For urbanization to help fuel continued economic growth in China, it will be important to
allow greater freedom of migration with extension of social benefits, such as access to
urban schools for migrant workers’ children, portable health insurance, and affordable
housing with room to accommodate multi-generation families.
Although policymakers should pay attention to fiscal sustainability, it is also important to
emphasize these positive direct and indirect effects of strengthening social welfare. More
robust health insurance, pensions, and long-term care not only can provide dignity at the
end of life for a generation that has sacrificed much for China, but also can create
positive economy-wide effects. The latter include
reducing precautionary savings, an important goal in light of China’s
extraordinarily high savings rate;
removing the economic rationale for son preference as old-age support; and
enabling the younger generation to migrate and urbanize – critical for educational
investment and productivity gains, and thus for continued improvement in living
standards.