[Opinion] China Must Address Potential Future Gaps in Basic Pension Insurance

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China must proactively address potential future shortfalls in basic pension insurance by strengthening multi-source funding mechanisms, increasing fiscal subsidies, continuing the…

(Yicai) Nov. 12 -- Social security can have a positive impact in various areas, including supporting technological progress, creating jobs, building a unified market, and promoting common prosperity. China must proactively address potential future shortfalls in basic pension insurance by strengthening multi-source funding mechanisms, increasing fiscal subsidies, continuing the transfer of state-owned capital, and establishing specialized management institutions for basic pension insurance funds.

Social security spending is classified as government expenditure or social consumption, and so it is sometimes seen as an economic burden. But nowadays, more and more people realize that it is a vital investment to ensure high-quality population development and is also an important driving force for economic growth. Although social security may take up a certain amount of economic resources, it is also highly productive and contributes positively to high-quality economic development in many ways.

Social security can play a decisive role in fostering innovation. Pension funds and insurance funds are important sources of long-term “patient” capital for technology companies from their startup and financing phases to getting listed. China’s pharmaceutical industry is now the second-largest globally and its rise has been powerfully bolstered by the national medical insurance fund, which has facilitated centralized procurement and the inclusion of innovative drugs in the reimbursement list. International and domestic experience shows that social security can be an important force in supporting technological progress and stabilizing the capital market.

Another benefit of social security is its potential to create jobs. New technological trends have brought concerns over the impact on the job market, but unlike traditional industrial labor that can be replaced by automation, industries related to social security are knowledge-intensive, labor-intensive, and value-intensive.

The social…

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