(File photo)

A recent report by the Institute for Social Development of China's National Development and Reform Commission showed that the rate of Chinese employees' social contribution - which includes endowment insurance, medical insurance, unemployment insurance, employment injury insurance, maternity insurance and the Housing Provident Fund - accounts for 39.25 percent of employees' total wages. This means that China ranks 13th in the world for social contributions.

According to the report, which was published on Aug. 29, China's high contribution rate has posed a great challenge for its manufacturing industry. Counting the Housing Provident Fund rate, which varies from 10 to 24 percent, the social contribution rate of some employees has reached nearly 60 percent of their total wages.

The high rate results in the continual rise of labor costs in China, which compromises the competitive advantage of China's manufacturing industry. The report indicated that the price of hiring one worker in China could pay for 1.5 in Thailand, 2.5 in the Philippines and 3.5 in Indonesia. 

The report further called for reasonable adjustments of the social contribution rate and the establishment of a more reasonable rate determination mechanism. This would help to reduce the burden of enterprises, control the sharp rise of labor costs and promote an optimal allocation of resources.