Will the State-owned Capital Transfer Policy Enhance the Sustainability of the Urban Employee Basic Pension Insurance Fund in China?

To analyze the effect of the state-owned capital transfer policy on the sustainability of China's urban employee basic pension insurance fund (CUEBPIF), this study develops an actuarial model for pension insurance. The results reveal the following: (i) Without policy intervention, the CUEBPIF would face a deficit in 2027 and a cumulative shortfall of RMB207.44 trillion by 2050, and the proportion of fiscal subsidies for the CUEBPIF in the total fiscal expenditure would increase to 12.86 percent in 2050. (ii) Based on a delayed retirement policy, the transfer of 10 percent of state-owned capital can delay the onset of the fund deficit by 6 years, and the accumulated shortfall in 2050 would fall to RMB39.42 trillion, and the proportion of fiscal subsidies would decrease by 11.77 percentage points. (iii) The state-owned capital transfer policy can improve the sustainability of the CUEBPIF and reduce the burden of enterprise social security contributions when the transfer ratio increases to 20 percent.