Pension funds are pooled by individuals, employers and the government. Unifying the basic pension systems for urban and rural residents means that pensions for farmers will increase and the government will have to provide more subsidies to the pension pools. The rate of aging population in China's rural areas is higher than that of urban areas. Calculating with the pension standard in 2013, the Chinese Government needs to offer an additional subsidy of 300 billion yuan ($49.1 billion) each year.

Zheng Bingwen, Director of the Center for International Social Security Studies of the CASS, said the process of unifying the basic pension systems for urban and rural residents comprises two aspects: the transfer of pensions for migrant workers in cities, which is not very difficult; the other is to unify pensions in different regions. For financial reasons, some local governments, especially those in under-developed regions, will obviously not be enthusiastic about doing so.

According to Zheng, most of the pensions paid for rural residents and unemployed urban residents come from transfer payments from the Central Government, followed by funds from local governments, while rural collective economic organizations contribute very little. Such a structure of financial sources will impose very little pressure on the budgets of community-level governments.

Social equality should be considered from a nationwide perspective. How to unify pension standards not only for urban and rural residents, but for all is one of the most contentious and important issues China faces today.

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