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China Builds World's Largest Social Security Network
China is stepping up efforts to knit a network of pensions and unemployment insurance to cover about 200 million people, the largest of its kind in the world, to replace its outdated "cradle-to-grave" welfare system.
Finance Minister Xiang Huaicheng told the ongoing annual session of the country's top legislature Wednesday China will continue to increase funding for the social security program this year.
Last year, it injected 87.6 billion yuan into the program, about one-third more than that of the previous year.
Premier Zhu Rongji said it remains a "major task" for China in the coming five years to improve its social security system.
A separate chapter was devoted to the issue in Zhu's Monday report on economic and social development strategy for 2001 to 2005 submitted for deliberation and approval by the ongoing fourth session of the Ninth National People's Congress (NPC).
Under the plan, more Chinese people will be covered by the pension system, and the pension system for urban employees that integrates unified financing and individual accounts will be further improved.
Retirees will receive their basic pensions on time and in full, while the basic life allowance for workers laid off by State-owned enterprises (SOE) will be covered by unemployment insurance under the social security system.
The new system emerges as China's market-oriented reform progresses, and its life-long welfare system initiated decades ago is no longer considered sustainable.
The cradle-to-grave welfare system calls for the SOE to be solely responsible for the welfare of their employees, including life-long employment, medical care and pension.
The heavy burden has made it harder for SOEs, the dominating part of the country's economy, to compete with private and foreign- funded enterprises.
From the middle of the 1980s, China began to diversify the sources of funding for medical care and pensions by making the government, the enterprise and the employee share contributions.
To date, the total number of SOE employees has dwindled to fewer than 50 million from 70 million due to accelerated reform and economic restructuring, bringing the registered jobless rate in urban areas to 3.1 percent.
The central government plans to keep the jobless rate at about five percent during the coming five years.
The figure translates into 2.5 million jobless workers, a heavy and growing financial burden on both the government and their employers, making it the most urgent economic task for the government to reshape the social security system.
Economists say a sound social security system will create a better environment for SOE reform and development while removing the obstacle to exchanges of professionals.
Bo Xilai, an NPC deputy and newly-elected governor of northeast China's Liaoning province, stressed that it will be impossible for economic restructuring to go ahead without a sound social security system.
Liaoning, a province of 40 million people and center of the rusty industrial belt, was chosen by the central government as the only province for piloting such a system.
At present, all SOE employees in the province, which account for one tenth of the country's total, are 100 percent covered by basic pensions thanks to support from the central government, said the governor.
The priority for the province is to ensure that the basic pension be given in full and on time, and that the basic pension be gradually raised so that retirees' standard of life will be maintained.
Eventually, Liaoning will gradually incorporate the basic living allowance for laid-off workers into a national unemployment insurance scheme.
Out of the 10 million pension policy holders in the province, about 75 percent currently hold jobs and the rest are retirees.
Last year, one fifth of the province's overall financial expenditures was used to cover insurance payments, which the governor described as "really a heavy burden".
Peter Becker, first counselor of the German Embassy in Beijing, said China could not afford to introduce a German-style costly social security system.
What is important is to make sure every one has enough food to eat and clothes to wear, or a thin but extensive social security network, said the diplomat.
The trial practice in China also coincides with a World Bank proposal for China, involving a social security system widely applicable through integration of public financing, compulsory and voluntary individual deposits.
In Beijing and Shanghai municipalities, Shandong and Jiangsu provinces, a social security system has been set up with funds for unemployment, medical and pension insurance programs accumulated from individual input and public financing.
Zhu Junyi, chief of the Shanghai Labor Bureau, said all employees in the city are covered by a social security system, including part-time workers, employees of foreign-funded firms, and even professionals.
The trial will be conducted in other cities in a voluntary way throughout China.
Yet, they all face the same common problems: a growing aging population, increasing demand for pensions, and the inability of enterprises with poor economic performance to pay their shares of basic social security fees for their employees.
Peter Becker believes China is expected to set up a social security system that is capable of supporting every person, but may not be as good as that in some developed countries in the near future.
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