Social security in China

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Social security in the People's Republic of China consists of two systems: one for urban workers in the formal sector and one for rural farmers and nonworking urban residents. The systems have different benefits and are funded differently. The urban system is the largest component of China's social security, and it includes both a social pooling account and mandatory individual accounts. In the less developed rural program, old farmers receive a small pension financed by general fiscal revenue and young farmers make small contributions to their individual social security accounts.

Contents

Current systems

There are two social security systems in China: one for urban workers in the formal sector and one for rural farmers and nonworking urban residents. [1] : 239  The systems have different benefits and are funded differently. [1] : 238 

The system for urban workers is the largest component of social security in China. [1] : 232  It combines a social pooling account (a pay-as-you-go program in which contributions from workers pay benefits to the old) and mandatory individual accounts. [1] : 232  In China, only the person who works (not their spouse) receives social security benefits. [1] : 241  This is a factor contributing to the high participation in the urban work place by women in China. [1] : 241 

The rural system is less developed. [1] : 232  Old farmers receive a small pension financed by general fiscal revenue and young farmers contribute a small amount to their individual social security accounts. [1] : 232 

History

Like other traditional societies, multi-generational households in which younger generations supported those in their old age were the historical trend. [1] : 234  This impacted Chinese culture, including through a preference for sons to support parents in their old age. [1] : 234  As China began to industrialize, traditional mechanisms of family support were not sustainable and the People's Republic of China developed a social security system. [1] : 234–235 

In the early 1950s, China established a social security system covering workers at state-owned enterprises (SOEs), collectively-owned enterprises, government administrative units (such as Ministries) and operative units (such as public universities and state-owned hospitals). [1] : 8  Each enterprise contributed 3% of employees' total wages to a government-managed social security account. [1] : 235 

During the economic disruption of the Cultural Revolution, this system experienced a severe payment crisis. [1] : 8  As a result, responsibility for paying social security benefits to SOE workers was moved to the SOEs themselves and the central government paid government administrative and operative employees from general fiscal revenue. [1] : 235 

China began more thorough reforms of social security in the mid-1980s. [1] : 235  China's Seventh Five-Year Plan required that responsibility for social security be moved from enterprises to society. [1] : 236  Therefore, in 1986 the State Council issued regulations mandating the creation of a social security account for short-term workers. [1] : 236  China also began local experiments with social pooling accounts for SOEs (particularly ones at the county and city levels) in an effort to help loss-making SOEs address their problems with paying social security. [1] : 235 

During the Third Plenary Session of the 14th Central Committee of the Communist Party in 1993, China passed its Decision on Several Issues Concerning the Establishment of the Socialist Market Economic System. [1] : 236–237  In the area of social security, the Decision called for mandatory individual accounts for each employee. [1] : 237 

In 1995, the State Council provided regions with two alternative approaches to social security which they could select. [1] : 237  All chose the option of using large social pooling accounts and small individual accounts. [1] : 237  Local governments were allowed to chose the size of the pooling accounts and as a result, systems varied regionally. [1] : 237  Eleven industries with younger workers withdrew from these systems and established their own. [1] : 237  Private enterprises and joint ventures resisted participating in social security. [1] : 237  Participation therefore declined each year. [1] : 237 

In July 1997, the State Council issued its "Decision on Establishing a Unified Enterprise Employee Basic Pension Insurance System." [1] : 238  This regulation established a unified pension system for urban workers. [1] : 238 

China's National Council for Social Security Fund was established in the late 1990s. [1] : 238  It is the largest pension fund in China. [2] : 202  The fund's assets under management expanded by 13% a year from 2010 to 2020. [2] : 204 As of 2023, it had approximately $415 billion of assets under management. [3]

The August 1998 "Circulation on Implementing the Provincial Pooling of Enterprise Basic Pension Insurance and Transferring Industry Pension Insurance Schemes to Local Governments" (issued by the State Council) merged the industrial pension programs with the local social security system. [1] : 237 

In December 2005, the State Council issued its "Decision on Improving the Basic Social Security System for Workers and Staff in Enterprises," a regulation which sought to resolve the shortage of funds in individual social security accounts. [1] : 239 

In 2014, the State Council merged the system for urban workers with the system for public employees. [1] : 248 

See also

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References

  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Lin, Shuanglin (2022). China's Public Finance: Reforms, Challenges, and Options. New York, NY: Cambridge University Press. doi:10.1017/9781009099028. ISBN   978-1-009-09902-8.
  2. 1 2 Roach, Stephen S. (2022). Accidental Conflict: America, China, and the Clash of False Narratives. New Haven: Yale University Press. doi:10.12987/9780300269017. ISBN   978-0-300-26901-7. JSTOR   j.ctv2z0vv2v. OCLC   1347023475.
  3. ↑ "National Council for Social Security Fund (NSSF) - Sovereign Wealth Fund, China - SWFI". www.swfinstitute.org. Retrieved 2023-12-27.
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