Tackling the Chinese Pension System

Robert Pozen of Harvard Business School proposes reforms in a new Paulson Policy Memorandum.


China Pension SystemChina has made great strides in expanding pension coverage for its population over the last fifteen years. Before 1997, state-owned enterprises (SOEs) provided their workers with so-called legacy pensions without regular contributions. Since 1997, China has established a contributory pension system, which covered over 280 million urban workers in 2011. More recently, China has established a pension scheme for rural workers; by the end 2012, the rural pension scheme had grown to cover roughly 460 million individuals.

Organized into three parts, this policy memorandum describes the current state of the Chinese pension system, as well as its shortfalls, and then offers some suggestions to help address these issues. First, it will discuss the key challenges facing the Chinese pension system: the aging of the population, the fragmentation of the system, the lack of advance funding, and the low level of investment returns. Second, it will examine the causes of each of these challenges. Third, it will put forward several proposals to address each of these challenges. In each of these three main parts, the memorandum will focus primarily on the Urban Enterprise Pension System (UEPS) portion of the Chinese pension system.


Robert C. Pozen

Senior Lecturer, Harvard Business School; Nonresident Senior Fellow in Economic Studies, Brookings Institution

Robert C. Pozen is Senior Lecturer at the Harvard Business School and Nonresident Senior Fellow in Economic Studies at the Brookings Institution. He was formerly Chairman of MFS Investment Management, which manages over $300 billion in assets. In 2001 and 2002, Pozen was a member of President Bush’s Commission to Strengthen Social Security. In 2003, Pozen served as Secretary of Economic Affairs for Massachusetts Governor Mitt Romney. From 2002 to 2004, he was also the John Olin Visiting Professor at Harvard Law School. In 2007-2008, he served as chairman of the US Securities and Exchange Commission (SEC) advisory committee on financial reporting. Pozen was formerly Vice Chairman of Fidelity Investments and President of Fidelity Management & Research Company, the investment advisor to the Fidelity mutual funds. During Pozen’s five years as President, Fidelity’s assets increased from $500 billion to $900 billion. From 1987 to 1996, he was Managing Director and General Counsel of Fidelity Investments. In that role, he created Fidelity's Charitable Gift Fund and helped launch Fidelity funds in several foreign markets. Before joining Fidelity, Pozen was a partner at the Washington, DC law firm of Caplin & Drysdale, where he led the banking/securities department from 1981 to 1986. Prior to that, he was Associate General Counsel to the SEC from 1978 to 1980. Pozen was also a law professor at Georgetown University and New York University from 1973 through 1977. In 1968, he graduated summa cum laude and Phi Beta Kappa from Harvard College, which awarded him a Knox Traveling Fellowship. He received a law degree from Yale Law School in 1972, where he served on the editorial board of the Yale Law Journal. In 1973, he received a JSD from Yale for his doctoral thesis on state enterprises in Africa. 

 Pozen is an outside director of Medtronic, Inc. and Nielsen, Inc. He is also an outside director of AMC, a private equity arm of the World Bank. In addition, he is a member of the governing board of two non-profit organizations, the Harvard Neuro-Discovery Center and the Commonwealth Fund. Pozen has published on many subjects, including opinion pieces in the Financial Times, the New York Times, the Wall Street Journal, and the Washington Post. He authored the main textbook on asset managers, The Fund Industry: How Your Money is Managed, as well as Too Big To Save? How to Fix the US Financial System. His latest book, Extreme Productivity, was named the third best business book of 2012 by Fast Company.

Topics: Economy