Transcript The Reform and Development of China`s Social Security System

The Reform and Development of China’s
Social Security System after 1978
Wang Yanzhong
April 28, 2005
Shanghai, P.R. China
Main Contents(1)
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From Working-Unit Security to Social Security
Reforms of the Social Security System
Establishment of New Pension Model
The Multi—layer of Pension System
Reform in the Medical Care Insurance System
The Peak of Laid-off Workers and
Unemployment Security
Main Contents(2)
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Social Security in rural areas
Improving the Last Safety Net
Improvements of the Social Welfare System
The Latest Development of China’s Social
Security Programs
• Some
Difficulties
for Social
Security
Construction in China
• Suggestions for the Future Development of
China’s Social Security System
From Working-Unit Security to
Social Security
• The social security system before the reform was one of a
unit security system based on the economic units of stateownership and collective ownership, with state financial
support to ensure that there would be no bankruptcy of
these economic units．The new social security system is a
socialized social security system．Staffs and workers
from being a “person of the unit” to one of being a “person
of the society” . Social security system means that of unit
responsibility to social responsibility．The funds should
come from diversified sources instead of just one source．
The Creation of China’s Social Security
System（1）
• In 2003, China’s unemployment covered 103.73 million people: those
were 40.4% of all city/township employees (totally 256.39 millions),
or 94.6% of all unit employees (totally 109.7 millions). In 2003, nation
wide, there were 8 million unemployed people on the city/township
unemployment register (registered unemployment rate was 4.3%). The
unemployment insurance funds in terms of receipts and payments were
25 billion yuan and 20 billion yuan respectively. The job replacement service center program had provided job skill training to
28.18 million people who were unemployed during the period of 1998
through 2003 and paid out 73.7 billion yuan for living allowances and
employment service fees. And the program had helped 18.9 million
people (67.2%) to find job again.
Progress in the Reform of the
Social Security System:Pension(1)
 In 1991, “Decision on the reform of pension
insurance system of urban enterprises employees
by the State Council”(1991 pension act)
 In 1993 “Decision on founding socialism market
economy system by CPC” was passed. The model
of combination of social pooling and personal
accounts was enforced.
Progress in the Reform of the
Social Security System:Pension(2)
• The State Council promulgated in 1997 “Decision on
Establishing a Unified Pension System for Enterprise
Employees”, deciding to create a unified system of old-age
insurance for enterprises workers.
• The government accelerated the pace in
introducing programs of overall social planning at
the provincial level
• The pilot reform project in Liaoning in 2001 in
Jilin and Heilongjiang in 2004
The Creation of China’s Social Security
System（2）
• Most employees have gradually joined the main socialized
basic health care insurance program by the combination of
the social fund and the individual account. There were
109.02 million city/township employees, including 29.27
million retirees, joining the program, taking 31.1% of the
total city/township employees and 72.7% of the total unit
employees in 2003. But there were no healthcare insurance
or self paid healthcare for the 90% countryside residents,
due to the disintegration of the cooperative healthcare
program. The health prevention and protection program
supported by the public finance administration also had big
problem because of over marketization behavior.
Progress in the Reform of the
Social Security System:others
• In 1998, the State Council issued a ‘‘Decision on
the Establishment of Medical Care Insurance for
Urban Workers'’, which serves as the basic
framework of the insurance system．
• In 1999，the State Council issued its “Regulations
on Unemployment Insurance”.
• “Lay-off” system and Re-employment Centre
• Establishment of social relief system from 1993
Table1
Participants
in Social Security System (million)
Year
Pension
Medical
care
Unemploym MLSGS in
ent
Urban
1998
84.76
1999
95.02
15.09
98.52
2.66
2000
104.47
28.63
104.08
4.03
2001
108.02
54.71
103.55
11.71
2002
111.28
69.26
101.82
20.65
2003
116.46
79.75
103.73
22.47
2004.9
120.37
92.24
103.67
79.28
The Multi—layer System of
Pension Insurance
• Basic pensions
• The supplementary pension insurance by
the enterprises
• Commercial pension insurance
Table 2 The Development of China’s
Basic Pension System
Year
Total
Employee
Total income of
participants participants pension fund
(billion yuan )
(million）
(million.）
1998
112.03
1999
124.85
2000
136.17
2001
141.82
2002
147.36
2003
155.06
84.76
95.02
104.47
108.02
111.28
116.46
145.90
196.50
227.90
248.90
317.15
368.00
Contribution by
Employer &
Employee
(billion yuan）
135.30
159.50
186.90
209.20
255.14
304.40
Expenditure
Of Pension
Fund(billion
yuan )
Accumulative
Surplus
(billion
yuan ）
151.20
51.81
192.50
72.70
211.55
94.71
232.13
105.41
284.29
160.80
312.20
220.70
Reform in the Medical Care
Insurance System
• From free medical care system for civil
servants and labor protection medical care
system to the basic medical care insurance.
• Regulation of the basic medical care
insurance: combination of social
pulling(52.5% of total contribution 8% of
total wages) and personal accounts
Unemployment Security
• Since the mid-l990s，the number of registered
unemployed in urban areas shot up，from 3.64
million in 1992 to 8 million in 2003 and the
unemployment rate has risen to 4.3 percent from
2.3 percent.
• The establishment and development of the
unemployment insurance fund played a positive
role in guaranteeing the basic necessities for laidoff and unemployed workers. 3 percent of the
wages for the unemployment insurance fund based
the regulation in 1999.
Social Security in rural areas
• The new Co-operative medical care system
in 2002 and public health construction
• The social pension fund for farmers since
1991 and new strategies from 2005
Improving the Last Safety Net
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Social relief is the most fundamental element in the social
security system，and is known as the last “safety net". The
former traditional social relief system formed under the
planned economy that was specially designed for "the
disabled” or “three nos” .
• By 1999，all the cities and towns had established the
minimum living standards system. In the same year, the
Central Government issued its ‘‘Regulations on Security of
Minimum Living Standards for Urban Residents” to
provide the most basic security for urban residents and
some rural areas.
Development and Improvement
of the Social Welfare System
• The social welfare system in China mainly refers
to the system in which the government gives
financial aid to the aged，orphans，and
handicapped who have need of life security.
• A new phenomena is the development of
volunteers and community work
• Social mutual aid is another non-governmental
form of social security，which has developed
under governmental encouragement in recent
years.
Some Difficulties for Social
Security Construction in China(1)
• The most challenge issue in this area is how to
expand the coverage of social security especially
the urban employees’ coverage of social insurance
system in a low income level per capital.
• One of the strongest criticizes for China’s social
security system is about the unfairness and low
efficiency of the medical care system.
• A practical difficulty is the pressure of the
increasing number of payments from the overall
social security fund．
Some Difficulties for Social
Security Construction in China(2)
• The pension fund management and
investment issues
• Construction on social security laws and
regulations
• Development of social security system in
rural areas
China’s old-age security (retirement)
program possesses major problems:
(1) the pressure of increasing pension payment;
(2) in fact, this system is still “pay as you go”
system on the whole;
(3) the low coverage and the lack of sustainable
development of the pension fund.
. Some Suggestions for the Future Development
of China’s Social Security System
• How to expand the urban employees’
coverage of social insurance?
• How to build the social security programs
for the residents in the rural areas?
• How to expand the coverage of the
healthcare security and improve the
efficiency of the medical service system?
Some policy suggestions of old- age
security program construction ：
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Defining government’s duty and settling the cost of conversion of the system;
Accelerating the construction of two accounts’ independent operation;
Accelerating the old-age security reform in government’s departments and
“shiye” units;
Clarify the old-age security of those people such as informal employees , the
self-employed, etc.;
Strengthening the management system of pension funds;
Combining the construction of the second and the third pillar with the
development of capital market;
Strengthening the supervision of fund operation ;
Accomplishing some policies about occupational pension;
Developing care system of the elder, community service and the old people
associations in some developed areas
Table 3 Social Public Expenditure in OECD
and EU countries 1997(% of GDP)
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公共社会
公共社会开支和个人强制
开支占GDP% 性支出占GDP%
澳大利亚
奥地利
比利时
英国
加拿大
丹麦
芬兰
法国
德国
希腊
冰岛
爱尔兰
意大利
18.09
25.42
23.62
21.59
16.95
30.48
29.33
29.64
25.56
22.19
17.96
17.90
26.85
19.25
26.25
25.11
21.93
16.95
30.85
29.49
29.64
27.75
22.19
19.20
17.90
26.85
日本
卢森堡
荷兰
新西兰
挪威
葡萄牙
西班牙
瑞典
瑞士
美国
捷克
波兰
14.43
23.87
25.10
20.70
25.37
18.71
20.88
33.67
22.40
16.03
19.77
25.85
14.76
23.87
25.86
20.70
26.45
19.06
20.88
33.67
27.21
16.54
19.77
25.85
Table 4 Figures on Social Security
Expenditure in China 2003
Note: Personal Accounts Only
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Social Insurance Income 487.8(bi.yuan)
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Pension 368.0(contribution 304.4, Fisical Subsidies 55.6)
Unemployment 24.95
Basic Medical Insurance 89.0
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MLSGS about 20.0
Liaoning Province Test:10.0
National Social Security Fund 132.5(only income no expenditure)
Public Health 10.0 for information system,10.0 for New Co-operation
Social Welfare 80.o—100.0 and Poverty Prevention(50.0)
Fiscal support on Civil servants and etc of pension, medical care and etc. around
100. 0
Above Total Income: 800.0—900.0 billion yuan
Total Expenditure about 700.0—800.0 billion yuan, 6%-7% of GDP
Adding some other social public goods like compulsory education, 2%-3%of
GDP
Sum: about 10% of GDP
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THANK YOU!