Comparison and Evaluation of China’s Urban Social Security Financing System Before and After the Reform

Abstract

The sustainability of China’s urban social security financing system has recently been seriously questioned. This article divides the financing system’s development into two periods (before and after reform). It compares the capital collection and the distribution and circulation structures and reviews the financing system before and after reform. In this study, we also discuss and explain the ‘empty account’ phenomenon, which severely undermines the financing system’s sustainability. We allege that the money accumulation system adopted after reform, which correlates personal accounts with the social pool, is not running as designed but as a ‘pay-as-you-go’ system. After evaluating the efficiency and cost performance of both periods, testing the financing system’s sustainability and correlating the system during both time periods with economic and social development, we find that the financing systems’ operation after reform corresponds with theories proved by case studies in other advanced states.