**Summary**

With rapid demographic changes, the improvement and reform of the social security system may be one of the key areas to advance during the "15th Five-Year Plan" period. What is the current status of China's social security system, and what pressures does it face? What experiences can be drawn from overseas social security systems? This article provides a systematic analysis for reference.

**I. Historical Evolution of China's Social Security Reform: China's Social Security System is Transitioning from "Universal Coverage" to High-Quality Development and National Coordination**

China's social security system has evolved through multiple stages in response to economic and social development needs. The "Labor Insurance Regulations of the People's Republic of China" in 1951 initially established the urban employee social security system. In 1986, pension insurance explored social pooling with joint contributions from enterprises and individuals. In 1991, a tripartite cost-sharing mechanism among the state, enterprises, and individuals was clarified, marking the transition from "enterprise insurance" to "social insurance." Starting in 1998, the social security system accelerated its construction, with the establishment of the Ministry of Labor and Social Security achieving administrative unification. The "Social Insurance Law" in 2010 promoted the social security system into a legalized stage.

Currently, China's social security system is transitioning from "universal coverage" to high-quality development and national coordination. In 2014, China integrated the New Rural Pension Insurance with the Urban Residents' Pension Insurance, establishing a unified basic pension insurance system for urban and rural residents, gradually breaking down the urban-rural dual division of social security. In 2018, the central adjustment system for basic pension insurance funds for enterprise employees was established. In 2022, the third pillar of personal pension was officially implemented, forming a multi-tiered system structure of "basic pension insurance + enterprise annuities and occupational annuities + personal pension."

By the end of 2023, China had built the world's largest social security system. Basic pension insurance coverage reached 1.06 billion people, covering urban enterprise employees, government and public institution personnel, and urban and rural residents. Basic medical insurance covered 1.33 billion people, including employee medical insurance and resident medical insurance. Unemployment insurance covered 240 million people, work injury insurance 300 million people, and maternity insurance 250 million people. In terms of contribution mechanisms, basic pension insurance for employees, basic medical insurance for employees, and unemployment insurance are jointly contributed by employers (approximately 28% in total) and employees (approximately 10%) according to prescribed ratios.

**II. Current Pressures Facing the Social Security System: Sustainability and Equity Issues May Become Key Focus Areas for Subsequent Reform and Improvement**

With China's social security system basically achieving universal coverage, sustainability and equity issues may become key focus areas for subsequent reform and improvement. On one hand, accelerating "aging" combined with "declining birth rates" may lead to "relatively fewer contributors and continuously increasing beneficiaries" in social security funds, creating intergenerational burden imbalance risks. On the other hand, issues such as varying protection levels among different insurance types during the social security system transition and uneven distribution of regional social security fund balances due to differences in regional economic development levels also require attention.

China's pension insurance sector faces fund revenue and expenditure pressures and significant urban-rural disparities. Since 2013, China's basic pension insurance fund contribution income has been lower than expenditures, with gaps filled by general fiscal subsidies. In 2023, fiscal subsidies at all levels reached 1.75 trillion yuan, accounting for 6.4% of general fiscal expenditures for that year. According to calculations by the Chinese Academy of Social Sciences, the current balance of basic pension insurance funds for urban enterprise employees may first turn negative in 2028. Meanwhile, despite strong fiscal support, the gap between urban and rural pension benefits remains significant. In 2023, urban employee basic pension insurance averaged 45,000 yuan annually per person, while urban and rural resident pension insurance was only 2,671 yuan.

Fiscal funds are an important pillar for the stable operation of medical insurance funds, and support has been continuously strengthened. Since 2015, general public budget subsidies for basic medical insurance have increased annually, reaching 673.5 billion yuan in 2023, accounting for 2.5% of general fiscal expenditures for that year. However, since 2016, medical insurance funds have normalized the situation where "expenditures exceed contribution income" with an expanding gap, which may place higher requirements on fiscal subsidies and fund management. Meanwhile, medical insurance fiscal subsidies show significant structural characteristics, with resident medical insurance being the core support direction. In 2023, resident medical insurance subsidies were 661 billion yuan, while employee medical insurance subsidies were only 1.21 billion yuan.

**III. How to Alleviate Social Security Sustainability Pressures: Reform of Contribution and Benefit Systems, and Improvement of Fund Preservation and Value-Added Mechanisms May Alleviate Pressures to Some Extent**

Delayed retirement is currently a key measure to address China's population aging and social security pressures, which may alleviate social security pressures to some extent. Currently, China's statutory retirement age is still lower than most developed countries. Among the 38 OECD member countries, the average retirement age for men and women retiring in 2022 was 64.4 and 63.6 years respectively, while in China it was 60 for men and 55 for women. In this context, delayed retirement may be an effective means to extend contribution periods in the short term and improve pension sustainability. Research by Renmin University of China shows that delaying retirement age by 4.8 years could reduce pension insurance contribution rates from 20% to 16% while maintaining unchanged pension replacement rates.

In addition to increased fiscal subsidies to alleviate social security revenue and expenditure pressures, value preservation and appreciation is also a key focus. Experience from the world's top seven pension markets shows that stocks (45%) and bonds (33%) are their core investments, supplemented by other assets (20%) and small amounts of cash (3%), with different preferences among countries - the US and Australia favor stocks, while Japan and the Netherlands favor bonds. China's pension funds follow a "fixed income-oriented, equity-supplemented" approach. In 2024, fixed income assets totaled 2.2 trillion yuan, accounting for 89.5%. Although Hong Kong stock returns reached 15.9%, equity allocation remains relatively low, suggesting significant room for improvement in increasing equity allocation and optimizing configuration.

Overseas pension fund experience shows that diversified structure and market-oriented investment allocation mechanisms not only help pension funds preserve and increase value but also benefit stock market long-term bull trends. In the US, Individual Retirement Accounts (IRAs) and Defined Contribution (DC) plans together account for nearly 60% of pension accounts, highlighting the importance of individual accumulation accounts. The 401(k) plan (DC type) provides continuous capital inflows forming long-term demand for the stock market. Most 401(k) participants entrust their funds to professional institutions like Fidelity and Vanguard for investment, enhancing US stock market capital stability and promoting long-term bull market development.

**Risk Warnings**

Policy changes exceeding expectations, economic changes exceeding expectations.