How private sector participation improves retirement preparation: A case from China

  • Wei Zheng
  • Zining Liu
  • Ruo JiaEmail author


This paper shows empirically how private sector participation improves the adequacy and equality of retirement preparation in a three-pillar retirement system. We develop a three-layer replacement rate approach based on the China Health and Retirement Longitudinal Study, a nationwide representative household survey of middle-aged and old aged population. Our empirical evidence shows that private sector participation increased the mean (median) replacement rate in 2013 from 35.4% (15.4%) to 69.8% (48.7%). The evidence also suggests that annuitising home equity is responsible for a large portion of this increase. Surprisingly, private sector participation also mitigates the inequality of retirement preparation between the formal and informal sectors. Our empirical findings emphasise the importance of annuitisable private savings for the retirement income security of the one-fifth of the global population who live in a representatively high-growth and rapidly ageing economy.


Retirement preparation Pension Replacement rate Adequacy Equality China 



The authors thank Christian Biener, Martin Eling, Katja Hanewald, Peng Jing, Chong Liu, Gene C. Lai, Ze Song, Yi Yao, and participants of the ARIA and APRIA conferences in 2016 for their helpful inputs and comments. This study is supported by the key grant of Chinese Ministry of Education - Commercial Pension in China: Institution and Operation (Grant No. 14JZD027), the National Natural Science Foundation of China (Grant No. 71703003), and the seeds fund of School of Economics, Peking University.

Supplementary material

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Copyright information

© The Geneva Association 2018

Authors and Affiliations

  1. 1.Department of Risk Management and Insurance, School of EconomicsPeking UniversityBeijingChina

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