1. The Reform and Development of Social Security System in China PRC
1
Professor Tan zhonghe
Chinese governments pay high attention to the construction of social
security system. Since 1980s, with the fast development of Chinese
economy, and adapted to the needs of market-oriented system reform,
China reforms traditional social security system. Then, the social security
system in China has achieved remarkable success in institutions building,
improving mechanisms and structure, expanding coverage, raising
treatment level, and promoting the opportunity of everyone’s acquiring
social security fairly and equally. By the end of 2011, the goals of social
security development had been mainly accomplished, which is “making
social insurance, social assistance and social welfare as foundations, and
basic old-age pension, basic medical insurance and minimum living
standard security as key points.”
1. Basic Situation
1.1 The development process of social security system in China
Starting from the founding of New China, the social security system
China has undergone the period of growing out of nothing, broadening
1
Professor Tan zhonghe,National Social Security Institute, Ministry of Human Resources
and Social Security of China PRC.
Email:zhonghe2009@gmail.com.
Address: Room 1205, No.17 street West Huixin, Changyang District,Beijing,china,PRC
ZIP:100029
1
2. coverage from urban to rural, from workers to all other residents in urban
and rural areas. It can be divided into three phases in this 60 years.
1.1.1 The Phase of Forming Labor Insurance
From the initial stage of New China to the beginning of Reforming
and Opening-up, for adapting the needs of planning economy system, the
policies of low-pay, high employment rate, high subsidy and extensive
welfare had been applied. Urban citizens were taken all responsibilities
by the government and enterprises in employment, housing, pension,
Medicare, and enrolling of children nurseries and schooling. In rural areas,
farmers depend on their land and provided the aged in their families. The
five guarantees families (the aged, the infirm, the old,widows and
orphans) were guaranteed by the rural collectiveness. In add, the
government guaranteed urban families to gain certain necessities by the
way of “low price, implicit subsidy and allotment”. At that time social
background, the social security system played a positive role in
stabilizing the society. However, the dual problems of identity
discrimination and equalitarianism were brought about, which is that the
guaranteed subjects were mainly the people employed in public economy
organizations, and that the allocating methods were used by the rule of
equalitarianism mess.
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3. 1.1.2 The Phase of Focusing on the Reform of Social Insurance
From the initial stage of Reforming and Opening up to the year of
2002, when the 16th National Congress of Communist Party was held,
surrounding the reform of state-owned enterprises and economy system
transition, China has explored the construction of social security system
which sharing the responsibilities among the state, enterprises and
individuals, according to the requirement of socialist market economy
system.
First of all, public old-age pension for workers in urban enterprises.
In this phase, China has established the public old-age pension which
institutional model is the combination of “social pool”fund and “personal
accounts”. Both the employers and workers have the responsibility of
paying old-age pension contribution. The benefit level is related to the
contribution period. Thus, the incentive and constraint mechanism of
“pay more, get more” is initially established.
Secondly, unemployment insurance. The unemployment insurance
of workers in urban enterprises was firstly built in 1986, at the time of
which called the “unemployment” as “waiting for employment” instead.
In 1999, the State Council issued “Regulations on Unemployment
Insurance”, which established the dual functions of unemployment
insurance of guarantying the minimum living standard and improving
employment.
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4. Thirdly, basic medical insurance for workers in urban enterprises.
China started the pilot reform of the institutional pattern of “social pool”
fund and “personal accounts” in certain cities in 1994. Then, in 1998, the
State Council issued decisions, which set the policies, institutions and
measures of workers’ basic medical insurance of workers in urban
enterprises. The reform of medical insurance of workers in urban
enterprises was fully activated.
Meanwhile, the institutions of work injury insurance, maternity
insurance, minimum living standard security system for urban residents
and so on were also get development and improvement. However, in this
period, the construction of social security system in China was mainly
developed to take city as a center, and to take occupational workers as a
key point. So the social security for the rural and the poor was not
comprehensively designed and considered.
1.1.3 The Phase of Institutional Innovation Characterized by
Balancing Urban and Rural Areas
Since the 16th National Congress of Communist Party(November
,
2012)speeding up the establishment of social security system which will
cover urban and rural residents has been proposed . Social security was
brought to an unprecedented strategy altitude. It has gone to the new
phase of balancing urban and rural development and achieving complete
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5. coverage. In 2003, “Suggestions on Build Newly Rural Cooperative
Medical Institution” was put into effect. It exerted itself to solve the
health problems of rural residents. In this system, the financing of
government accounts for 80%. In 2007, “The Guidance on Carrying out
Pilot Reform of Basic Medical Insurance for Urban Residents” was put
into effect, which covered urban residents who are not employed. In 2007,
“The Minimum Living Standard Security System for Rural Areas” was
put into effect which made both the urban and rural residents being
covered by the minimum living standard security system. It was decided
to implement the pilot reform of the old-age pension for workers in public
institutions in some provinces in 2009, and the public old-age pension for
urban residents in 2011
1.2 Current Situation
Now, the social security system in China is comprised of 6 items,
which are social insurance, social assistance, social welfare, and social
preferential treatment, housing security, charity and commercial
insurance. It can be further divided into 25 sub-items.
1.2.1 Social Insurance
Being as the core of social security system, social insurance is
comprised of basic old-age pension, unemployment insurance, medical
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6. insurance, work injury insurance and maternity insurance. The
complementary insurance concludes complementary old-age pension and
complementary medical insurance.
Basic old-age pension is comprised of public old-age pension for
workers in urban enterprises, newly public old old-age pension for rural
residents and public old-age pension for urban residents. Workers in all
kinds of urban enterprises, individual business households, flexible
employed persons and foreigners employed in China are covered by
public old-age pension for workers in urban enterprises . Its institution
model is the combination of “social pool” fund and “personal accounts”.
Both the employers and the workers should undertake the responsibility
of contribution, and the rate is 20% and 8% respectively.. The individual
business households, and flexible employed persons who participate this
system should contribute 20% according to the local employee’s average
wage level last year and 8% of their contribution is booked into personal
account. Insured workers who reach the mandatory retirement ages (60
for male workers, 55 for female cadre, 50 for female workers, and 5 years
early for special professions), pay the contribution for 15 years, and fulfill
retirement procedures, could receive public old-age pension benefit
monthly.
The financing resources of newly public old-age pension for rural
residents and public old-age pension for urban residents are individual
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7. contribution, collectivity assistance and government subsidy. The urban
and rural residents who pay the contribution for 15 years, and reach 60
years old, could receive benefits. The pension is comprised of national
basic pension and individual account. By 2012, it will achieve complete
coverage.
Basic medical insurance is comprised of basic medical insurance for
workers in urban enterprises, newly rural cooperative medical insurance
and basic medical insurance for urban residents. All workers are covered
by the basic medical insurance for workers in urban enterprises, which
include workers and retirees in all kinds of organizations and private
business, flexible employed workers and peasant-workers. Its institutional
model is exercised by “social pool” fund and “personal accounts”. The
“social pool” fund is mainly used in the payment of hospitalization
(wholesale) costs and arranged by the Social Security Administration
Department. The “personal accounts” is mainly used to pay outpatient
(small account) costs. The insurance is paid by employers and employees
jointly.
People who are not covered by basic medical insurance for workers
in urban enterprises could join the basic medical insurance for urban
residents voluntarily, which contain the primary and secondary school
students (including vocational senior school, technical secondary school
and vocational school students), children and other residents who are not
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8. employed. This sub-item is comprehensively arranged for serious
diseases. Its financing resources are mainly from family contribution,
appropriate subsidies from governments and the assistance by the
employer for the contribution of family members of his workers if
possible. The insurance fund is mainly used to pay the hospitalized and
outpatient serious diseases costs.
Rural residents are covered by newly rural cooperative medical
insurance. Peasants could join this insurance voluntarily in the unit of
family. It is comprehensively arranged for serious diseases by mutual
assistance. The financing resources are personal contribution, collectivity
assistance and government subsidy. The way of compensation is mainly
divided into two kinds. In the first kind, the compensation is mainly used
for hospitalization costs, and the rest is used for outpatient costs. In the
second kind, the compensation is only used for hospitalization costs and
some chronic disease outpatient costs. The pattern of compensation is
basically the same as the basic medical insurance for workers in urban
enterprises.
All kinds of enterprises and individual business households hiring
employees are covered by work injury insurance. The institutional pattern
of work injury insurance is “social pool” and pay-as-you-go, managed
and administrated by local governments. The employers should
contribute work injury insurance on time. The employees do not need to
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9. contribute. The benefits mainly include work injury medical cost
reimbursement, permanent disability subsidy, nursing care, installing
supplement appliance, funeral subsidy, supporting the bereaved families
and one-off work death grants.
Urban enterprises and their employees are covered by maternity
insurance. The institutional pattern is “social pool” and pay-as-you-go,
managed and administrated by local governments. The enterprise
contributes according to certain proportion, and the employee does not
need to contribute. The benefits mainly include maternity allowance in
female employees’ maternity leave, the examination, delivering,
operation, hospitalization, medicine costs of maternity, and the medical
fee and other allowances caused by maternity after leaving hospital.
Many kinds of enterprises including state-owned enterprises, urban
collective enterprises, foreign investment enterprises, urban private
enterprises and other urban enterprises, public organizations and their
employees are covered by unemployment insurance. The institutional
pattern is “social pool” and pay-as-you-go, managed and administrated by
local governments. The insured enterprises and employees contribute 2%
and 1% of employee’s salary respectively. The employees could get
unemployment insurance benefits when they meet the following
conditions. First, the employee and his employer have contribute for 1
year according to the rules. Second, the employment is not broken off by
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10. the employee’s desire. Third, the employee has already registered
unemployment, and has the desire to get a job. The benefits mainly
include unemployment insurance fund, medical grants, and funeral grants,
supporting the bereaved families, occupation training and introducing
subsidy. The period of receiving unemployment insurance benefits is
related to contribution period, and the longest period for receiving should
not be over 24 months.
By the end of 2011, the coverage of public old-age pension has
expanded rapidly. Public old-age pension for workers in urban enterprises
had covered all the counties nationwide. Newly public old old-age
pension for rural residents had covered 81.5% counties. Public old-age
pension for urban residents had covered 75.3% counties, and the insured
population amount to 622 million, increasing 2.86 times than that in 2005.
In 683 counties, public old-age pension for urban and rural residents were
combined to implement. Basic health insurance covering nationwide
came true. The institution system of basic medical insurance for workers
in urban enterprises, newly rural cooperative medical insurance and basic
medical insurance for urban residents had covered all counties nationwide.
The insured population had reached over 1.3 billion, increased 2.77 times
than that in 2005. In 189 counties, the basic medical insurance for urban
and rural residents were combined to implement. The unemployment,
work injury and maternity insurances synchronized to implement with
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11. public old-age pension and basic medical insurance for workers in urban
enterprises. The insured population reached 142 million, 170 million and
122 million respectively.
1.2.2 Social Assistance
The object of social assistance in China is to gurantee the minimum
living standard for the low income population. The financing is all
undertaken by public finance. It can be divided into three classes. The
first class is usual assistance, such as minimum living standard security
system in urban and rural and the assistance institution for rural “five
guarantees”. The second class is emergency assistance, such as disaster
assistance. The third class is temporal assistance, such as medical
assistance, assistance for urban vagrants and beggars and so on.
By the end of 2011, the objective population of minimum living
standard security system for urban residents had reached 22.5627 million;
the objective population of minimum living standard security system for
rural residents had reached 52.9828 million, and the objective population
of rural “five guarantees” had reached 5.7862 million. In 2011, the
medical assistance fund for urban and rural financed 66.4935 people to
attend health insurance, directly help 23.6727 million persons in post
medical curing.
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12. 1.2.3 Social Welfare
The social welfare institution, including old-age welfare, disable
welfare and children welfare, has gradually improved. Its key points are
assisting the old, helping the disabled and aiding orphans. By the end of
2011, in the whole nation, the social welfare organization were 42.5
thousand; the nursing beds were 3.2105 million; the population of
adopted old persons, disabled persons and children were 2.3792 million;
the social welfare enterprises absorbed 628 thousand disabled persons to
obtain employment.
1.2.4 Veteran Benefit and Placement
The veteran benefit and placement is a special policy treatment for
the veteran, military personnel in active service and their families. It is
characterized by honor, compensation and preferential treatment,
including veteran placement, preferential treatment for military personnel
in active service and soldier’s family, compensation the bereaved family,
and placement for the military retired cadres.
1.2.5 Housing Security
Housing security is comprised of housing accumulation fund,
economy housing and low rent housing. The housing accumulation fund
plan is forced to build by national regulations, covering urban employees.
12
13. The accumulation fund is operated by government, financed by employer
and employee. The low rent housing is financed by government, provided
to the poor family by free or low rent. It used dynamic management
measures by personal application and verifying qualifications. The
economy housing is built by the qualified real estate companies, which
acquire tax preferential policy, and is sold to the low income family
according to government regulations.
1.2.6 Charities
The government supports and encourages social organizations and
social members to conduct charitable donation and social mutual
assistance by the tax preferential policy. The government guides and
support charities development, energetically cultivates public welfare and
charitable social organizations. By far, the social donation networks have
formed.
Commercial insurance is also a component of social security system.
It is located to meet the requirement of high income group, who would
like to improve security level. The insurance is managed by commercial
insurance company, operated by market. The government initiates the
residents with economic capability to purchase all kinds of life insurance
and health insurance production of commercial insurance companies
according to personal preference.
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14. The framework of social security system in China is shown in the
followed figure1:
The framework of social security system
The special care and Housing security Charity and commercial
Social insurance Social assistance Social welfare placement insurance
the placement for Low rent housing
Old age Social welfare fot the retired soldier
Minimum living standard odd
pension security system for urban
and rural residents s
Economical housing
medical The placement for
insurance Social welfare for
Retired army cadres
children
The five guarantees
Maternity The special care for Housing
insurance active soldier accumulation
Social welfare for the fund
Emergence assistance disable
for victims
Unemploymen
t insurance
The special care for
the military dependent
medical assistance
Work injury
insurance
Preferential
treatment for the
Assistance for Vagrants armymen victims’
and beggars family members
Figure1. system framework of social security in china PRC
1.3 Social Security Fund
The social security fund is financed by two types. The social
insurance fund is financed by employee and employer’s contributions and
public finance. The social assistance and social welfare is mainly
financed by public finance. In 2011, 18 items of social security funds
inflowed ¥2840.205 billion, outflowed ¥2110.017 billion. The year-
end accumulative surplus was ¥3.111859 trillion, increasing 312.79%,
299.78% and 435.24% than that in 2005 respectively (shown in table 1).
Table 1: social security inflows and outflows and surpluses in 2011
(unit: billion,RMB)
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15. Social
Inflows Outflows Surplus in the end of year
security
funds amount ratio amount ratio amount Ratio
Social
2619.453 92.22% 1907.001 90.37% 3030.372 97.38%
insurance
Social
185.659 6.54% 171.873 8.15% 64.535 2.07%
assistance
Social
35.093 1.24% 31.143 1.48% 16.952 0.55%
welfare
Total 2840.205 100.00% 2110.017 100.00% 3111.859 100.00%
In 2011, among 2619.453 billion of social insurance inflows, the
employers’ contributions, employees’ contributions, public finance and
other finance were 1261.491 billion, 717.796 billion, 539.148 billion and
101.018 billion, amounting for 48.16%, 27.4%, 20.58% and 3.86%
respectively (shown in figure 1). Among 220.752 billion of social
assistance and social welfare funds inflows, the public finance was
216.386 billion, and other finance was 4.366 billion, amounting for
98.02% and 1.98%.
public finance
the employers’ contributions,
employees’ contributions
other finance
Figure 2: the financing resources of social insurance fund in 2011
Figure 2: the financing resources of social insurance fund in 2011
In 2011,among 18 items of social security funds from public finance,
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16. the central government and local government invested 450.876 billion
and 304.658 billion, increasing 534.15% and 632.01% than that in 2005
respectively. The proportion of social insurance, social assistance and
social welfare invested by central government are 60.67%, 64.74 and
15.27%. (Shown in table 2)
Table2: the public finance investment from central and local governments
(unit:billion, RMB)
Public finance from central
Total public finance investment Public finance from local government
Item government
Amount Ratio Amount Ratio Amount ratio
Social
539.148 100.00% 327.107 60.67% 212.041 39.33%
insurance
Social
183.396 100.00% 118.733 64.74% 64.663 35.26%
assistance
Social
32.99 100.00% 5.036 15.27% 27.954 84.73%
welfare
total 755.534 100.00% 450.876 59.68% 304.658 40.32%
The surplus of social insurance fund is totally ¥3030.372 billion,
of which ¥7.183 billion is managed by People’s Bank of China and
China Agriculture Development Bank and central public finance special
account. The left surplus is managed by provincial, municipal and county
governments, and ratios are 38.08%, 35.61% and 26.31% respectively. In
the terms of area, the ratio of surplus in east, middle and west part of
China are 56.78%, 21.54% and 21.68% respectively. In terms of deposit
status, the ratios of surplus in current account, time deposit and other
status are 38.44%, 58.01% and 3.55%.
The scale of China’s social security fund expands gradually. The
fund is operated smoothly and steadily, which guarantee effectively all
items of social security benefits payments.
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17. 1.4 Main Accomplishments
1.4.1 Achieving Basically the Building of Social Security System
Covering Urban and Rural Areas, Promoting Social Fairness
Strongly.
Since 2005, China has promulgated more than 20 regulations on
social security. The minimum living standard security system in rural has
established. The pilot reforms of basic medical insurance for urban
residents, newly rural cooperative medical insurance and public old-age
pension for urban residents have been implemented, which first built the
complete social security for rural and urban residents historically in China.
The goal of social security of all people with basic living security has
gradually put forward. The insured covered by newly rural cooperative
medical insurance and public old-age pension for urban and rural
residents had grown from 2700 million in 2009, when the institutions had
been established, to 3550 million in 2011, increasing 12.15 times. The
insured covered by basic medical insurance for urban residents and basic
medical insurance for urban and rural residents reached 2160 million in
2005, over 1 billion in 2011, increasing 3.89 times. The coverage of
social insurance in rural areas expands rapidly. The insured of public
old-age pension and basic medical insurance were 161 million and 345
million in 2005, over 600 million and 1.3 billion at the end of 2011,
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18. increasing 2.86 and 2.77 times respectively. (The coverage of five social
insurances since 2005 is shown in Figure 3)
With more energy on social assistance and more improvement of
assistance standard, the coverage of social assistance expands gradually.
In the end of 2011, the population covered by minimum living standard
security system had reached 75.5455 million, increased 1.59 times than
29.1752 million in 2005. (The changing of population of minimum living
standard security system in urban and rural in 2005-2011 can be shown in
Figure4.)
18
19. minimum living
standard security
system in urban
minimum living
standard FIigure4.The changing of population of minimum living
security system standard security system in urban and rural in 2005-2011
in rural
In terms of social security investment, the key points are inclining
to less developed areas and rural areas to narrow the gap of social
security between regions. Since 2005, in the investment of public finance
of central government, the proportion of middle and west parts of China
is kept 80%. The investment in middle and west parts grows from
¥54.757 billion to ¥360.995 billion, increasing 5.59 times. (The public
finance investment from central government in east and middle& west
area in 2005-2011 is shown in Figure 5)
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20. The public finance investment of central government to peasants
expands gradually. The subsidy to newly public old old-age pension for
rural residents grows from ¥1.076 billion in 2009, when the institution
was built, to ¥35.206 billion in 2011, increasing 31.73 times. The
subsidy to newly rural cooperative medical insurance grows from
¥0.542 billion in 2005 to ¥80.177 billion in 2011, increasing 146.93
times. (The public finance subsidies from central government to newly
public old old-age pension for rural residents and newly rural cooperative
medical insurance in 2005-2011 is shown in Figure6)
20
21. old-age pension for
rural residents
newly rural cooperative medical insurance
Figure6. The public finance subsidies from central government to newly
public old old-age pension for rural residents and newly rural cooperative
medical insurance in 2005-2011
1.4.2 Increase Social Security Level Steadily and Improves People’s
Lives Obviously
In recent years, China improves the social security level in old-age
pension, medical insurance and minimum living standard security steadily.
That the old will be looked after, the sick will be medicated, and the
people in difficulty will be helped, and they could enjoy the national
development fruits. In terms of public old-age pension, from 2005 to
2011, the benefit level of enterprise workers has been increased 7 times
consecutively, from ¥713.25 in 2005 to ¥1516.68 per capita monthly
with the yearly growth rate of 13.4%. The extent of rising is 10.03
percentages higher than CPI in the corresponding period. (The benefit
changing of public old-age pension for workers in urban enterprises in
2005-2011 is shown in Figure7.)
21
22. Yuan/moth/personn
Figue7. The benefit changing of public old-age pension for workers in
urban enterprises in 2005-2011
In terms of basic medical insurance, the reimbursements ratios of
three sub-items which are basic medical insurance for workers in urban
enterprises, newly rural cooperative medical insurance and basic medical
insurance for urban residents has heightened gradually in the scopes of
the “three catalogs” (basic pharmacy catalog, basic service facility
catalog and basic service item catalog) of the national basic medical
insurance. By the end of 2011, the ratios had reached 77%, 62%, and 70%.
The factual reimbursement ratio of basic medical insurance has also
increased steadily in recent years, especially in rural areas. The factual
reimbursement ratios of basic medical insurance for workers in urban
enterprises and basic medical insurance for urban residents increased
from 58.91% and 45.00% in 2005 to 64.10% and 52.28% in 2011,
increasing 8.81% and 16.18% respectively. The factual reimbursement
22
23. ratios of newly rural cooperative medical insurance and basic medical
insurance for urban and rural residents increased from 24.80% and
23.78% in 2005 to 49.20% and 44.87% in 2011, increasing 98.39% and
88.69% respectively. (The changing of factual reimbursement ratio in all
sub-items of basic medical insurance in 2005-2011 is shown in Figure 8)
Figure8. The changing of factual reimbursement ratio in all sub-items
of basic medical insurance in 2005-2011
In terms of minimum living standard security system, the average
security level for urban and rural residents increased from ¥154.3 and
¥74.83 in 2005 to ¥288.04 and ¥140.29 per capita monthly in 2011,
increasing 86.68% and 87.48% respectively. The subsidy level increased
from ¥73.34 and ¥28.37 in 2005 to ¥227.92 and ¥100.07 per
capita monthly in 2011, increasing 210.77% and 252.73% respectively.
(The changing of accumulative rate of minimum living standard security
and subsidy level in urban and rural in 2005-2011 is shown in Figure9.)
23
24. Figure9. The changing of accumulative rate of minimum living
standard security and subsidy level in urban and rural in 2005-
2011
From 2006 to 2011, the average growth rates of minimum living
standard security in urban and rural are 10.99% and 11.4%, 7.62
percentages and 8.03 percentages higher than the average growth rates
of CPI in the same period. Especially since the universal
implementation of minimum living standard security system in rural
nationwide in 2007, the average growth rate of security level is 14.02
percentages higher than the average growth rate of CPI at the same
period. (The changing of growth rates of minimum living standard
security in urban and rural and CPI in 2006-2011 is shown in Figure
10).
24
25. Figure10. The changing of growth rates of minimum living standard
security in urban and rural and CPI in 2006-2011
1.4.3 Solves the Problem of History Leave-over and Security of
Special Groups, Promotes the Harmony and Stability of Society.
Chinese government keeps solving the history leaving over problems
of social security, and improving the living conditions of land acquisition
peasants, low income and special difficulties groups, which provides a
good condition for industrialization, urbanization and state-owned
reforming. By the end of 2011, 5 million uninsured retired people in
collective enterprises and 20.9 million land acquisition peasants had been
covered by old-age pension. 10.31million retired people in bankrupt
enterprises and workers in running-difficult enterprises had been covered
by medical insurance. 3.12 million “workers with work injury in early
times ” had been covered by the social pool of work injury insurance.
25
26. Meanwhile, public finance from central government and local
governments have keeping investing in medical assistance fund. The
difficult population who get financially assisted by medical assistance
fund to be insured increased gradually, and the person of direct assistance
to post remedied also increased. The population by assistance to be
insured increase from 4.8402 million in 2005 to 66.4935 million in 2011,
increasing 12.74 times. The person of direct assistance to post remedied
increased from 2.5373 million in 2005 to 23.6727 million in 2011,
increasing 8.33 times. (The changing of population who were difficult
financially assisted by medical assistance fund to be insured and the
person of direct assistance to post remedied is shown in Figure 11.)
Figure11. The changing of population who were difficult financially
assisted by medical assistance fund to be insured and the person of
direct assistance to post remedied
1.4.4 Stands up in Natural Catastrophe, Safeguards the Basic
Living of Victims by Disasters
26
27. The social security funds play a positive role in facing natural
disasters, solving the temporary difficulties such as food, clothing,
housing and hospitalization, transferring, rescuing, and settling the
victims and reconstruction. Since 2005, central government and local
governments invested ¥141.07 billion of living assistance fund for
natural disaster, of which ¥102.91 billion were from central public
finance, and ¥38.16 billion were from local public finances. 595.884
million victims were assisted totally, of which 106.433 million people
were transferred and settled in emergency, 489.451 people were assisted
for living through winters and springs, 219.13 million houses were
reconstructed. After natural catastrophes, such as Wenchuan earthquake,
Yushu earthquake and Zhouqu mud avalanche, the public finance from
central government invested in living assistance amounting to ¥76.924
billion. In disasters, 9.4779 million people were rescued, and 5.932
million houses were reconstructed. The timely investment of emergent
funds makes victims settled down properly and the victims’ basic living
guaranteed effectively.
1.4.5. Expand the Scale of Social Security Fund, Provides an
Important Support for Economic and Social Development.
The scale of social security funds expands rapidly, which establishes
a solid material foundation for the sustainable development of social
27
28. security system. By the end of 2011, the accumulated surplus of social
insurance funds had reached ¥3.030372 trillion, increased 4.34 times
than that at the end of 2005. The average growth rate is 32.19%. 98% of
funds were deposited in financial organizations. (The changing of
accumulated surplus of social insurance funds in 2005-2011 is shown in
Figure 12.)
Figure12. The changing of accumulated surplus of social insurance
funds in 2005-2011
Public finance from central and local governments has kept
investing in social security. The social security investment from local
public finance including the central government transferring payment
increased from ¥341.845 billion in 2005 to ¥1416.4 billion in 2011,
increasing 314.34%. It is higher than the growth rates of local public
fiancéinflows and outflows at the same period, which are 247.32% and
267.4%, 67.02 percentages and 46.94 percentages higher respectively.
(The growth rate changing of social security investment from local public
finance, local public finance inflow and outflow is shown in Figure 13. )
28
29. Figure13. The growth rate changing of social security investment from
local public finance, local public finance inflow and outflow
The outflows of 18 items social security funds increased from ¥527.8
billion in 2005 to ¥2.110017 trillion in 2011, increasing 299.78%. (The
changing of the outflows of 18 items social security funds is shown in
Figure 14.)
Figure14.The changing of the outflows of 18 items social
security funds
The improvement of social security system, the expansion of inflows
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30. and outflows, and the fast accumulation of funds play a positive role in
strengthening public confidence, promoting social fairness, pulling
consumption, boosting domestic demand, tackling international finance
crisis effectively, promoting the transform of economy development
model, and also providing multiple support for economy and social
development.
1.4.6 The System of Social Security Management and
Administration has Formed Basically.
By the end of 2011, the system and network of social security
management and service has constructed gradually, which levels of Social
Security Administration Department are as main organizations including
banks and kinds of service organizations. There are 11.9 thousand Social
Security Administration Department nationwide. Public service facilities
of civil affairs are constructed greatly. The abilities of basic security and
service are keeping strengthening. The community service system
gradually developed. Meanwhile, social insurance supervision
committees are built in 28 provincial levels, 217 municipal levels and
1189 county levels. The society is keeping supervising intensively. Levels
of governments organize relevant departments to launch special
supervision and examination time after time, to promote the
standardization of fund management.
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31. 2. The Main Existing Problems
The reform of social security system in China is using the model of
“fording the river by feeling for the stones”. Surrounding the reform of
national economy mechanism, embarking from handling the most urgent
problems, the social security system is designed by groups, managed by
departments, implemented by regions, the way of which push the
development of social security system growing out from nothing and
developing rapidly. However, with the deepening reform and accelerating
urbanization, the improving of the economy and social development, the
advancing of democratic rule of law, and the gradual expanding of
population mobility, flaws including the relevant institutions lacking of
linkage, scattering and overlapping gradually appeared. So some issues
should be improved and improved further.
2.1 The Issue of Institutional Fairness
Firstly, some groups have uninsured. Peasant-workers also belong to
enterprise workers, and should be insured in urban social insurance.
However, the proportion of insured peasant-workers in this system is
obviously low. Take the public old-age pension as a example, by the end
of 2011, the population of peasant-workers has reached 252.78 million.
However, the population of peasant-workers insured in public old-age
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32. pension for workers in urban enterprises were 41.4 million, insured in
unemployment insurance were only 23.91 million, insured in basic
medical insurance for workers in urban enterprises were 46.41 million,
and insured in work injury insurance were only 68.28 million. The
insured rates were 16.3%, 9.5%, 18.4%, and 27% respectively, which are
obviously very low. Most of peasants-workers could not benefit from the
urban basic social security.
The situation of peasant-workers insured in public old-age pension
for workers in urban enterprises in 2006-2010 is shown in figure15.
Figure15. The situation of peasant-workers insured in public
old-age pension for workers in urban enterprises in 2006-2010
Secondly, the social security policies in different regions do not
uniformed. From the perspective of contribution policy, by the end of
2011, the contribution base were not carried out according to the law of
social insurance in 21 provinces, 201 municipalities and 1252 counties,
which regulates the base was calculated by the worker’s total salary. The
kinds of factual contribution rates of public old-age pension for workers
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33. in urban enterprises were 16, and the highest was 22%, the lowest was
10%. It is that the contribution rate does not uniformed yet in 8 provinces.
In some province, it was amounted to 12 kinds that the contribution rates
were. In addition, the contribution rate or the contribution basis of social
insurance was reduced by local decisions in 5 provinces, 4 municipalities,
and 8 counties, the contributions were ¥51.734 billion less than it
should be. The insured conditions of social insurance, such as age and
“hukou”, were restricted by local decisions in 3 provinces, 6
municipalities, and 9 counties. The social insurance policies in 16
non-dependent administrated development zones were carried out
differently from local administration. So the disparity of contribution
level varied greatly, and the contributions for enterprises and individuals
were unbalanced.
Thirdly, the benefit level gap is too big for some groups. Currently,
public old-age pension for workers in urban enterprises and institution for
old-age security of retirees in public organizations exist at the same time
in China. This dual-track system of enterprise and public organizations
leads to the increasing gap between workers and cadres, which bring
obvious problem of social unfairness and great social conflicts. According
to census, the pension per capita monthly in governments and public
organizations is 1.07 and 1.1 times of those in enterprises in 1990, and
1.54 and 1.57 times in 2000. In the 21st century, the difference amplified
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34. further, and they became 2.25 and 1.89 times in 2010. Although the
pension level for enterprises retirees are raised consecutively in 8 years,
the absolute gap is still increasing.
In more than 20 years, Chinese economy grows rapidly, the pension
for enterprises workers grows more, and the average yearly growth rate
reaches 12%. But the growth rate of pension for public organizations
reaches 16%. The gap is continuously widening.
2.2 The Linkage among Different Insurances do not Effectively
Realized Completely Yet.
Currently, social insurance system is designed by groups. There are
not explicit linkage among different institutions. Even if in the same
insurance institution, the policies were implemented variously in different
regions. This brings the problems of repeated contribution, transferring
and continuing contribution. By the end of 2011, 1.1242 million people
has participated public old-age pension for workers in urban enterprises,
newly public old old-age pension for rural residents and public old-age
pension for urban residents at the same time; 10.8611 million people
has contributed basic medical insurance for workers in urban enterprises,
newly rural cooperative medical insurance and basic medical insurance
for urban residents repeatedly, which brings public fiancé subsidy
¥ 1.769 billion excessively; 92.7 thousand people receive pension
34
35. benefits repeatedly of ¥684.529 million; 95.7 thousand people get
medical costs reimbursement of ¥147 million; 2.404 million people
have two or more trans-provincial personal accounts of public old-age
pension for workers in urban enterprises nationwide. In addition, the
problems of old social security for rural areas are complicated, and
promoting of new social security for rural areas is heavy in some regions,
so there are problems that the funds of old social security for rural areas
have not transferred into new social security for rural areas.
2.3 The Operation Mechanism of Social Security Need to be
Improved.
Currently, various works of social security are governed by different
departments, and operated by different administrations. Contributions are
also collected by different organizations. The coordination and
connection among different departments is not enough, which in turn
influences the whole executing effects of policies to some extent. For
example, there are some problems that lead the policy of financing the
poor to be insured in medical insurance by the medical assistance funds is
not carried out completely yet in some regions, such as the coordination
mechanism operates ineffectively because of basic medical insurance and
medical assistance are managed by many departments, the service
capabilities of social assistance in grass-roots level in some regions are
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36. not enough, the capabilities of management are weak, the working
methods are still backward and so on. By the end of 2011, in 2514
counties, the accumulated surplus of medical assistance in urban and rural
areas was ¥12.639 billion, the same as 80.28% of the public finance
investment in medical assistance in those regions at the same year.
However, according to the policies, the proportion of people covered by
minimum living standard security system who was financed by medical
assistance fund to be insured in medical insurance was only 63.69%. In
random selective 7522 enterprises which are audited in five items of
social insurance contributions collected by different administrations, the
contribution base of 6123 enterprises was checked and ratified
inconsistently in every item of insurance, and the ratio is 81.4%.
In addition, special funds are not carried out for special purposes
strictly in some regions, ¥30.592 billion social security funds are mixed
used among different social security items.
3. The Main Situations of Social Security to be Faced with
Currently, China is and will be in the primary stage of socialism in
the long run. The main contradiction of social security is the conflict
between the people’s growing social security needs and the backward
social production. Meanwhile, many challenges to social security system
are brought by the profound adjustment of economy structure, the
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37. accelerating transformation of social structure, the sharp transformation
of population structure.
First, the aggregate economy grows continuously, but the growth
rate becomes slow down. Currently, China is at the middle stage of
industrialization and at the period of driving urbanization fast. The
endogentic dynamics of economy growth is powerful. The healthy
fundamental situation is not changed in the long run. After 30 years
consecutive high speed growing, the economy will still grow steadily in a
long term. However, China need to be farewell to traditional extensive
growth pattern, accelerate to transform economy development pattern,
push the adjustment of industry structures, and pay attention to the quality
and efficiency of economy. In addition, because of the uncertainties
brought by the economy globalization and international financial crisis,
Chinese growth rate will slow down in the future. This will lead some
firms bankrupt, lock, merge and transform. The flexible employed people
will continue to increase since the third industry is strived to develop, and
the poor will also be likely to grow. Those above mentioned negative
factors will challenge social security system.
Second, with the rapid urbanization, the floating population will
keep in a large scale in long term. It is estimated that the level of China’s
urbanization in 2015 will be close to 55%, 60% in 2020, 70% in 2030,
and the urban population will reach 1 billion in 2030. Thus, the great
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38. amount of floating peasant workers between urban and rural areas will
greatly increase the difficulty in the connection of urban and rural social
insurance institution.
Third, the primary distribution has great disparity, and the
adjustment of secondary distribution has greatly difficulty. Currently, the
income differentials between urban and rural area exceed 3:1. The income
of highest 10% income group is 23 times of that of lowest 10% income
group. The proportion of urban and rural poor population in China is still
large in the future, and the difficulty of breaking away from poor will
broaden gradually. The conflicts between fairness and differentiation will
still be faced in improving social security system and developing the
adjustment function of redistribution. In one hand, different social classes
expect to incline to urban and rural low income people by redistribution,
to narrow the income gap, to reflect social fairness and to promote social
harmony. In the other hand, different classes start from theirselves
interests, keep comparing benefits, appeal kinds of desires. It is not only
to narrow different classes’ benefits, but also to have overall
consideration of different interests. This is the long term tasks to reform
and improve the social security system.
Fourth, the aging of population is accelerating. Compared with the
aging of population in developed countries, there are 3 characters of
China’s aging of population. The first is coming early. Western countries
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39. go to aging behind the completion of industrialization. But China goes to
aging without achieving wealthy. The second is coming soon. The aging
in western countries from 5% to 10% uses 40 years commonly, but it is
18 years in China. In 2010, the 65 and above years old people in China
reached 120 million, accounting for 8.9% of total population. It is
predicted that it will be 13% in 2020, approximate 30% in 2050, and the
population of 65 and above years old will reach 400 million at that time.
The third is lasting long. Because of large population base, it is perdicted
that the aging peak will appear in 2030s, and will keep 30 to 40 years. In
2050 there will be one old person among 4 persons by preliminary
calculation.
4. The Objective of Social Security Development in China
The basic objective of social security system in China is to build the
whole people sharing social security institution, mechanism and system
with Chinese characteristics, to fulfill that the whole people are insured,
the way of security is variety, the financing resources are diversified, the
management and service is socialized, to provide the harmonious and
steady safety net for fulfilling comprehensive well-off society.
Five aspects should be emphasized. First, the security items should
be complete, thus everyone could enjoy basic security. Second, the
benefits should be appropriate and could guarantee the basic living
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40. effectively. Third, the management and service should be improved and
could guarantee the convenient, swift and comprehensive services for
citizens. Fourth, the institution should be customized and the funds could
balance in the long run to realize sustainable. Fifth, the way of security
should be multilevel to meet people’s higher needs.
5. The Main Tasks of Contemporary Social Security Reform in
China
The main tasks of accelerating the development of social security
system with Chinese characteristics are to strengthen the fairness of
institution, to adapt liquidity, and to secure the sustainability.
5.1 Strengthen the Fairness
In first, institution absence should be made up quickly, and the social
security system should be constructed perfectly. Currently, the social
security system has covered urban and rural residents. However, some
people have still not been absorbed in current institutions such as the
peasant-workers, flexible employment groups and so on. The most
unfairness is without institutional security. Now, the prominent problem
is that, the contribution rate of public old-age pension for workers in
urban enterprises, which the employer should contribute 20% of worker’s
salary and the worker should contribute 8% of his salary, is too high to
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41. make some enterprise and people without employers have the ability to
contribute, and also make many small firms and low income group people
are not able to contribute,. So the measures of reducing contribution base
and rate properly should be taken to encourage and guide private
enterprises and flexible employed groups to participate in basic old-age
pension and expand coverage. The history leave-over problems in the
process of mechanism transferring should also be solved positively by
adopting public finance investment and multiple channels of financing.
Meanwhile, the institutions for the sick and the disable allowance and the
survivor subsidy should be built, thereby the security system for the sick,
the disabled and the survivor are integrated in the social security system.
In second, the old-age subsidy institution should be carried out for
the urban and rural old-age people without any security. Now, the
population of old-age people without any security in rural and urban areas
is about 100 million. The problem of their impoverishment is more and
more prominent. The national old-age subsidy institution dominated by
the central government should be developed gradually.
In third, the whole benefit level of basic security should be improved
gradually, and the benefit differences among different groups should be
defined properly. With the development of economy, the social security
benefit level should be improved in plan and step by step. The people
should share more fruits of economy and social development. In the time
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42. of improving the whole benefit level, the benefit differences among
different groups should be defined properly, and the function of social
security to adjust social allocation should be utilized. The problem of
benefit gap between enterprise workers and public organization cadres at
the same level should be controlled by policy adjustment to prevent the
gap increasing further. Meanwhile, the benefit gaps between workers and
residents, urban and rural areas should be narrow gradually, and the
minimum living standard between urban and rural areas should also be
narrow gradually.
5.2 Adapt Liquidity
In first, the administrated level of social security should be
heightened. The administrated level of public old-age pension for workers
in urban enterprises should be enhanced to the national level gradually
based on achieving the administrated level of provincial. The problems of
transferring and continuing of the records of social security for liquid
groups should be solved. The problem of medical insurance needs to be
resolved is the settlement of medical costs among different areas. The
administrated level of basic medical insurance, unemployment insurance,
and work injury insurance should be realized gradually in municipal level,
and balanced in provincial level. Some regions should try to be realized
in provincial level if possible.
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43. In second, the policy connections in the same institutions should be
solved properly. The institution of public old-age pension for workers in
urban enterprises and public old-age pension for urban and rural residents
should be connected and transformed, to adapt the liquidity of labors
moving between urban and rural areas. The transforming path between
urban and rural health insurance institutions should be linked gradually,
to guarantee the rights of different groups while moving between urban
and rural areas. The medical security institutions for urban and rural
residents should be uniformed. Combining with the reform of government
organizations, the management and administration mechanism of social
security should be straightened out further, and the resources of social
security management should be integrated to improve the operation
efficiency.
In third, the social security information management system should
be developed rapidly. The fundamental resolution is improving
information level in solving the conflict between adapting liquidity and
inability of social security management and service. The social security
information management system should be built in uniform standard and
could be access to nationwide networking, and could share data with
other public management system. By the way of informatization, the
contribution and benefit of the insured could be recorded timely and
accurately. The system could follow, record, serve and guarantee the
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44. whole life of a person, and provide convenient, fast and excellent social
security service for people.
5.3 Secure Sustainability
First, social security funds should expand. The social security
supporting ability should be strengthened, in securing the sustainability of
social security, especially in replying to the challenges of aging peak. The
following measures could be take consideration. The public finance
expenditure structure should be adjusted further to increase the
investment to social security. Based on the revenue of public finance, the
proportion of social security to public finance should increase gradually.
The single social security budget should be built, and the ratio of social
security amount to GDP should be increased. The personal account of
old-age pension should be made full. The “empty” of personal account in
public old-age pension for workers in urban enterprises should be solved.
The scale of national social security fund should expand, and the national
strategy storage should be enriched. The investment channel of social
security fund should be developed. The regulation on management of
surplus and maintenance and appreciation of social security funds should
be promulgated to solve the problems of fund squeezing, appropriating
and depreciation. The supervision mechanism should be built to
guarantee the funds safety.
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45. Second, the legislation of social security should be paced quickly.
Combined with the implementation of the Law of Social Insurance, the
“Interim Regulations on the Collection of Social Insurancet”,
“Regulations on Unemployment Insurance”, “Interim Regulations on the
Disable Employment Fund Management”, “Finance Institutions on Social
Insurance Fund”,” Accounting Institutions on Social Insurance Fund” and
etc. should be revised. The regulations of social insurance, social
assistance and social welfare institutions linkage should be improved to
build a thorough system of social security law and regulation system.
Third, the mandatory age for retirement should be prolonged in
proper opportunity. Prolonging the age for retirement is the priority
policy in every country to replying aging. According to the facts of
people’s improving health level and the extending life expectancy, in the
premise of studying supply and demand in labor market and considering
the psychological endurancee of people, the adjustment of retirement
should be adjusted properly using flexible strategy.
Fourth, the complementary security should be developed, and multi
level security system should be built. The items of complementary social
security not only include enterprise annuity, complementary medical
insurance, and civil servant medical assistance, but also include
commercial old-age pension, health insurance and social charity business.
Currently, the development of complementary social security in China
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46. still lags, and it has limited influence on the whole social security system.
The employer should be encouraged to build complementary insurance
for employee, through more powerful preferential tax policy. Meanwhile,
the market resources should be fully utilized, and all kinds of social
organizations and market subjects should be guided and standardized to
set up complementary social security business.
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