Large scale-up of rural basic pensions: historical debt, financial viability and strategic choice for domestic needs

Three articles were written a month ago and, for reasons that are well known, were deleted and now consolidated into a reissue. The audio in the annex is a podcast of the bean bag based on the content of the article, which is also very well read, and the video below is also a tool for generating options for friends who do not have the time and energy to read long texts.

One hundred forty-three dollars. Monthly.

This is the national minimum standard for basic pensions in rural areas in China in

1. The equivalent of less than five dollars a day. Can't buy a bowl of noodles, can't hang it once. At the same time, the average monthly pension for urban retired workers exceeds 3500 yuan. The gap is exactly 24 times the difference.

This is not an abstract policy figure. It is a daily reality of the rural seven-month old and a deep-rooted cause of the children working in the city but not really living in their homes, and is the structural cause of the country ' s need situation, which is least discussed but most worthy of discussion.

This article wants to do three things. First, from a historical perspective, we ask what the land has taken from farmers. Secondly, to address the problem of being used repeatedly to shield the gun: where does the money come from? Thirdly, using the logic of economics to make it clear that raising pensions for the elderly in rural areas is not charity, but the most effective economic investment in China at this time. Three things, one common point: this is not just something to do, but to do it.

History books: What did this land take from farmers

Understanding the 24-fold gap ahead must begin with understanding the logic of history. The contribution of Chinese farmers to the modernization process in the country has never been an ethical expression of appreciation to the farmers, whose contribution to the country's modernization is a systematic economic learning that can be quantified, traced and analysed in a systematic manner. Through three mutually reinforcing institutional channels, it has been operating for almost seven decades, and it has profoundly shaped the alarming gap between today ' s urban and rural old-age security.

Poor agricultural scissors: 30 years of farming and nursing industry

In 1953, China introduced a system of generalization of purchases. The State has forced the purchase of farmers' main agricultural products, such as food, cotton and oil, at "national prices" far below market prices, and has sold them in reverse at relatively high industrial prices. This price-in-kind exchange, which is an incoherent price system, has a famous statement in China ' s economic history: the price of the agricultural and industrial products is poor.

The difference in scissors is not just a price phenomenon, but a systematic hidden tax mechanism. It has continuously shifted the much-created residual value of the agricultural sector through price distortions into the national system of industrial accumulation, which underpins the priority development strategy of heavy industry and promotes the rapid establishment of basic national economic industries such as steel, energy and machinery.

The mechanism has been in operation for almost three decades throughout the country, and it was not until 1985, when the system of generalization of purchases was largely abolished and prices of agricultural products gradually liberalized. Conservative estimates by the relevant research institutions indicate that, between 1952 and 1985, net transfers from the agricultural sector to the industrial sector through the price differentials of agricultural and industrial scissors were cumulatively between RMB 600 billion and RMB 800 billion (at the time price). Given that China's annual GDP was only about 500 billion yuan in the early 1980s, this transfer was equal to the size of the entire national economy at that time — it meant that the three decades most critical to China's industrialization were based on the systematic contribution of the agricultural sector.

It is worth noting, in particular, that this historic and massive transfer of wealth has no repayment mechanism, no interest arrangements, and no policy of ex post facto compensation. Farmers sell food at a compulsory low price and buy industrial goods at relatively high prices, in a double-defeating exchange. This is not a voluntary transaction in the market, but a mandatory institutional arrangement. This history is rarely discussed positively in official narratives, but is well documented and analysed in the academic literature on development economics in China.

The data sources in the following articles illustrate the size of the difference between the scale of the work and the farm scissors, the existence of different methods and calibres in the academic community, conservative estimates of about hundreds of billions of yuan, and higher estimates of hundreds of trillion yuan, with differences from statistical ranges, price benchmarks and time-frames. The paper uses a more conservative academic caliber to ensure the soundness of the argument. Whatever the calibre used, the net transfer of the agricultural sector to the industrial sector represented a significant proportion of the national GDP over the same period.

Externalized labour cost in urbanization

After the 1980s, hundreds of millions of rural labour began to move to urban areas on a large scale as reforms and openings moved forward. This unprecedented migration in human history has provided China ' s manufacturing industry with a large and inexpensive labour supply in a very short time, making it the most important source of production for China ' s export-oriented economy.

However, there is a profound structural contradiction in the design of this urbanization process: rural workers are urgently needed by the urban economic system, but are not equally accepted by the urban public welfare system. The civil registry system plays a key role here, cutting the labour market and the public service system apart, creating a unique institutional arrangement — access to urban employment for rural workers, but the education, medical security, housing benefits and the most core of old-age security for their children, are not guaranteed the same institutional guarantees as those for urban residents.

From the perspective of labour economics, the essence of this institutional arrangement is the systematic externalization of the social reproduction costs of the labour force. In the framework of a standard market economy, the price of labour should include the cost of old-age pension for workers. However, through the civil registry system, China's institutional arrangements have made it compulsory to exclude this part of the cost from labour prices and to transfer it to workers themselves — as evidenced by the old age of rural workers, who are dependent on family support or very small rural pensions for their livelihood; In urban areas, their children are forced to sell their labour at less than normal wages to cover the social costs of being externally integrated.

The macroeconomic consequences of this system are that the international competitiveness of Chinese manufacturing is based in large part on the systematic lowering of the cost of social security for the labour force. The low price of Chinese export commodities is partly due to the fact that the old-age security of workers who produce these commodities is "divide" by rural families and their land, rather than by the industrial system in which they are employed. The ultimate payer of this externalization is the parents who have gone to the countryside, who support their old age on a $143 monthly basis.

The implementation of the Labour Contracts Act 2008 and the subsequent establishment of a new rural social pension insurance system have improved this situation to some extent. However, the accumulated gap, particularly the older generation of rural workers who have left the city and returned to their old age in the countryside, continues to be seriously deficient in their old-age pension security.

Distribution of land value added: an 80 trillion-billion-dollar mismatch

After entering the 1990s, as the urbanization process accelerated significantly, land became the most acute interface between farmers and the modernization process. The land regime arrangement in China, which gives local governments the power to expropriate and openly cede rural collective land for State-owned construction, has generated value-added gains in land of a rare scale in human economic history, driven by the wave of urbanization.

Specific operational mechanisms are as follows: the land of the farmer is compensated for its agricultural value, the compensation is calculated at a number of times the annual value of the product for which it was used, usually a very small proportion of the market price; Land is expropriated and converted to State-owned construction land, which is given by local governments through a roll-on procedure at a price determined entirely by the market, possibly dozens or hundreds of times as high as the price of the compensation charged. The large, low-level rents, which, through the "land finance" mechanism, are mostly channelled into local government budgets, have become important sources of urban infrastructure, local debt repayment and various types of public expenditure.

The size of land concessions has seen a dramatic increase in income over the past two decades. In 2021, the national land concessions peaked at 8.7 trillion yuan; Even after the deep restructuring of the real estate market since 2022, it reached 5.8 trillion yuan in 2023; The cumulative land concessions over the past two decades have conservatively been estimated at over $8 trillion. This figure represents about 63 per cent of the total national GDP in 2023.

Land is the most central asset base of the rural collective economy and the most important potential source of property rights for farmers in the modernization process. However, during this two-decade-long land value-added feast, which has a total value of over $8 trillion, farmers, who are the primary holders of land rights, have very limited participation in the sharing — they receive compensation for agricultural uses, but the bulk of the value-added gains that result from land conversion is channelled through institutional arrangements to local government and real estate development systems.

These three historic withdrawal channels constitute the most profound institutional source of the gap between urban and rural old-age security today. This is not simply to put complex historical processes into a single moral judgement, but to point out objectively that, while farmers have contributed three-fold of systematic economic support to China’s modernization process, there is a serious and quantifiable imbalance between the institutional returns they receive on the most basic social safety net, the guarantee of old-age, and their historical contributions.

The reality of the gap: a set of inescapable figures

History's debt has sunk into a real gap that can be clearly measured today. Let us put these numbers together.

Number one: direct difference between urban and rural pensions. Average monthly pension for basic old-age insurance for urban workers: over 3,500 yuan. National minimum basic pension for urban and rural residents: 143 yuan. Gap: 24 times. The largest regional disparities are found in Shanghai, where the average monthly average of older persons is approximately US$ 1,490, and Yunnan, Gansu and other provinces, where the difference is between US$ 123 and US$ 130, which is more than twelve times the difference between rural residents.

Number II: The replacement rate gap. The replacement rate is the pension as a proportion of pre-retirement income and measures the ability of the pension to maintain a standard of living. The International Labour Organization (ILO) set the basic standard at 45 per cent. The replacement rate for urban workers in China is approximately 42 to 45 per cent, and is generally on target. The rate of rural replacement is about 7.02 per cent, in terms of average national agricultural income. A farmer who has worked hard and has an old age pension can only maintain a standard of living of 7 per cent during work.

Number III: International comparison. The average pension at the end of 2024 was approximately RMB 2100, with an average annual increase of 8.43 per cent, a one-time increase of 15 per cent in July 2024 and a downward adjustment in the non-contributory pension age from 80 to 75 years. Thailand has advanced the increase of old-age benefits to RMB 200 to 600 per month and has measured in its policy document that large-scale old-age expenditure can boost GDP by 0.1 percentage points. Korea established a national pension for all in 1988, which fully covered the rural elderly, and then needs to expand over the next 10 years, crossing the middle-income trap.

Contrast Dimensions

Rural population

Urban workers

Gap

Average monthly pension

143 (nearest in the country)

More than $3,500.

About 24 times.

Pension replacement rate

About 7 per cent

About 42-45%

About six times.

Internal disparities within regions

123-1490 (12 times)

There's less difference.

The rural gap is even greater

International Comparison (Viet Nam)

143 yuan/month (rural, China)

2,100 yuan/month (Viet Nam average)

Vietnam is 15 times more than China.

These figures require us to look at the basic fact that it is not the inability of the country to raise the price of rural pensions in China that is the result of the fact that this matter is at the back of the policy priorities and has long been the case. When countries like Viet Nam and Thailand, where per capita GDP is far below that of China, have made stronger commitments to the security of the bottom-up elderly, the "development-stage decision theory" is no longer sufficient to justify, let alone justify, policy inaction.

What does a civilization define its maturity? Not the height of skyscrapers, not the speed of high irons, but how it treats those who are the oldest, the weakest and the least able to speak for themselves. By this standard, China has a reason and a responsibility to do better.

Financial pursuit: where is the money, how is it coming from?

Every time we discuss raising the pension for farmers, there's a wall in front of us, saying, "Where does the money come from? " This question is sometimes a genuine financial doubt and a pretext for obfuscation, but whatever the motivation, it deserves serious, complete and data-based answers.

Let's get the demand-side plates clear. The monthly rate has been raised from $143 to $500 for the country ' s approximately 180 million elderly people who receive basic pensions for urban and rural residents, with an additional $357 per person per month and an annual increase of approximately:

357 yuan x 180 million x 12 months ≈ 7700 million yuan

Seven hundred and seventy billion dollars. That's the true height of that wall. That sounds like a big number, but let's put it in the real wealth map of the country and see what it means.

First route: dedicated transfer of land for the purposes of the transfer of proceeds

The land concessions are one of the largest sources of financing in China ' s financial system and most directly linked to rural interests. The national land-leave income peaked at 8.7 trillion yuan in 2021, while the total income over the past two decades exceeded 80 trillion yuan yuan in 2023.

The source of this money is the differential value added from the expropriation of rural collective land and its conversion to urban land for construction, whose original tenure base is closely linked to the rural collective economy and to farmers. However, the distribution of this revenue has long been a major investment in urban construction and infrastructure, and the proportion of rural rural agricultural flows is far below the policy requirement.

The key is that this is not an area without a policy basis. The Ministry of Finance issued a Circular on Further Land Transfer for Rural Rural Work in June 2021, which explicitly requires that by the end of the 14th and 5th year, the proportion of land concessions from provinces and municipalities be no less than 50 per cent for rural agricultural work. If the proceeds were to be transferred on the basis of $5.8 trillion in 2023, 50 per cent, or approximately 2.9 trillion, would be used for rural farming.

The proposal is very modest: within the framework of the above-mentioned policy, 10 per cent of the land concessions are earmarked for the Rural Basic Pension Fund, which is to be used as a priority for the rural old-age pension:

5.8 trillion yuan x 10% ≈ 58 billion yuan

In one case, approximately 75 per cent of the $770 billion required for the bid was covered. This does not require any new legislative mandate, and existing policy documents already provide sufficient framework support. What is lacking is not a legal instrument, but a reordering of the will to implement and the priorities.

From a longer historical perspective, a significant proportion of the $8 trillion in land concessions comes from the value added of the expropriation of collective rural land. The logic of equity inherent in the return of this historical wealth from rural land in the form of old-age security to the rural elderly.

Second way: a reasonable return of proceeds of State-owned assets

State-owned enterprises are "all-owned" — not only ideological expressions, but also the definition of property rights as defined by Chinese law. By the end of 2023, the total assets of State-owned enterprises nationwide were about RMB 3.4 trillion and net assets about RMB 90 trillion. In the legal sense, every citizen of China, including every rural old person, is the owner of this huge State-owned asset.

However, the mechanisms for allocating dividends to all citizens, especially low-income groups, are chronically deficient. The State-owned enterprises contribute their profits to the State-owned capital operating budget each year, a figure of approximately $500 billion in

1. Under the current policy, State-owned enterprises contribute to State revenue at 5 to 25 per cent of post-tax profits (different rates applied to different sectors).

Compared to the management practices of the major sovereign wealth funds and pension funds worldwide, the Norwegian Government's Global Pension Fund, which injects all Norwegian oil revenues into the Fund and provides pension security to all citizens, has become a classic example of a system of "resource returns to universal welfare". Singapore ' s San Martín shareholders are in the red and are also re-routing public services through part of the Government ' s budget.

If the rate of post-tax profits for Chinese state-owned enterprises is increased to 35 per cent (which is still below the levels of Norway, Singapore and others), the annual rate of revenue from the State may be about:

The new contribution rate is about 10-20%, and the current net profit base is about 200 billion.

At the same time, in 2017, the State Council had requested that part of the State capital be transferred to the National Social Security Fund, at a rate of 10 per cent. Within the framework of existing policies, the transfer rate would be increased from 10 to 20 per cent, providing a substantial source of incremental financing for rural old-age security over the long term.

The more fundamental logic is that if State-owned assets are truly owned by all, then it is the right of the rural elderly, who never receive any dividends from "all-owned" – to receive hundreds of more a month – as defined by this property right, and to return to the system of "all-owned" – rather than to additional gifts.

Third route: activation of the investment potential of the Social Security Fund

The Social Security Fund, administered by the National Social Security Fund Board, had assets of approximately $3 trillion as of the end of

1. This is a strategic reserve fund, which is used to respond to the pressure on pension payments during the peak period of ageing.

However, the management of the investment of this fund has been relatively conservative over the long term, with a combined annual rate of return on investment of approximately 3.97 per cent. (a) Comparison of the main sovereign wealth funds and pension funds worldwide: the Norwegian Government ' s global pension fund has a long-term annualized return of about 6 to 7 per cent; The 10-yearized rate of return on the Canadian Pension Scheme Investment Board (CPPIB) is about 9 per cent; Singapore GIC has a long-term real rate of return of about 4 to 5 per cent (real rate of return, net of inflation).

The total return on the Social Security Fund has been increased from about 4 per cent to about 6 per cent, subject to control of risk, by upgrading its specialized investment management capacity, with an additional investment return of about 4 per cent per year:

3 trillion yuan x 2% = about 60 billion yuan

The $60 billion is not required to be collected from anyone, is not subject to any additional taxes and is an incremental amount that can be released solely through improved efficiency in asset management. At the same time, the national integration of the basic pension funds for urban workers, which have been set up to take up a total of about $6.8 trillion of the accumulated balance, has been significantly reduced by the significant amount of funds held in provincial and municipal county accounts, without increasing the overall financial burden.

Fourth route: strategic restructuring of the structure of financial expenditures

This path, perhaps the most long-term structural path, is also the direction where the examination of spending priorities at the policy decision-making level is most needed.

In 2024, the general public budget spent around 28 trillion yuan. Of this, infrastructure-related expenditures (transport, urban and rural community building, etc.) totalled approximately 5 trillion yuan, or nearly 18 per cent. Social security and employment expenditure was approximately 4.1 trillion yuan, or 14.6 per cent.

China has already achieved or is close to the world ' s top infrastructure: the highways are the world ' s largest, high-iron operating miles exceed two thirds of the world ' s total, and airports, ports and electricity grids have been modernized on a large scale. After basic infrastructure improvements, additional and large-scale investments continue, with a significant decline in the economic multiplier effect. Evidence from the International Monetary Fund shows that in more well-infrastructured economies, the fiscal multiplier for infrastructure investment is about 0.5 to 1.0, while the fiscal multiplier for transfers to low-income groups can be 1.5 to 2.5 during the demand contraction phase.

The development experience of Germany, France and the Nordic countries shows that no high-welfare economy has achieved high well-being through sustained and increased capital investment, and that they have opted for a shift in financial resources towards social security, after basic infrastructure improvements, which are the core financial path for their development of a high-welfare society.

If the share of infrastructure-related expenditure is reduced by 3 percentage points, it will be reduced to the social security and livelihood floors:

28 trillion yuan x 3% ≈ 84 billion yuan

The amount of $770 billion required for the bid has been exceeded. This is a policy choice for the expenditure structure, not involving an expansion of the overall fiscal scale, without any additional taxes, but simply redirecting the same scale of funds from the use of marginal benefits that have been reduced and redirected to more marginal uses.

Fifth route: natural return of tax revenues from expansion of consumption

This is a different route from the first four, which is not an independent source of funding, but rather a financial internal feedback effect of the pension billing policy itself, which translates the policy effects of the expenditure end into a natural increase in the income end.

The marginal consumption trend of rural older persons is close to 1, and about 90 to 100 per cent of the billing transfer payments will be quickly converted into immediate consumption into the real economy cycle. At the county level, this consumption is amplified by a multiplier effect (estimated at about 1.5 to 2 times) which can generate an increase of GDP of about RMB 1.15 trillion to RMB 1.5 trillion.

According to the tax structure of China, each new GDP of about RMB 1 trillion could bring about an increase in tax revenues of between RMB 150 billion and RMB 180 billion (value added tax, enterprise income tax, personal income tax, etc.). Based on the GDP increase of RMB 1.15 trillion, tax revenues naturally flow around:

Z$ 1.15 trillion x 17% Zen 2000 billion

This means that of the $770 billion in fiscal expenditure, about $200 billion will automatically return to the current treasury in the form of taxes. The real net financial cost is about:

7700 billion dollars

• 2000 billion dollars = about 570 billion dollars

This represents 2.6 per cent of the national revenue of approximately $21.8 trillion in

1. What is the concept of 2.6 per cent in a country with annual fiscal revenues of more than $21 trillion? It is equivalent to less than one in forty of the national revenue.

Summary of five routes: a clear financial conclusion

Source of funds

Releaseable scale (years)

Operation Path

Policy basis

Ten per cent of the proceeds from land concessions

About 45-58 billion yuan.

Compulsory allocation to rural pension funds

The Ministry of Finance has a framework in place for the 2021 document

35% of the profits of state-owned enterprises

About $200 billion more.

Increasing the contribution of State funds and specifically infusion of social security

There are precedents for national transfers to social security.

The rate of return on the investments of the Social Security Fund increased to 6 per cent

About $60-70 billion.

Diversification of investments to target global sovereignty funds

Increased investment capacity without additional funding

3 per cent restructuring of capital expenditure

About $840 billion.

Compressing inefficient infrastructure and turning to the bottom of the living.

Policy options on the structure of fiscal expenditures

Consumption expansion taxes return naturally.

About $200 billion.

Policy impact financial feedback, automatic

Multiplier Effect Measurement

Total (conservative)

Over $770 billion in the gap.

Five-way synergy, phased advancement

No new taxes.

Each of the five paths has a realistic basis and none of them needs to increase any tax burden to the general public. Their essence is to reorient the already existing flow of wealth — from inefficient to efficient uses and from less needed to most needed.

The question is never "have enough money" but "where is it?" In a country where land finances are plowing hundreds of trillion dollars a year and the net value of State assets exceeds nine trillion, it is not an objective statement of lack of means but a subjective result of the preferred choice that no money is available to raise the pension of farmers.

* *

The first two parts address the issue of "should do" and "do it". This part, in a purely economic sense, answers the third question: is this a matter of money?

This issue is important because there are several influential economic challenges in the discussions. They each have real logical points, but at the same time they have limitations that can be identified. This will be addressed in a positive way: first, "consumption is never driven by middle-income, rural pensions are not driven by domestic demand"; Second, "In times of economic downturn, welfare spending is not sustainable"; Third, "The amount of Zammy oil salt is not enough to affect macroeconomics."

These challenges are not to be ridiculed or emotionally refuted, but rather require serious and well-founded responses.

Marginal consumption trends: the most undervalued distributional inequalities in economics

Understanding why giving money to the poorest is the most efficient way to activate consumption, the core tool being marginal consumption tendencies (Marginal Propensity to Consume, MPC). The MPC measures how much of each new unit of income is translated into consumption expenditure.

A large number of empirical studies from different countries and periods have led to a high level of convergence: the worse the MPC is associated with income levels

• the lower the income, the higher the MPC; The higher the income, the lower the MPC. The logic behind this is: low-income people face the constraints of basic needs, and additional income is almost entirely used to meet immediate consumption; The basic needs of the high-income population are fully met, and additional income is increasingly invested in savings, finance or assets.

Estimates based on studies already available in the context of China's economy, as follows:

Based on the estimates of studies already available in the context of China ' s economy, the figures are broadly as follows:

Income groups

Marginal consumption trends (MPC)

The 100-dollar new income to be consumed

Rural low-income elderly

0.90-1.00

90-100 dollars.

Rural middle-income groups

0.75-0.85

75-85 bucks.

Urban middle-income group (middle-income)

0.50-0.70

50-70 bucks.

High-income urban groups

0.20-0.40

20-40 bucks.

Based on this set of data, it is possible to estimate that the same sum of $770 billion is being transferred to the capital, and that if the income is given to the middle-income urban group in the form of tax reductions, it will eventually translate into immediate consumption of about $385 billion to $539 billion, with the remainder entering the savings account or the asset market; If the pension is directly awarded to the rural elderly, it will translate into immediate consumption of about $693 billion to $770 billion.

The efficiency of the unit of fiscal expenditure that activates consumption is about 50 to 70 per cent, while the efficiency of the latter is about 90 to 100 per cent. The difference is almost double.

This is not a judgment, it is a pure efficiency measure. Keynesian fiscal multiplier theory is most directly applied here: in an economy with insufficient aggregate demand and low consumer appetite, the most effective expansionary fiscal policy is to channel transfers precisely to the groups with the highest consumer preference. In the current income structure of China, this group is precisely the rural elderly with the lowest pensions.

Facilitation effect: the real value of a dollar in China

Marginal consumption tends to tell us the probability that money will be spent, but there is another equally important dimension: how much of this economic gain on consumption really remains in China’s economic cycle?

One concept in economics is the Leakage Effects, which refers to economic gains from consumer behaviour, which flow out of local or national economic cycles and do not allow for effective multipliers to be scaled up domestically.

A review of the current consumption structure in China reveals high-end consumption by middle-income urban groups, with a generally high leakage effect: out-of-country tourism transfers consumption to Japan, Thailand, Europe; The profits from luxury consumption are going to French, Italian and Swiss brands; (b) Children abroad to study abroad to channel large amounts of education expenditure to British and Australian universities; (b) High-end medical care to be taken abroad; Savings invested in port, United States or overseas properties are directly allocated to offshore markets.

These consumptions are accounted for in GDP statistics in China, but their real-led economic activities, job creation, and tax revenues are largely generated outside China. Its economic multiplier effect in China is well below the level indicated by book figures.

In contrast, the consumption of woody salt by rural elderly people has a leakage rate of almost zero. The rice bought at the village commissary, the number of the town's toilet, the cotton shoes on the market, the daily items purchased by the rural electric power company platform

• each cent of the money is left in the most basic economic cycle in China, moving in the economic cerelics of 40,000 townships and more than 2,800 county towns and cities, generating local employment, activating local commerce and supporting the economic survival of the county.

Measured by the fact that money is actually in China and that it creates an effective cycle in the local economy, the real contribution of one dollar of consumption of wood and salt by the rural elderly to the Chinese economy may be much greater than the one dollar of tourism or luxury consumption in cities. This is not a value judgement, but an objective difference that can be validated by economic statistics methods.

300 million rural workers: maximum consumption potential pool locked into preventive savings

The two above analyses discuss the direct effects of the consumption of 180 million rural older persons themselves. But there is also an indirect effect of this, which may be more significant, more permanent and more structural than direct — it concerns 300 million rural workers.

China ' s 300 million rural workers, with an average monthly income of about $4,500, are the largest labour-income group in the country and the most important potential consumer force. However, their actual consumption rates have been abnormally low over the long term. Behind this is a central mechanism: Preventive Save.

The precautionary savings theory states that, in the face of future uncertainty, rational economic agents will take the initiative to reduce current consumption and increase savings in response to possible contingencies or income disruptions. For Chinese migrant workers, the serious inadequacy of old-age security for their parents is one of the most important drivers of preventive savings.

The reality is that parents are unable to support their basic livelihood on their own, on the basis of a monthly basic pension of 143 yuan; In the event of a parent ' s illness, migrant workers need to return at any time, pay for medical care and take care of them; The daily living expenses of parents are highly dependent on regular remittances from their children. This reality forces rural workers to transfer a significant proportion of urban income back home in the form of remittances, while maintaining a very high savings rate in cities in order to meet emergency household expenses as they may be at any time.

This invisible rope prevents 300 million people from living in cities, from expanding their daily consumption, from giving birth to their children, from completing the transformation of their true social identity from "to work in cities" to "to urban dwellers" and from permanently placing themselves in a temporary state of "one foot in the city and one foot in the countryside at any time". The statistics on urbanization are good, but the substantive quality of urbanization is largely contained here.

This rope is significantly relaxed once the rural basic pension is raised to a level sufficient to provide for the basic needs of the elderly. Conservative estimates suggest that 300 million rural workers can release an additional $200 per month of consumption spending:

$200 x 300 million x 12 months = $72 billion

This sum of $72 billion, combined with an increase of about $1.15 trillion to $1.5 trillion in GDP generated by the multiplier effect of the direct consumption of 180 million rural elderly, combined domestic demand increases are close to $2 trillion.

With $770 billion in financial inputs, the domestic demand increase was almost $2 trillion. The financial multiplier is approximately 2.5 times. This is an exceptionally significant return figure in the measurement of the effectiveness of all China ' s major fiscal policies over the past decade.

"Consumer by Chinese production": a historical proposition that has expired in China

The judgment that consumption is always driven by middle-products has its true historical and geographical context. It came from the post-war United States in the 1950s and 1970s: baby booms promoted family formation, suburbanization expanded to drive housing consumption, and the spread of automobiles and domestic electricity generated large-scale manufacturing demand, and income growth from post-war reconstruction underpinned a sustained expansion of consumption. Under that particular historical condition, middle-product consumption is indeed the most important engine of growth in the United States.

Even in the United States, the proposition has long been fundamentally challenged. In his book The Fault Line, after the 2008 financial crisis, Professor Raguram Rajan of the University of Chicago argued in depth that the post-war US-based boom in middle-product consumption was largely based on a widening debt leverage and wealth distribution divide, with subprime loans as an institutional arrangement for debt to advance future consumption, rather than as a reflection of real purchasing power growth.

The problem is even more acute when the title is moved to China in

1. China ' s middle-income population is under pressure to pay for the purchase of housing, the education of children, the medical care of parents, and the reduction of assets resulting from job uncertainty and adjustment of housing prices. Against this background, the most significant illustration of China ' s real consumption of Chinese production is savings data: in 2022, China ' s urban and rural residents ' savings added 17,84 trillion yuan, a record increase; The addition of $16.67 trillion continued in 2023.

This is not a consumption of middle-borns, but a vote of middle-borns — a strong sense of uncertainty about the future — in a way of frenzy of savings.

During the same period, the leverage rate of the Chinese population jumped from 18 per cent in 2008 to about 64 per cent in 2023 and more than tripled in 15 years. The past consumption of middle-yielding products has been considerably overspent in future debt consumption, based on the assumption of vulnerability of permanent increases in house prices and job stability. After 2021, this assumption began to shake, with the willingness to consume middle-products falling into the ice hole, as evidenced by new savings of over 16 trillion yuan a year.

Against this macro-level background, the expectation that middle-income countries, which are trapped in preventive savings, will carry the flag of domestic demand while turning a blind eye to the rural elderly, whose consumer preferences are close to one, is both an erroneous reading of the realities of China’s consumption structure and a disregard for the underlying economics principle of marginal consumer tendencies.

"The economy goes down, welfare is unsettled": the cut-off historical logic

This is the most convincing challenge in the discussion, as it cites real historical observations: the establishment and complete spread of cooperative medical care in rural China did take place in the context of the high economic growth and the significant increase in financial capacity that followed 2003; The billing of rural pension districts is also highly relevant to the local financial situation. In historical experience, welfare expansion needs to be underpinned by an economic base, and this observation is itself accurate.

But when this historical observation was cited as the basis for "the present conditions are premature, and so on" there is a key logical gap: it does not answer, why has rural health care been a gap in the 25 years since GDP had increased 40 times?

From 1978 to 2003, China ' s GDP grew from $36.79 billion to $13.7 trillion, almost four times the size of the country ' s economy, one of the fastest growing periods in history. However, during the 25-year period, basic health care in rural areas was almost non-existent. The collapse of the rural public health system, which shocked decision-making levels, was not until 2003, when the SARS outbreak shocked the rapid establishment of a new rural cooperative health system under great external pressure. Similarly, the new rural social old-age insurance introduced in 2009 was also built against the backdrop of the 2008 financial crisis and the major pressure on social stability resulting from the return of large numbers of migrant workers.

History has repeatedly demonstrated that improvements in rural welfare are not the result of economic growth, but of external pressures. Without sufficient pressure, even high economic growth will not automatically lead to rural social protection. So the real lesson of history is not "when the economy is well, the welfare comes," but "without sustained external pressure, even if the economy is well, the welfare will not come."

There's another dimension to face. Keynes’ counter-cyclical fiscal theory makes it clear that, in the period of economic downturns and insufficient aggregate demand, it is precisely when Governments should scale up their spending, because the private sector is shrinking, and government expansionary spending can fill the demand gap and stop the spiral of recession. (a) The social security legislation of the new Roosevelt policy, which was adopted in 1935 during the most difficult period after the collapse of 1929; The British National Health Service (NHS) became operational in 1948, with the ruins of World War II and the country ' s financial resources being extremely low. The common logic of these historical cases is that the establishment and expansion of the bottom-up social security in times of economic hardship is one way of successfully emerging from economic distress.

The current macroeconomic environment in China — inadequate domestic demand, low consumption, real estate adjustment, and a slowdown in external demand — is precisely the most typical application of Keynesian countercyclical theory. In this context, the transfer of financial resources to the most marginal consumer groups is the most direct policy tool for boosting domestic demand and stabilizing consumption expectations, rather than the "beep-up" that must wait for the economy to improve.

The Japanese warning, the Korean mirror.

China ' s policy options were discussed, and two highly relevant historical cases were not bypassed.

Japan, "30 years lost." After the bubble burst in 1990-1991, the main stimulus for the Government of Japan was a large-scale infrastructure investment, with more than 10 rounds of fiscal stimulus throughout the 1990s, but consumption has been difficult to sustain. A deep cause of long-neglected neglect is the systematic loss of blood from the bottom consumption base. The consumption capacity of the elderly population in rural areas and small and medium-sized cities continues to decline, the district business system is in disarray and the population is concentrated in megacities. Japanese sociologists have described the phenomenon as "local eradication", and it is projected that nearly 900 urban villages will die as a result of population displacement and depletion of consumption. This is not just a demographic issue, but a consumption base: an economy that collapses on the consumption side, and that does not fill that demand gap — the ropes are the force of the line, the threads are the same, no matter how much the government invests on the supply side and the capital side.

Korea, across the middle-income trap. In 1988, the Republic of Korea made a key institutional choice in a financially modest situation: to establish a national pension system that would cover all citizens, and would include all rural residents, self-employed persons and informal workers in the pension scheme. This decision was under great political and financial pressure, but data for the following decade proved to be one of the key institutional factors for South Korea ' s success in crossing the middle-income trap. The systematic increase in the consumption capacity of rural older persons has directly activated the county economy, boosted domestic demand growth and supported fiscal sustainability and a positive cycle.

Two paths, two endings, the answer to history is clear.

China’s current macro-consumption dilemma is structurally similar to the early symptoms of the collapse of the Japanese bubble: high savings rates, consumption growth below GDP growth, declining economic dynamism in the county, and over-concentration of the population into mega-cities. China also has a policy tool that Japan did not have in the past: to re-establish the cereo-vascular system on the consumption side by significantly increasing the level of old-age old-age security in rural areas, activating the base of bottom consumption. This tool, which is cost-controlled, has a faster impact and a significant multiplier, is an effective policy option to prevent the Japanese-style consumption chassis collapse.

Integrated measurement: a complete input output bill

Benefits dimension

Measurement

Basis and description of measurement

New Transfer

About $770 billion.

180 million x $357 x 12 months

Direct consumption conversion rate

About 90-100%

Rural elderly people tend to be marginal consumers1

Consumption multiplier (district economy)

1.5-2.0 times

Local economic cycle, very low leakage rate.

Direct GDP pull-up

About $1.15

• $1.54 trillion

770 billion yuan x multiplier effect

Preventive savings release for migrant workers

About $72 billion.

300 million people x 200 yuan/month x 12 months

Total incremental internal requirements

About 187-2.26 trillion yuan

Direct effect + lock-out effect of rural workers

Taxes return naturally.

About $200 billion.

The average additional GDP x tax rate is about 17%.

Real net financial cost

About $570 billion.

$770 billion less tax revenue and $200 billion back.

Net cost/annual revenue

About 2.6 per cent

Based on approximately 21.8 trillion in 2024

Input output ratio

About 1:2.5-1:3.0

Net cost vs total incremental internal requirements

The real net financial cost of about $570 billion is to leverage the domestic demand increase of about $1.9 trillion to $2.3 trillion. This is an exceptionally high return figure in the macroeconomic policy benefit spectrum, and it is not a one-off pulse effect, but a continuous structural improvement: a systematic improvement in bottom consumption capacity that will support the economic dynamism of the county economy in a stable and long-term manner, reduce the preventive savings pressure of 300 million rural workers and improve the substantive quality of urbanization.

The increase in old-age pensions for rural old people is not a piece of economic cake taken from the economic cake, but a piece of well-calculated input that activates the whole cake to grow better. This is the most efficient, cost-efficient and broadest macroeconomic investment in China at this time.

A land-based programme: clear three-stage path

The three components, which are based on the three dimensions of historical justice, financial viability and economic efficiency, provide a complete case for why this should be done, done and done. This part, which provides a clear and operational path to policy implementation, is not an ideal slogan but a practical proposal based on realistic constraints.

Phase I (2026-2027): emergency markings to establish a floor of dignity

Core objective: To raise the national minimum basic pension from 143 yuan to 500 yuan per person per month, to be completed gradually over three years, with priority given to the central and western provinces.

The $500 is a figure with an economic connotation, not an arbitrary set. According to a structural analysis of the basic living expenses of rural residents, approximately $500 per month can be covered: between $200 and $250 per month for basic diets; Medical out-of-pocket costs (including new UCP) of approximately $100 to $120; Basic expenditures such as utilities fuel are estimated at between $80 and $100; Basic purchases of daily supplies range from $50 to $80. The 500-dollar allowance means that an elderly rural person can maintain a minimum standard of living of basic dignity, without having to ask for maintenance from his children and without having to buy cotton in winter.

(a) Proposals for funding: the central fiscal authority covers more than 80 per cent of the additional expenditures in the central and western provinces, mainly through a special transfer of proceeds from land concessions (see Part II, Road

1. and a combination of two channels for the transfer of State capital proceeds; The provinces with more developed economies in the east are dominated by provincial finances, with appropriate subsidies from the central fiscal authorities; Establish audit and publicity mechanisms for the use of earmarked funds to ensure that funds are accurate.

(a) Complementary policy: to increase the proportion of government subsidies that contribute to personal accounts in parallel, and to make the system more attractive; (b) To improve the rural old-age services infrastructure in parallel with the provision of monetary and service security; :: Establish a system of pension distribution desk accounts, starting at the grass-roots level, to address the problems of "failure" and "misinsurance" in some areas.

Phase II (2028-2033): Dynamic linkages to achieve sustainable growth

Core objective: To establish a mechanism for linking pensions to the dynamics of rural consumption levels, with a national basic rural pension of 40 per cent of the monthly consumption expenditure per capita in rural areas by 2033, with a target area of approximately $900 to $1,200 per month.

The dynamic linkage mechanism is designed to link annual pension increases with the growth of per capita consumption expenditure in rural CPI and rural residents, to establish a rule-based automatic adjustment process, and to transform pension adjustments from "annual application and annual fiscal policy" to transparent and predictable regulatory implementation. This mechanism, which has been successful for decades in mature welfare countries such as Germany and Sweden, has a core value in providing stable old-age income expectations that make pensions truly a consumer "squad stone".

The 40 per cent replacement rate target, which remains below the basic standard of 45 per cent recommended by the International Labour Organization, is a relatively modest improvement, but is sufficient to enable the rural elderly to live from "minimum survival" to "end-ages that guarantee basic dignity".

Phase III (after 2034): institutional convergence towards universal coverage

Core objectives: To promote the logical convergence of the urban and rural pension insurance systems, to eliminate the institutional boundaries for the classification of benefits by means of a household status and to establish a national pension system that covers all citizens.

The institutional convergence does not mean a simple equalization of treatment, but rather a shift in the basis of treatment from a civil status to a contributory years and historical contributions, and the establishment of a more equitable and sustainable framework for old-age systems. The Korean National Pension System and the Taiwan Regional Labour Insurance System provide a more mature institutional reference: uniform rules for contributions, uniform treatment formulas, and a high percentage of government financial support for individual accounts of low-income groups to compensate for historical affordability.

• The three-pillar system of "State basic pension plus collective supplement plus individual accumulation": the basic State pension is the minimum level of universal security, reflecting the State's responsibility for all citizens' basic pension security; (b) The collective complementary dimension encourages the participation of rural collective economic organizations, which is a form of solidarity of the collective economic community; The individual accumulation dimension enhances the individual ' s capacity to maintain a pension through tax incentives and financial incentives.

Phase

Time nodes

Core objectives

Funding focus

Expected impact

Phase I

2025-2027

Minimum rate 500 yuan/month

Transfer of proceeds from land-specific conversions to national resources

The establishment of a minimum of dignity for the consumption of rural workers has been partially untied

Phase II

2028-2033

Dynamic linkages to 900-1200 yuan/month

Establishment of automatic linkage mechanisms for the return of consumer tax flows

Substitution rate is close to 40%.

Phase III

2034 years later

Three-pillar system for institutional alignment

Systemic systems re-engineer multi-channel synergies

Establishment of a universal pension safety net for urban and rural areas with fair coverage

The end of 70 years, and a civilisation for history.

After all the data, historical retroactivity and economic measurements have been completed, I would like to put them aside at the end and say the last thing.

China is standing at a historic turning point. The era of high growth is over, population ageing is accelerating, the first phase of urbanization is nearing its end, and internal needs are at odds with the deep-rooted social security system, which is increasingly influencing the bottom logic of the country ' s economy. At this node, the question of how to deal with those who, at the last historical stage, have borne the most institutional burden and who have benefited least from distribution is both a matter of historical justice and a question of real strategy.

From the perspective of historical justice, the real existence of three-fold systematic extraction has been discussed in detail: the cumulative transfer of poor agricultural and industrial scissors, externalization of labour costs in urbanization, and the unequal distribution of value added gains from land. These are not emotional allegations, but historical facts that are well documented. At a time when the country is already in a position to do better, it is a policy choice that needs to be seriously asked to maintain this deep security gap.

The figures are clear enough from a realistic strategic point of view. The net financial cost of about $570 billion is about 1.9 trillion to 2.3 trillion yuan in domestic demand, 2.6 per cent of annual revenue and about 2.5 to 3 times the output of inputs. None of the five available sources of funding requires an increased tax burden on the public. The positive and negative cases of Korea have been answered in history. Not only should this be done, but it will be better for the country after it has done it.

Viet Nam did. Korea did. Thailand is on its way. They were all poorer than China, and some are still much poorer than China. They make different priority choices, with more limited financial resources, and place the basic security of the under-age population at the top of the policy hierarchy. Not because they were richer, but because the right choices had been made at that particular policy moment.

The sustainability of an economy depends ultimately on whether it provides an institutional way for all — not just the lucky ones — to share in the fruits of growth. The proposal for a basic rural pension is the most basic building block of this approach.

Those old people have worked their whole lives on this land. After three difficult years, they had been collectively fed for decades, and had taken away their children to work in the city and grew old alone in increasingly empty villages. They are unable to speak out, have no access to rights and have no institutional means of bringing their needs into the agenda of policy discussions. All they can do is wait in silence.

This article is written for them and for all those who are capable of making changes — whether policymakers who hold the policy agenda or every focus person who can sustain public discussions.

We live in a country that has built 400,000 kilometres of highway, 370,000 kilometres of railway and launched dozens of satellites every year. We live in a country where mobile phone payments have reached every town's commissary, where electric couriers have reached every administrative village. We live in a country with the second largest GDP in the world, foreign exchange reserves of over $3 trillion and annual fiscal revenues of over $21 trillion.

It is in a country where 180 million older people, who are on less than five dollars a day, support their old age. It is not a question of capacity, nor of timing, nor is it a question of conditionality. It's a choice. Seventy years. This land owes them an old year. This is not only a matter to be done, but also a matter that China, both morally and in terms of investment, deserves to be done.