1 NTA country report China’s Case Ling Li China Center for Economic Research at Peking University Beijing, China

China Center for Economic Research 2 Contents Country background  Economic and population growth  Private transfer system  Public transfer system  poverty alleviation program Progress Made on NTA Account  Work progress  Data Source  Short description on unique methodology  NTA Estimation Results  Future plan

China Center for Economic Research 3 Country background Per capita GDP and Growth Rate, China, ( )

China Center for Economic Research 4 Country background Shift from “high birth rate, high mortality” to “low birth rate and low mortality ”

China Center for Economic Research 5 Country background Private transfer system to the elderly  No developed social security system especially in rural areas  The majority of elderly Chinese lives in the same household with their offspring

China Center for Economic Research 6 Country background Private transfer system to the elderly  intra-household transfer is the main channel of supporting the elderly  11.3% of the elderly in the rural area aged 65 and above still make living by themselves  26.3% of rural elderly and 18.2% of urban elderly do not get adequate financial support to cover their living cost Table 2 Main source of financial support of the elderly, 2002 urbanruralTotal pension 37.8%5.5%19.9% spouse 2.4%1.9%2.1% child(ren) 43.8%69.0%57.8% grandchild(ren) 3.9%6.0%5.0% other relative(s) 0.4%0.7%0.6% local government or community 5.8%4.2%4.9% work by self 3.9%11.3%8.0% others 2.1%1.3%1.7%

China Center for Economic Research 7 Country Background Pensions  Urban: basic old-age insurance system for the enterprises employees Enterprise employees who have reached retirement age and who have paid their share of the premiums for 15 years or more shall be entitled to collect a basic old- age pension every month after retirement Two parts: base pension and personal account Coverage: million, million of whom were employees (2003) Raising Funds:  Premium payment by both enterprises and employees  Government subsidy  National social security fund  Rural: old-age security in rural areas is centered mostly on families In 2004, the Chinese Government began to experiment with a system that supports and rewards households that practice family planning by having only one child or two girls in some of the rural areas. Each person of such couple may receive a minimum of 600 Yuan a year from the age of 60 till the end of his or her life.

China Center for Economic Research 8 Country Background Health care  Delivery System Over 90% healthcare resources are owned by public hospitals 3-tire healthcare service network  Financing Government subsidy accounted for less than 10% of hospital income Price and healthcare expenditure grew rapidly (12 times from 1990 to 2005) The poorer get the less service

China Center for Economic Research 9 Country Background Health care  Low insurance coverage  Of all the healthcare expenditure, individual out-of-pocket expenditure account for as much as 60%  Basic Medical Insurance System for the Urban Employees  Rural: New Collective Medical Insurance: the reimbursement rate is low Healthcare Insurance Coverage TotalUrbanRural Basic insurance Public insurance Labor insurance Cooperative Insurance Other social insurance Private Insurance Out-of-pocket

China Center for Economic Research 10 Country Background Education  compulsory education (9 years) and voluntary education  the government expenditure accounts for the majority of education expenditure. Enrollment rates of variety levels of schoolsComponent of education expenditure

China Center for Economic Research 11 Country Background Education  Challenge Growing regional gap and gap between the rural and urban Deficiencies in Education for Women Unmet Education Needs of Migrant Children

China Center for Economic Research 12 Country Background Unemployment Insurance All enterprises and institutions in urban areas and their employees must participate in the unemployment insurance program employers pay 2% of their total wage bill and individuals pay 1% of their personal wages as unemployment insurance premiums. Guarantee of the Minimum Standard of Living for Urban Residents

China Center for Economic Research 13 Country Background poverty alleviation programs  According to China’s national poverty line, rural poverty population has dropped from 250 million in 1978 to 28.2 million in 2002, decreasing by 88.7%  why China can decrease poverty population by a large margin high economic growth rural labor force transfers to non-agricultural industries Human capital has been obviously improved. Anti-poverty actions adopted by the government  Government Policies for the Aid-the-Poor Program Defining the Key Poverty-stricken Counties to Be Aided by the State Putting the Stress on the Poverty-stricken Areas in the Central and Western Regions Financial support Aiding the Poor with Technology and Education Cooperation of the Eastern and Western Regions in the Aid-the- Poor Work ( 对口支援） Encouraging Migration

China Center for Economic Research 14 Progress Made on NTA Account Work progress  New private data source: Chinese Household Income Project (CHIP) data, 1995 The sample size of CHIP95 (over 50,000 individuals) is much bigger than our previous data (no more than 5000 individuals) We are in the progress of negotiating with the Academy of Chinese Social Science to get the CHIP2002  Public data source Statistical yearbook Population census data Some specific yearbooks

China Center for Economic Research 15 Progress Made on NTA Account Short description on unique methodology  Separately estimation between urban and rural area most of the micro data in China is collected and reported separately big gap between the rural and urban China For the private accounts, people may have different behaviors For the public accounts, most government expenditures (public resources) are allocated in the urban areas

China Center for Economic Research 16 NTA Estimation Results Private consumption Private consumption, urban, 1995 Private consumption, per capita, rural, 1995

China Center for Economic Research 17 NTA Estimation Results Private consumption ： discussion Healthcare expenditure  regression method may lead to bias  Big gap between the urban and rural  The elderly (over 50 years old) consumes less than other countries Age-health profile by different methods, urban Private Healthcare Expenditure, per capita, 1995

China Center for Economic Research 18 NTA Estimation Results Private consumption ： discussion Healthcare expenditure  Why the elderly consumes less?  the household choose to allocate more resource to the mid-ages rather than the elderly when they get sick  The elasticity of the healthcare expenditure for the mid-ages (25-50) to the household income is 0.35, while the old-ages (50 and above) is 0.25 Two-week healthcare expenditure of different age groups, 1997 Source: 2nd National Healthcare Service Survey

China Center for Economic Research 19 NTA Estimation Results Public consumption  Allocating different public expenditures according to different rules  Problem:  How to allocate public expenditures between the urban and rural Public Expenditure, Urban, Per capita, 1995 Public Expenditure, Rural, Per capita, 1995

China Center for Economic Research 20 NTA Estimation Results Labor income  the gap of labor income contributes much to the income diversity between urban and rural.  The age-labor income curve of the rural is much “fatter” than the urban Labor incomes, urban, per capita, 1995 Labor income, rural, per capita, 1995

China Center for Economic Research 21 NTA Estimation Results Labor income: discussion  Migration’s impact on labor income in the rural Average Working Time out of Hometown, 1995 Wage income, rural, per capita, 1995

China Center for Economic Research 22 NTA Estimation Results Labor income: discussion  Ronald Lee (2004) Brazil type France type Japan type  the China age-labor income profile in the urban follows the mixture of type I and type II, while the rural one follows type II  whether they have the same mechanism is an interesting topic to be discussed. Share of aggregate earrings from youth (20- ) and elderly (65+), 1995

China Center for Economic Research 23 NTA Estimation Results Life-cycle Deficit Note  Underestimation of the labor income Incomplete aggregate data Labor income includes only earning 2/3 agriculture income is considered as labor income, I think that the ratio is lower, as the agriculture production is labor-intensive.  Over-estimation of public consumption Public investment is includes LCD, per capita, rural, 1995 LCD, per capita, urban, 1995

China Center for Economic Research 24 Future plan Complete the estimation using CHIP95 data and make full estimation with CHIP2002 data after we get it Construct methodology to separate government expenditure to the urban and rural Estimate and discuss the difference and transfers across the urban and rural Investigate the reason why Chinese elderly consumes relatively less healthcare expenditure. The National Aging Population Survey data is full of health indexes, which may help us a lot. Discuss the role of migration in terms of the NTA Account.

China Center for Economic Research 25 Thanks