within provinces, in important program parameters such as contribution rates, the wage base, benefit levels and rules for indexation.

This fragmentation is one consequence of China’s decentralized approach to reforming social insurance provisions, which gave authority and responsibility to local governments to devise reforms suitable to local fiscal capacity. At the outset of social insurance reform, funds were pooled at county, city or industry level (Table 4). Since the mid-1990s, China’s government has made concerted efforts to promote pooling across larger geographic areas and populations, especially for pensions and medical insurance. Pension insurance funds are now consolidated at the prefectural city level, and partially pooled at the provincial level through an adjustment fund for social pooling accounts. For medical insurance, funds for urban workers and residents are now pooled at prefecture city level in most provinces. Other insurance schemes are now also pooled at prefecture city level.

As China has 333 prefecture cities and 31 provinces, social insurance funds are still pooled at a low level. The recent social insurance law sets a target of pooling pensions at the national level, and the provincial level for other social insurance schemes. Raising the level of pooling, however, must overcome tricky issues of political economy. Pooling at higher levels would facilitate more efficient operation of the labor market, but more affluent provinces and localities are concerned about being required to subsidize the pension and social insurance funds of poorer provinces.<sup>27</sup> Reinforcing fragmentation are differences across regions in the management of social insurance programs, as decentralization of control led to localized accounting, budgeting and management and information systems. As a result, social insurance programs cannot “talk to each other” across cities and provide integrated services to geographically mobile beneficiary populations. Localized management leads to lack of portability of social insurance benefits and likely discourages participation of migrant workers who may only claim individual account accumulations when moving to work in another city. In response to uncertainty about future benefit entitlements, rural migrant workers tend to withdraw individual account accumulations each year before returning to their home villages during Chinese Spring Festival.

In recognition of this phenomenon, the Chinese authorities issued two policy documents in 2009 to guide the transfer of pension insurance and medical insurance accumulations for migrants.<sup>28</sup> With respect to

> 27 Variation across provinces in both coverage and benefit levels is shown in Appendix Figures A.3 to A.7. These figures use provincial level administrative data to show differences in coverage and benefit levels over time and by level of provincial average gdp per capita.

> 28 In December 2009, the Ministry of Human Resources and Social Security and the Ministry of Finance jointly issued the _Interim Measures on the Transfer and Continuation of Basic Pension Relationship of Urban Enterprise Workers_ ; In the same month, the Ministry of Human Resources and Social Security, the Ministry of Health and the

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