The Reform and Development of China

1
The Reform and Development of Chinas Social
Security System after 1978

• Wang Yanzhong
• April 28, 2005
• Shanghai, P.R. China

2
Main Contents(1)

• From Working-Unit Security to Social Security
• Reforms of the Social Security System
• Establishment of New Pension Model
• The Multilayer of Pension System
• Reform in the Medical Care Insurance System
• The Peak of Laid-off Workers and Unemployment
  Security

3
Main Contents(2)

• Social Security in rural areas
• Improving the Last Safety Net
• Improvements of the Social Welfare System
• The Latest Development of Chinas Social Security
  Programs
• Some Difficulties for Social Security
  Construction in China
• Suggestions for the Future Development of Chinas
  Social Security System

4
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 state-ownership 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.

5
The Creation of Chinas Social Security System(1)

• In 2003, Chinas 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 re-placement 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.

6
Progress in the Reform of the Social Security
SystemPension(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.

7
Progress in the Reform of the Social Security
SystemPension(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

8
The Creation of Chinas 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.

9
Progress in the Reform of the Social Security
Systemothers

• 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

10
Table1 Participantsin Social Security
System (million)
Year Pension Medical care Unemployment MLSGS in Urban
1998 84.76 79.28
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
11
The Multilayer System of Pension Insurance

• Basic pensions
• The supplementary pension insurance by the
  enterprises
• Commercial pension insurance

12
Table 2 The Development of Chinas Basic Pension
System
Year Total participants (million) Employee participants (million.) Total income of pension fund (billion yuan ) Contribution by Employer Employee (billion yuan) Expenditure Of Pension Fund(billion yuan ) Accumulative Surplus (billion yuan )
1998 112.03 84.76 145.90 135.30 151.20 51.81
1999 124.85 95.02 196.50 159.50 192.50 72.70
2000 136.17 104.47 227.90 186.90 211.55 94.71
2001 141.82 108.02 248.90 209.20 232.13 105.41
2002 147.36 111.28 317.15 255.14 284.29 160.80
2003 155.06 116.46 368.00 304.40 312.20 220.70
13
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

14
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
  laid-off and unemployed workers. 3 percent of the
  wages for the unemployment insurance fund based
  the regulation in 1999.

15
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

16
Improving the Last Safety Net

• 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.

17
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.

18
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 Chinas
  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.

19
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

20
Chinas 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.

21
. Some Suggestions for the Future Development of
Chinas 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?

22
Some policy suggestions of old- age security
program construction

• Defining governments 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
  governments 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

23
Table 3 Social Public Expenditure in OECD and EU
countries 1997( of GDP)

• ???? ???????????
  
• ???GDP ????GDP
• ???? 18.09 19.25
  ?? 14.43 14.76
• ??? 25.42 26.25
  ??? 23.87 23.87
• ??? 23.62 25.11
  ?? 25.10 25.86
• ?? 21.59 21.93
  ??? 20.70 20.70
• ??? 16.95 16.95
  ?? 25.37 26.45
  
• ?? 30.48 30.85
  ??? 18.71 19.06
• ?? 29.33 29.49
  ??? 20.88 20.88
• ?? 29.64 29.64
  ?? 33.67 33.67
• ?? 25.56 27.75
  ?? 22.40 27.21
• ?? 22.19 22.19
  ?? 16.03 16.54
• ?? 17.96 19.20
  ?? 19.77 19.77
• ??? 17.90 17.90
  ?? 25.85 25.85
• ??? 26.85 26.85

24
Table 4 Figures on Social Security Expenditure
in China 2003 Note Personal Accounts Only

• Social Insurance Income 487.8(bi.yuan)
• Pension 368.0(contribution 304.4, Fisical
  Subsidies 55.6)
• Unemployment 24.95
• Basic Medical Insurance 89.0
• MLSGS about 20.0
• Liaoning Province Test10.0
• 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.o100.0 and Poverty
  Prevention(50.0)
• Fiscal support on Civil servants and etc of
  pension, medical care and etc. around 100. 0
• Above Total Income 800.0900.0 billion yuan
• Total Expenditure about 700.0800.0 billion yuan,
  6-7 of GDP
• Adding some other social public goods like
  compulsory education, 2-3of GDP
• Sum about 10 of GDP

25
THANK YOU!