China Launches Social Security Reform Package

With no ribbon cutting, China launched a project Sunday to weave the world's largest social security network in a heavily burdened industrial base in the northeast.

Liaoning, a province with 40 million people and the center of the rusty industrial belt, was the only pilot province selected to establish a new independent province-wide social security system with diversified fund channels and socialized management in three years.

Some of the major tasks are to adjust and perfect the current pension insurance system being practiced in urban areas, to speed up the establishment of a basic medicare system for urban employees, to replace the basic living allowance for laid-off workers with unemployment insurance, to improve the minimum standard of living for city residents, to strengthen the pooling and management of social security funds, and to make a social security law as soon as possible.

The central government has approved the reform plan which has been revised for four times, said Zhang Zuoji, minister of labor and social security, in Shenyang, capital city of this northeastern province.

Liaoning is required to report its experiences to the central government as a reference for building a new social security system in the rest of the country.

"The situation in Liaoning is typical and representative in China," the minister said. Liaoning is home to one tenth of the country's large and mid-sized state-owned enterprises (SOEs). Some two million SOE workers have been laid off in recent years and more than 10 million of them are covered by the pension insurance.

The province does have some protruding social security problems derived from its tremendous amount of SOEs, retired and laid-off workers, and financial difficulties, Zhang said.

Under such circumstances, "if Liaoning succeeds in the experiment, it would be a great boost to the confidence and determination of the central government to establish a nationwide social security system," said the minister.

It is both an opportunity and a challenge for Liaoning to pilot this project, said Bo Xilai, governor of the province.

"The mission is really tough," he said, explaining the main difficulty is the shortage of funds and the complexity of the work.

Deputy Finance Minister Gao Qiang said that a large part of the funding shortage will be met by the central finance during the three-year period.

However, Gao added that money could not guarantee that this arduous work would be done successfully. He suggested that local officials and enterprises be very cautious at fulfilling this unprecedented great project.

According to experts, the new social security system might not sound new to Westerners but it does offer some novel ideas to Chinese. For example, under the reform package, retirees will no longer have to get their pension from their former enterprises. Instead, a pension insurance fund will pay their pension no matter if the enterprises are well managed or bankrupt.

The word "unemployment" will be officially used when someone loses his or her job and gets paid from the unemployment insurance, instead of being "laid off" and receiving the basic living allowance from enterprises.

For quite a long time in the past, China had practiced a " cradle-to-grave" welfare system which called for SOEs to be solely responsible for their employees' welfare, including life-long employment, housing, medical expenses, pension, and even children' s schooling.

A reform, started in the mid-1980s, changed the situation to some extent as individuals were required to share contributions to their future pensions. But enterprises still have to take care of most of the welfare.

China aims to keep the unemployment rate at around five percent in the next five years. It means 2.5 million jobless people out of a cardinal number of nearly 50 million SOE workers across the country at the present time.

"It is a matter of great urgency to build a new social security system which can guarantee the essential interest of urban workers and residents," said Zhang Zuoji. Under China's situation, the new social security system could only be built as one that is at a low level but covers an extensively wide range of beneficiaries.

At the launch of the reform package, Gu Mingchu's eyes were filled with joy. As general manager of the Shenyang Changbai Computer Group, Gu said that 70 percent of his energy has been consumed in tackling various welfare problems of the company's 10,000-plus employees.

"I think I will be able to spend 80 percent of my energy on management in two years' time," he said, "and I will dare to cut the number of redundant employees, too."

The reform plan enables Gu and other SOE managers in the province to transfer social welfare matters to specialized institutions which are independent from the SOEs.

Dong Li, a senior official of the All-China Federation of Trade Unions, applauded the reform package and urged employers to strictly abide by the Labor Law and other regulations when dealing with their employees.

According to Minister Zhang Zuoji, other provinces and autonomous regions can each voluntarily choose one city to try the reform plan, with all the other cities still carrying out the existing social security system.

Zhang said he believes that the result of Liaoning's experiment would not only have a impact on the current economic and social life in China but also the country's future.

(People’s Daily 07/09/2001)

In This Series

Social Security Network Being Woven Nationwide

China Issues Report on Social Security for 2000

Liaoning Reforms Social Welfare System

Government Commits Itself to 3.5% Unemployment Rate

Unemployment Rate on the Rise



Web Link