The Impact of the Two-Child Policy on the Pension Shortfall in China: A Case Study of Anhui Province

Abstract

The one-child policy was designed as a basic national policy in China and was written into the Constitution in 1982. The main content and purpose of the policy are to advocate late marriage, late childbearing and fewer births to control population growth in a planned way. Since the implementation of the basic national policy, its positive effect upon China’s economic development cannot be ignored, but after entering the 21st century, the problems related to population aging became obvious. Consequently, the basic pension system is confronted with great challenges. Under these circumstances, China initiated the two-child policy in 2016. This paper tries to forecast the change of pension shortfall after the implementation of the “two-child” policy in Anhui Province in China by establishing a pension revenue model, a pension expenditure model and a population prediction model. The prediction results reveal that the “two-child” policy helps to alleviate the pressure on the pension system, but the effect is limited and the “two-child” policy cannot change the trend of increasing pension shortfall in the long run. To reduce the burden on the pension system, the government can consider extending the pension contribution period and retirement age to make pension system sustainable.