differences of population ageing in different continents and then the ageing process of countries with a large ageing population and that of typical countries. Moreover, it reviewed the ageing process of population before 2015 and then made a prospect of the ageing trend after 2015. When analyzing the population ageing of typical countries, it also discussed the tendency of population ageing. Finally, it concluded the characteristics of population ageing in the world: the world's population ageing is unbalanced in its development, the world's population ageing would continue to deepen, the degree of the world's population ageing will continue to increase, the ageing process of the world's population ageing is influenced by the ageing process of countries with a large population and the world's population ageing is influenced by two factors: birth and death. Section 3 is about the review and prospect of China's population ageing. Firstly, it reviewed China's population ageing and studied China's population and the developing and evolving rules of population ageing in the past. It used not only the materials of all previous population censuses but also the population prediction data of the United Nations. It pointed out that China's ageing population began at the end of the 1960s, before which the population was in a process of getting younger while after which the degree of population ageing keeps deepening; meanwhile, the population also demonstrated a tendency of aging of the aged in the process of population ageing. Secondly, by using the population statistics of the United Nations, it made a prospect of the development trend of China's population ageing and aging of the aged in the future. Finally, it summarized the characteristics of population ageing in China: ageing population is huge in size; the ageing speed of China's population is rapid in the future; the degree of ageing and senility of rural population is higher than that of urban population; China's population senility would continue to develop; China's ageing is ahead of its modernization; the dependency ratio of the elderly in China is obviously large. During the study, it arrived at important conclusions as follows. From the perspective of the development speed, China's population ageing was in a period of slow growth before 2005, in a period of rapid growth from 2005 to 2015, in a period of high-speed growth from 2015 to 2025, in a period of super-high-speed growth or at a peak period from 2025 to 2035, in a period of rapid growth from 2035 to 2045, in a period of high-speed growth from 2045 to 2055 and in a period of adjustment and oscillation after 2055. From the perspective of the development level, the highest degree or the highest absolute level of China's population ageing will appear in about the 2080s and 2090s. At that time, the 60-year-old ageing coefficient would be fluctuating around 40% and the 65-year-old ageing coefficient would be fluctuating around 35%. From the perspective of the development of aging population size, the population of elderly people aged 60 and above reached 100 million in 1995 and 200 million in 2015. It is expected to pass 300 million, 400 million and 500 million respectively in 2026,2035 and 2055, reach the peak of 507 million in 2055 and then reduce slowly, and there would still have been a population of nearly 400 million by the end of this century. The population of elderly people aged 65 and above passed 100 million in 2010. It is expected to pass 200 million, 300 million and 400 million respectively in 2025, 2036 and 2055, reach the peak of 420 million in 2060 and then reduce slowly, and there would still have been a population of 338 million by the end of this century. To sum up, China is now in a period of rapid ageing growth and is about to enter the peak period of ageing.

Chapter Ⅱ is the evolution of China's pension system. Pension insurance is a fundamental right granted to laborers by laws including Constitution, Labor Law and Social Insurance Law. Whether pension insurance could develop in a healthy and sustainable way is a matter of priority that relates to social stability, rights and interests protection of laborers and people's well-being. The Communist Party of China and the government have always attached great importance to the development and progress of social security undertakings including the pension system. A series of laws and regulations have been enacted successively to gradually perfect and improve the pension system in China. This chapter is divided into 3 sections. Section 1 is about the development course and current situation of China's pension system. It mainly studied the establishment, reform and development of China's pension system, focused on analyzing laws and regulations that promoted the its development analyzed its current development situation and concluded the characteristics of its development: pilot before promotion, emphasis on synergy among 3 sides and adherence to“a combination between social pooling and personal accounts”. Section 2 is about problems existing in China's pension system. Although China's pension system keeps finding and solving problems in its process of reform, there still exist many problems: the pension is faced with a risk that incomes fail to cover expenses; the role of enterprise annuity is still quite weak;commercial pension insurance is still at its beginning stage; there exist huge differences in the benefits of basic pension insurance among different groups; laws and regulations are still to be perfected; the pension funds'rate of return on investment is still relatively low;97% pensions of retirees in China come from the 1st pillar. Section 3 is about measures to improve China's pension system. It pointed out that the development of China's future pension system should focus on making up for the weaknesses, i. e., accelerating the legislation of the pension system and accelerating the development of enterprise annuity and commercial pension insurance. Meanwhile, making efforts to make up for deficit of pension funds, strengthening the investment and application of pension funds, changing the way of fiscal subsidies and improving the efficiency of fiscal subsidies are also important means of ensuring the healthy operation of a multiple-level pension system in China.

Chapter Ⅲ is about the measurement and sensitivity analysis of China's pension deficit in the process of population ageing. This chapter is the core of the whole research. With the acceleration of China's population ageing, China's pension funds will be confronted with a situation that incomes could not cover expenses and the quota of fiscal subsidies would increase day by day. It has become a hot issue for all sectors of society to alleviate the deficit of pension funds in China, study the reasons for the deficit of pension insurance and put forward targeted suggestions. This chapter is aimed at calculating the size of pension deficit by the year 2100. This chapter is divided into 5 sections. Section 1 is about the literature review on the population prediction, pension deficit and its measurement methods. It is believed that there are many ways of measuring the pension deficit in China and there are also great differences in measurement, so the measurement results are also significantly different. Generally speaking, these results are a little small numerically and there is insufficient awareness of the size and severity of pension deficit in China or insufficient sensitivity analysis of factors influencing the pension deficit, so it is of necessity for remeasurement. The first chapter analyzed the tendency of population ageing in China, which was mainly based on materials including the UN's population prediction statistics and census statistics on China's population. In this chapter, it would be based on assumptions that could better comply with China's realities and the Leslie matrix model and the Lee-Carter model would be applied to re-predict the future evolution of population in China, which could also facilitate subsequent measurement and sensitivity analysis of pension deficit in China. Section 2 is about the prediction of China's population based on the Leslie matrix model. Leslie matrix model is the most traditional and classical model of population prediction in China. Based on the 6th national population census data in 2010, by assuming models of fertility, this section employed the Leslie matrix model to predict the tendency of China's population ageing from 2015 to 2100 and analyzed the prediction results before finding that the results were not significantly different from the conclusions of the first chapter. Finally, based on China's current social and economic situations and the current situation of family planning policy, it proposed reasonable policies and suggestions for the prediction results. Section 3 is about the prediction of China's population based on the Lee-Carter model, a very popular population prediction model in recent years. Firstly, it introduced the basic principles and methods of the Lee-Carter model. Then, it prepared related initial statistics. Finally, it predicted the changing tendency of population mortality in China so as to predict the trend of population evolution and population ageing in China and arrive at this conclusion: ageing coefficient and the size of elderly people would have reached their peak around the year 2060 and China's ageing speed would be at its peak from the year 2020 to the year 2040. Section 4 is about the measurement of the gap between incomes and expenses of pension funds in China. This section, first of all, clarified some concepts of pension deficit and then respectively established different models of the gap between incomes and expenses of pension funds for different types of pension systems. Finally, based on a basic hypothesis, it measured and calculated the current deficits and cumulative deficits of different types of pension funds and overall pension funds in China. This section arrived at a basic conclusion that under the synergy of three types of pension systems for urban enterprise employees, urban and rural residents and governmental institutions, the overall cumulative deficit of China's pension funds would exist in 2046 and later and the growth speed would be greatly increased with a tendency of exponential growth. Section 5 is about the sensitivity analysis of the impact of the gap between incomes and expenses of pension funds in China. Based on the results of predicting incomes and expenses obtained by applying models of measuring the gap of pension funds in the fourth chapter, this section respectively made corresponding analysis on variables influencing incomes and expenses of pension funds, including the replacement rate of pension and the average growth rate of salaries. This section first of all, respectively made adjustment analysis on the parameters or conditions involved in the models and then concluded the results after the adjustment so as to get the results of sensitivity analysis of the overall deficit of pension funds. Under the joint regulation of 5 factors including the retirement age, the growth rate of taxable salaries, the contribution rate, the replacement rate of pension and the total fertility rate, the current balance and the cumulative balance of the overall pension funds had been obviously increased in the earlier period and the current deficit and cumulative deficit had been obviously decreased in the later period. Finally, the factor of fiscal subsidies was also taken into account, which not only conduced to increasing the balance of pension funds in the earlier period and decreasing the pension deficit in the later period but also significantly delayed the occurring year of the deficit.

Chapter Ⅳ is about global experience and enlightenment in coping with pension deficit. It could be found from the analysis of the first chapter that in the past, the process of China's population ageing started late and developed slowly and that China's pension system is also confronted with many difficulties, but there are not too many problems in pension payment because the population structure is relatively young. Meanwhile, it is also found that the process of population ageing in developed countries started early and developed quickly, their degree of ageing has also surpassed that of China, and their pension systems have been improved after being reformed for many times, so they are more experienced in coping with population ageing and pension deficit. Therefore, the research purpose of this chapter is to provide experience and enlightenment for us to learn from. Section 1 is about the experience and enlightenment of Japan in coping with pension deficit. Japan's population ageing is developing at a rapid speed and now it has been the country with the highest degree of ageing in the world and a very long average life expectancy. Its pension system of annuity for all is confronted with a serious change of population ageing and Japan has to reform it by raising incomes and cutting expenses to ease the pressure of a widening pension deficit. In the process of reform, Japan's experience of paying attention to establishing a multi-pillar pension system and clarifying the responsibilities of the government in the pension system are worth learning from for us. Section 2 is about the experience and enlightenment of France in coping with pension deficit. France is the first aged country in the world and its ageing speed is developing at a slow rate, but it is also confronted with the challenge of population ageing. France is constantly reforming its pension system to cope with the pressure of pension payment, but it pays attention to the disadvantaged groups in the process of reform, so its fertility rate is stabilized and maintained at a high level. It reforms its pension system step by step. It reforms the general pension systems and then special pension systems so as to increase incomes and cut expenses in both ways as much as possible. Section 3 is about the experience and enlightenment of the United States in coping with pension deficit. The population ageing of the United States is at a slow rate and the degree of its population ageing is not very high, but it has a large size of elderly people, so it is also confronted with the pressure of population ageing. In the process of reforming its pension system, the United States attaches importance to developing occupational pension by taking advantage of tax preference so as to reduce governmental responsibilities in basic pension insurance and it also makes full advantage of being the world's first economic and military power with a highly-developed financial market to strengthen the investment application of pension funds. At the same time, the United States adheres to giving priority to legislation in the process of reform. Section 4 is about the experience and enlightenment of the UK in coping with the pension deficit. Under the guidance of the Beveridge Report after the Second World War, the UK became a welfare state of offering all-round protection“from cradle to grave”. However, under the background of stagnant economic development, its pension system was confronted with huge challenges and the pressure of population ageing on pension payment. Since the 1980s, it has carried out a series of reforms of its pension system, especially that its recent reform measures including simplifying the pension system, promoting the development of occupational pension and implementing progressive delay in retirement are worth learning from for us. Section 5 is about the experience and enlightenment of Germany in coping with pension deficit. Germany became an aged country in 1930 and since the 1970s, its population ageing has been deepening rapidly due to its rapidly decreasing rate of fertility, so the level of its population ageing ranks top in the world. Germany is the first country in the world that has ever made legislation for pension. Its overly generous pension benefits is under a dual pressure of the rapid development of population ageing and economic transition, so its pension system is confronted with many challenges. Therefore, since the 1990s, Germany has carried out a series of reforms, i. e., raising incomes and cutting expenses on the whole, among which its“annuity for mothers”and“child care allowance”could provide us with important enlightenment. Section 6 is about the experience and enlightenment of coping with“European debt crisis”. The population ageing started early and developed rapidly in the Europe and European welfare countries could not sustain to provide all-round good welfare security for the people under the dual pressure of economic transition and population ageing, so the debt crisis is unavoidable. This section, first of all, discussed the situation and impact of population ageing in European countries and then analyzed the development and causes of“European debt crisis”before explaining the inevitability of“European debt crisis”under the tendency of population ageing. Finally, it concluded the enlightenment for China based on measures of European countries in coping with population ageing.

ChapterⅤis about the causes and countermeasures of pension deficit at the peak of population ageing in China. At present, China has been in the rapidly-growing period of ageing and it is about to enter the peak period of its ageing speed. As could be seen from the prediction results in the third chapter, China's pension funds would soon turn from balance to deficit and pension deficit will keep expanding with the deepening of ageing degree. Meanwhile, there still exist many problems in China's pension system, especially in that the multi-pillar pension system is in essence still a model of single pillar for the other pillars have not yet been fully developed. The present phase is a good time for the healthy development of economy. “Demographic dividend”has not been completely exhausted, so it is of urgency to reform China's pension system so as to cope with the huge challenge of population ageing. This chapter consists of 2 sections. Section 1 is about the causes of pension deficit at the peak of population ageing in China. The causes could be mainly concluded as follows: the transition of pension system and the deepening of ageing lead to the decrease of laboring population; there are problems left over by the dual-track pension system; the level of pension benefits keeps increasing; the second pillar pension and the third pillar pension are underdeveloped; it is difficult to increase the payment standard of pension insurance and increase and maintain the value of pension funds, etc. Section 2 is about the major countermeasures for coping the pension deficit at the peak of population ageing in China. Based on the enlightenment that developed countries provide for us in coping with the pension deficit, it learned from the lesson of“European debt crisis”and proposed the following countermeasures based on a full consideration of China's national conditions: delaying retirement progressively, actively absorbing the cost of transforming the pension system, vigorously developing the enterprise annuity and commercial pension, strengthening the investment application of pension funds, strengthening the management of pension funds, strengthening fiscal support, improving the fertility rate, perfecting the pension system and promoting the healthy development of the economy.

To sum up, China's population ageing would be very severe in the future, which would have a great impact on China's pension system. If we intensify the reform and improvement of pension system, make efforts to promote the healthy development of national economy, gradually increase fiscal subsidies and improve the efficiency of subsidies and actively develop enterprise annuity and commercial pension by fully using the tool of tax preference, we will be able to calmly deal with the challenge brought by the increasing pension deficit in China at the peak of population ageing.

The innovation of this research is mainly reflected as follows：

（1）It systematically studies the ageing tendency of global population and makes a comparative study by putting China's population ageing in the world's population ageing so as to arrive at the conclusions about the characteristics of China's population ageing, the peak period of population ageing speed and the development level of population ageing. In particular, it comparatively analyzes the population ageing between China and some typical countries.

（2）By using two most important, classical and authoritative models of population prediction, it selects hypotheses that better comply with China's actual situations to arrive at reliable conclusions about the development and evolution of China's population ageing. Based on the pre diction results of future population mortality by means of the Lee-Carter model, it re-calculates the size of China's pension deficit and points out its severity. Besides, it also analyzes the sensitivity of factors influencing the balance and deficit of China's pension funds and concludes that there are methods to decrease the future pension deficit.

（3）It systematically sorts out the experience and lessons of Japan, France, the United States, the United Kingdom, Germany and the European Union in coping with population ageing and the pension deficit, and draws corresponding enlightenment.

（4）It proposes targeted measures, such as increasing subsidies and improving the efficiency of fiscal subsidies, making efforts to develop enterprise annuity and commercial pension, implementing progressive delay retirement as soon as possible, especially combining importance attached to fiscal subsidies and the promotion of developing second pillar and third pillar and paying attention to providing financial support for low-income groups.

The major shortcomings of this research are listed as follows：

（1）Because the factors considered are not comprehensive enough, the prediction results are not authoritative enough, but the overall tendency should be correct. The domestic data are not sufficiently mastered, so the analysis is not deep enough.

（2）Due to the difficulty in collecting foreign data, there are some deficiencies in the summary of international experience in coping with the pension deficit.

Key words: population ageing; pension insurance; actuarial method; pension deficit