Risks and Coping Practices: formal and informal social safety net in rural China

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Risks and Coping Practices formal and informal
social safety net in rural China
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1. introduction

• Historically only the state employed groups
  Guojia Zhigong, not those unemployed and rural
  population, were under the formal social
  protection.
• In rural area formal Three No Persons Five
  Guaranteed House, and land approach.
• Physical, economic and social risks are increased
  to lead to vulnerability in rural area of China

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• According to the two poverty lines in China, 683
  RMB absolute poverty and 958RMB relative poverty,
  there still 21.48 million rural absolute poor and
  35.50 million relative poor in rural area.
• Up to 2006, 24 provinces,2400 counties set up
  minimum rural social security system covering 13
  million with 650-1500RMB annual standard in
  different areas, at same time, in urban area
  22.33 million covered with 2000RMB

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Physical and Natural
social
risks
biological
economic
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When risk takes place, usually both formal and
informal measures can prevent the affected to be
vulnerable, some can reduce the degree of the
vulnerability during crisis, and some can cope
with after the crisis, all those forms social
safety net in a broad sense.
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2. Social safety net in China general
formal informal comments
1. Social help minimum living standard Five Guarantee disaster relief health help housing help legal assistance and poverty reduction through development assistance Living standard, Five Guarantee disaster relief, and poverty reduction Housing legal assistance Minimum living standard only partly
2.Rural insurance pension and health insurance Cooperative insurance Pension and health Cooperative health insurance only partly
3. Social welfare public health, education, house and other social services Poor area and household education program Health, house
4. Military welfare All formal
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3. Formal system Minimum Living Standard policy
and targeting

• 1996 began to set up the system and gradually
  expend.
• Finance comes from state, province, county and
  township, mainly from province and county, depend
  on different situations.
• Standard different from different provinces,
  Fujian 1000yuan gap compensation

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Sha County, Fujian MLS finance project 1997-2004
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• Targeting
• Poverty line
• Different target groups
• Insufficient fund
• Leakage and mis-targeting
• others

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Cooperative health insurance

• 2. Cooperative Health Insurance Program all
  villagers covered 40Yuan from the state,10 yuan
  from villager per year. Reimbursement
  1000yuan45,1000-3000yuan 50, above
  3000Yuan,65, ceiling to 8000yuan.

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4. Type of risks in the village
Ranks Type of risks in the community and defined by it
1 Drought
2 Grazing ban policy
3 Lack of drinking water
4 Lack of loan
5 Lack of agricultural input
6 Risk of mono-cropping
7 Lack of animal feed
8 Crop pest and disease
9 Lack of training
10 Low technical skill
11 High interest rate of informal loan
12 Health probelm
13 Market difficult for animals
14 Education cost
15 Earlier frog
16 Marketing difficult to sell crops
17 Land conversion program change
18 People get old
19 Delayed payment for migrant labour
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5. Informal risk coping practices

• The villagers cope with the risk in following
  ways
• Mutual help
• Mobilize saving
• Sell sheep
• In formal loan 20-30 interest rate, 75
  villagers use
• Brow money, no interest rate
• Shift income alternatives immediately
• Sell crops

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Rank of coping practices the measures are taken
according to the degree of risk seriousness. Most
villagers first look immediate income
alternative, until to sell stored crops during
the very serious situation. Usually, villagers
first chose borrowing than using saving as
borrowing does not need to pay interest.
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Expressive and instrumental support

• Expressive support is widely practiced by most
  villagers, but only in the cases of urgent
  occurring, health problem, childrens education
  difficult, marriage difficult and house-building
  etc. it confines with family members, relatives
  and close friends expressed by contribution in
  cash or in kind. One villagers son was enrolled
  in university in Beijing, but he had difficulties
  for tuition fee, then one of his brothers
  contributed 1000yuan, another brother contributed
  1000yuan,and neighbors and friends contributed
  1000yuan. Expressive support can be divided into
  two kinds, pure present or gift or help in cash
  or in kind, and borrowing which is usually a bit
  larger, however with no interest rate charged,
  still as the help.

• Instrumental support is also often practiced, but
  only within the activities which does not
  directly lead to emotional reactions among family
  members, friends and relatives. Those are usually
  as shortage of immediate cash low, business
  failure and other kind risk of economic
  activities. The main instrumental support is
  informal loan with 30 interest rate.

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Sheep material asset for safety net

• Sheep is served for all villagers the most
  important material asset for preventing,
  relieving and coping the risk. High number of
  sheep holding associates with less risk
  experience presented in the projection.

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Safety net for the elder

• 1. for those who has children only one son
  lives together many sons live with the one with
  good relation, others contribute in cash or in
  kind no son but daughter live alone, daughter
  contributes
• 2. for those who have no children step a son
  from the families with same surname or relatives,
  then child is stepped during young age and
  nurtured by stepped family, he will look after
  the stepped parent when they are old. He keeps
  the family name of the stepped in his surname and
  still keep his original family name as part of
  his full name, but his children will resume his
  original family name. eg the informant for this
  case, his name is Yang and Li, his children are
  all Li.

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Combined practices

• Case one the wife of the family had Venter tumor
  in 2005. the family spent 3500 Yuan for
  treatment. The husband thought to sell sheep, but
  the price of the sheep was very low, he decided
  to get informal high interest loan from the
  village to pay the hospital fee. Afterward he
  went to off-farm labor and got 1200 yuan. One
  month late, the price of sheep increased 1 yuan
  per kg, then he sold 14 sheep and got 540yuan
  more comparing to the price when he needed money,
  then he only paid interest rate 102 Yuan during
  the time he was dealing with the risk.

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• Present and gift
• Borrowing and loan
• Sell and buy
• Save and use saving

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Thank you for your attention!

• Dr. Li Xiaoyun
• Prof. of Development Studies, Dean of College of
  Humanities
• and Development/ School of Public Administration,
  China
• Agricultural University, Beijing 100094 China
• Tell 0086-10-62733094
• Fax[phone]
• E-mailxiaoyun_at_cau.edu.cn