Chen Yang, School of Finance and Trade
Abstract: The construction of China's security financial system is a process for the government to re-recognize the function of social security finance under the specific social, economic and financial environment; to aspire to enhance social security financial efficiency; to effectively promote financial deepening; to establish suitable social security operational mechanism; and to provide comprehensive and sustainable social security for all the citizens. Current financial arrangement for our country's social security operation, to some degree, lacks systematic design and bears an obvious transitional feature. The overall efficiency of the social security system is far from reaching the policy targets. The current management system of China's social security system is facing more and more practical problems and conflicts, and has “nowhere to go”. It is under such a realistic background that the sustainable development of social security financial system is proposed.
1. Research objectives
The objective of this research is the construction and sustainable development of China's social security financial system. The study explored the ultimate goal of social security financial system; compared social, economic and financial environment of different countries; and concluded that for social security to act as the core institutional arrangement to protect people's welfare, a constant guideline is to enhance and expand social security financial functions, and an effective path is to construct sustainable social security system.
2.Research aims
This study explored the general rules of social security financial system operation in a specific social, economic and financial environment. In the light of the theoretical framework of the sustainable financial development based on financial resource theory, the study systematically analyzed the main factors and methods that may influence the targets of the social security financial policy; and put forward some effective measures to construct our country's sustainable social security financial system. It is intended that these suggestions will contribute to building a harmonious society based on an improved welfare level for all the Chinese people.
3.Research strategy
This dissertation discussed the old yet brand new problems associated with “social security” from social, economic and financial perspectives; and summarized that the precondition of welfare maximization and happiness maximization for those who are entitled to “social security” is the deepening of social security financial transactions. By applying the theory of sustainable financial development, this thesis incorporated existing studies into a relatively systematic and standard framework. Centering on the goal to enhance and expand social security financial functions, this thesis explored the policy principles and practical methods to construct and sustain social security financial system. The research is conducted and organized as follows:
First, theoretical preparation
The concept and philosophy of social security finance is deeply rooted in history. From the personalized financial contracts embedded in the “great unity” thoughts of the Spring and Autumn Period and Warring States Period, and the “raising children to prevent destitution in old age” thoughts incorporated in Confucianism; to the life annuity and other insurance and saving products emerging with the philosophy and practice of democracy, freedom and rule of law in old Greece and old Rome about 2000 years ago; to the faster development of financial instruments to provide personal insurance in western Europe around the 12th and 13th century; to the rapidly evolving financial service means and the revolution of social security systems all over the world in the 21st century; the financial development has never ceased to penetrate the social security evolution with its profound extensiveness and professional independence. While recognizing the resource nature of finance and in turn the social security finance, this thesis united all social security financial factors and relative concepts under a clearly-structured social security financial resource system. With the aim to enhance and expand social security financial development, this paper explored the basic meaning, construction method and path to realize sustainable social security financial development.
Second, operation of social security financial system in different countries and the sustainable development analysis
A common feature of social security in various countries around the world is that it is increasingly, deeply, and extensively penetrated by the social security finance. This is also the process for social security finance to realize its function. Social security financial system underpins the social security financial function and development. A nation's social security financial system at least include professional independent or entrusted social security financial institutions, social security fund, social security products, social security institutional arrangement. Despite the diverse functions, structures, operational mechanisms and manners exhibited in different countries'social security financial system, some common rules of social security financial development can be distilled as different nation, environment, background, objective, need, mode, and policy lead to different result. All of this analysis and comparison forms the foundation and background for the study of China's social security financial system. Through this comparative approach, we can not only identify the factors that protect social security financial development, but also those important determinants that ensure its sustainable development.
Third, relationship between operational environment and sustainable development of China's social security financial system
Social security finance does not exist in void but in some specific social, economic and financial environment. For this reason, it is highly important to examine China's social security system in its operational environment, and identify the practical factors that have a significant influence over its sustainable development. In the light of the theoretical review and international comparative study, this study mainly examined the impacts of the following aspects of China's social security financial environment: the evolution of social security institutions, the huge hidden social security debt, the diversified structure of social security (source and benefit), the management and operational structure of social security, and the financial innovation.
Forth, Priori analysis of the sustainable development of China's social security financial system
The previous discussions and investigations are conducted in a broad sense of social security financial theory. However, considering that pension plays a significant role in social security system and it is easy to observe and measure quantitatively, this study constructed a model based on China's current social security financial system, and run a priori test using the balance and surplus of pensions in current and future terms as important indicators. Based on the test, the paper proposed a systematic management paradigm for the new system; analyzed the application and effect of Securities Lending Business and stock index future arbitrage; evaluated the analysis results and made a prospect.
Fifth, the principle for constructing China's social security financial system, the available paths, and the sequence
Given that different social security financial arrangements have different strength and weakness in different environment, the optimal social security financial arrangement for China is therefore the arrangement most suitable to China’s social, economic and financial environment. This paper concluded that to construct the most suitable social security financial system, the focus should be placed on researching and establishing relevant laws; creating favorable social, economic and financial environment for the operation of social security financial system; selecting the right mode, methods and construction manners; making systematic design and formulating countermeasures; strengthening the management and supervision of social security work; reforming the current social security financial system and improving the overall efficiency; and last but least, guiding the whole course with the far-reaching strategy of building harmonious society and enhancing people's welfare on a comprehensive, healthy and sustainable basis.
To summarize, this study follows such a thread: theoretical preparation> operational rules from other countries> China's specific environment> priori test>principle, path and sequence
4.Research Contribution
Theoretical contribution: Based on the specific situation in China, and the careful review of important economic and financial theories in the field of social security, this study organized various social security financial factors under a clearly-structured concept of social security financial resource system. Further more, the study explored the essence of the sustainable social security financial development, which is to enhance and expand the financial function of the social security financial system. Last but not least, the study put forward some practical method and optional paths to realize this goal.
Contribution to the operational mechanism: based on the analysis of other countries' successful operation of social security system, taking our country's capital markets development into consideration, this paper mapped out a sustainable operational model for our country's social security financial system-that is to achieve the stage balance of national social security financial system on the basis of the annul balance while transitioning from the current Pay-As-You-Go System to the Partially Accumulated System.
Contribution to the institutional design: Based on theoretical analysis, the study explicitly put forward the philosophy, objective, principle and path for the sustainable development of China's social security financial system; discussed the required theoretical, market, legal and practical conditions; and pointed out a clear direction for the sustainable development. At the macro level, it is to clarify the function and the position of social security financial system in the overall financial system; to promote the perfection of social security financial system; and to ensure the effective exertion of its financial functions. At the micro level, it is to design a reasonable operational mechanism; and to maintain the sustainable operation of social security fund. Some specific suggestions were raised as to the development of capital markets and derivative instruments.
Contribution to the operational model of investment: In the light of other nations' management and operation mechanism, the study put forward a investment management model for China's social security financial system--that is the collection, payment and investment under the management of National Social Security Committee. In terms of investment management, this paper innovatively proposed the model of establishing social security financial controlling group and conducting capital market operations such as IPO to realize the sustainable development.
Method contribution: In order to prove that the social security financial system based on the joint-stock companies' market-value management model represents the most optimal choice in China today, with its fast developing capital market and stable economy, the study innovatively employed the priori test on the investment management model of social security fund and of social security financial system. As proved in the paper that by following the proposed model, not only current social security problems can be solved, but the long-term sustainable development of China's social security financial system can be achieved.
Read the article here:
【可持续发展】中国社会保障金融体系构建及可持续发展研究.pdf
