China's deposit insurance system model

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The mechanism of the pay-as-you-go system is for the younger generation to provide for the older generation, and for the insurance premiums paid by the younger generation to be used to pay the older generation's pension benefits. This model of fund financing can cope with the risks posed by inflation.

However, this financing model is closely related to the demographic structure, when aging is serious, it will increase the expenditure on pension insurance premiums, and the contribution of the younger generation to the pension insurance will have to be increased, thus increasing the burden of the young people. In addition, since the introduction of pension insurance in 1997, those who retired before 1997 (i.e., the "old people") have not contributed to pension insurance, which has to be provided entirely by society; those who joined the workforce before 1997 and retired after 1997 (i.e., the "middle people") have contributed to pension insurance. The pension insurance premiums paid by those who worked before 1997 and retired after 1997 (i.e., the "middle-aged") are not enough to provide for their old age and have to be partially paid by the society, which is the biggest problem faced by China's pension insurance - the so-called "hidden debt" problem.

In order to solve this problem, China's pension insurance financing model from the pay-as-you-go system to a part of the accumulation system, personal contributions to the personal account for personal retirement; enterprise contributions to the social account, to solve the problem of implicit debt, thus, not only to ensure the old age of the older generation of old age security, but also to reduce the burden of the younger generation.