A Social Safety Net for Urban and Rural Residents Has Taken Shape in China

From: English Edition of Qiushi Journal Updated: 2013-02-19 09:46
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Leading Party Members’ Group of the Ministry of Human Resources and Social Security

Social security serves as a “safety net” underpinning social stability and a “shock absorber” supporting the sound operation of the economy. Social security programs in China have witnessed rapid development since the holding of the Sixteenth National Congress of the CPC in 2002. Since then, the basic framework of a social safety net for both urban and rural residents that is geared to the socialist market economy has taken shape. This system has made a positive contribution to social stability and to healthy economic and social development in China. 

Students at the First Primary School of Linze County in Gansu Province make their way home after a day at school. China’s revised Compulsory Education Law, which came into effect on September 1, 2006, clearly states that China “will not charge tuition fees and miscellaneous fees for students attending compulsory education.” In addition to being exempted from tuition fees and miscellaneous fess, students attending compulsory education in rural areas were also exempted from textbook fees in the autumn of 2007. This policy came to the benefit of 150 million students in rural areas. / Photo by Xinhua reporter Zhang Meng

I. Major progress in China’s social security programs 

We have made major breakthroughs in the establishment and development of social security programs and succeeded in setting up the basic framework of a social safety net for China. Over the past 10 years, we have filled in many of the gaps in our social security programs by establishing new ones, whilst at the same time consolidating and improving programs that previously existed. Firstly, we have promulgated and implemented the Social Insurance Law of the People’s Republic of China. Secondly, we have improved our program of basic pension insurance for the employees of enterprises; begun pooling basic pension funds for working residents in urban areas at the provincial level; introduced measures to allow for the transfer of personal pension insurance accounts from one part of the country to another; launched trials for the reform of the pension insurance system in public institutions; and made progress in the establishment of enterprise annuities. Thirdly, we have set up and implemented a new pension insurance program for rural areas and a pension insurance program for non-working urban residents, which will cover all residents in rural and urban areas by the end of 2012. Fourthly, we have set up and fully implemented a new cooperative medical care program for rural areas, a basic medical insurance program for non-working urban residents, and a medical assistance program for urban and rural areas in addition to improving basic medical insurance for working residents. This year we have established a major illness insurance program for urban and rural residents. These efforts have allowed us to put programs in place for the provision of basic medical care to all rural and urban residents. Fifthly, we have established a mechanism to promote employment through the provision of unemployment insurance, and engaged in active trials to establish a framework of provisions to ensure living standards, promote employment, and prevent unemployment. Sixthly, we have implemented work injury insurance and maternity insurance in most areas. Seventhly, we have established and implemented a subsistence allowance system throughout rural areas. Finally, we have made active efforts to develop commercial pension insurance and health insurance. Due to these efforts, China has succeeded in establishing the basic framework of a social safety net which is based on social insurance, social assistance and social welfare, which primarily comprises of basic pension insurance, basic medical insurance, and subsistence allowances, and which is supplemented by charity programs and commercial insurance. Whereas in the past care was the responsibility of the workplace or families, now it is the responsibility of society as a whole. Whereas in the past social security was only available to employees in cities and towns, now it is available to all residents in urban and rural areas. Whereas in the past there were few assurance programs, now there are numerous programs on multiple levels. This represents a substantial change.

We have rapidly enlarged coverage, thereby allowing more and more people to enjoy social security. Over the past 10 years, the coverage of social security programs has extended from urban areas to rural areas, from state-owned enterprises to all kinds of enterprises, and from working residents to all residents in rural and urban areas. In 2011, approximately 284 million people were covered by basic pension insurance in urban areas, 473 million were covered by basic medical insurance in urban areas, 143 million were covered by unemployment insurance, 177 million were covered by work injury insurance, and 139 million were covered by maternity insurance. Compared with levels of coverage in 2001, these figures represented increases of 100.18%, 549.79%, 38.27%, 307.24%, and 302.08% respectively. In 2011, 832 million rural residents were covered by the new cooperative medical care program, while a total of 364 million people were covered by new pension insurance in rural areas and pension insurance for non-working residents in urban areas. In the space of just years, China has made the incredible achievement of bringing hundreds of millions of people under the coverage of social security programs to establish the world’s largest social safety net.

We have raised the standard of benefits by a considerable margin so as to better safeguard and improve people’s basic standards of living. From 2005 through 2012, the level of pensions for retirees from enterprises has been increased for eight consecutive years. The average monthly pension for retirees from enterprises is expected to reach 1,700 yuan in 2012, which represents an increase of 180% over the national average in 2002. Expenses for treatment at local medical clinics are now covered by pooled funds, and the level of reimbursement provided under basic medical insurance in rural and urban areas has been gradually raised. The standard of subsidies from all levels of government for basic medical insurance for non-working urban residents and new cooperative medical care in rural areas has been increased from 40 yuan per capita annually to over 240 yuan in 2012. Under the program of basic medical insurance for working people in urban areas, the maximum amount that can be reimbursed for medical expenses has been increased from 4 times the average annual salary for the area in question to 6 times. Under the programs of basic medical insurance for non-working urban residents and new cooperative medical care in rural areas, the maximum payout has been raised to more than 6 times the average disposal income of urban residents and net income of rural residents per year respectively. The level of benefits provided under programs such as unemployment insurance, work injury insurance, maternity insurance, and subsistence allowance for urban and rural residents has been increased gradually, as has the level of allowances and subsidies for children under the age of 16, disabled people and elderly residents in rural areas with no means of support (who are entitled to support concerning food, clothing, medical care, housing and burial expenses, or in the case of minors, education), and disabled servicemen and the family members of revolutionary martyrs and servicemen who are entitled to special care and preferential treatment. The gradual raising of social security standards has created favorable conditions for living standards to be improved and for more people to benefit from China’s economic and social development.

Social security funds have grown constantly and thus we have become more capable of guarding against risks. Governments at all levels have stepped up their expenditure in social security programs and continued to standardize procedures for fund collection, payment, and administration. The result of these efforts has been the constant growth of social security funds. In 2011, the revenue, expenditure, and accumulated balance of funds for the five insurance programs for working residents in urban areas (pension insurance, basic medical insurance, unemployment insurance, work injury insurance, and maternity insurance) reached 2.4 trillion yuan, 1.81 trillion yuan, and 2.9 trillion yuan respectively. The rapid growth of social security funds has laid down solid foundations for the sustainable development of China’s social safety net. From 2009 to 2010, in response to the international financial crisis, enterprises in financial difficulty were allowed to defer their premium payments for the five insurance programs for the very first time; the premiums for four of the five insurance programs were lowered; and government subsidies for three insurance programs were increased. This policy alleviated enterprises of a financial burden amounting to 80.77 billion yuan, helping to secure the jobs of 60 million people and promote the steady recovery of the economy.

We have established a basic public service system for social security and gradually expanded the service network. An organizational framework for the administration of social security and a network for the provision of services in which social insurance agencies at various levels play the core role, banks and other designated service providers play a supporting role, and community labor service stations play a foundation role have been gradually developed. In this network, which has been extended to towns, townships, and administrative villages, there are over 8,100 service agencies at or above the county level, with 160,000 employees; more than 190,000 community service stations in urban sub-districts, communities, towns, townships, and administrative villages, with 370,000 full-time and part-time employees; as well as 96,000 designated hospitals and 113,000 designated drugstores for medical insurance. A promising start has been made in the development of social security service centers, in the application of IT in the administration of social security programs, and in the capacity-building of social security service agencies. We have established a three-tier network at the central, provincial, and municipal levels, and linked provincial networks to the network at the Ministry of Human Resources and Social Security, which allows us to upload and monitor the data of hundreds of millions of social security account holders. IT has been widely applied in the administration of social insurance and the provision of services under various programs. By the end of 2011, a total of 199 million social security cards had already been issued. All basic pensions for retirees from enterprises are now issued by social insurance agencies, while 77.3% retirees have been brought under the administration of local communities. The constant improvement of systems for social security administration and service provision has helped to constantly raise standards in administration and services and further enhance the role that public services play.

II. Promoting the sound and rapid development of social security programs by putting people first  

The decade since the 16th National Congress of the CPC has seen China’s social security programs develop at an unprecedented pace and the general public benefit from these programs more than ever before. In an effort to promote the development of a social safety net with Chinese characteristics that covers all residents in urban and rural areas, we have maintained a commitment to putting people first and applying the Scientific Outlook on Development; given due consideration to local conditions in China so as to develop a social safety net that matches our level of economic development; given equal consideration to fairness and efficiency whilst matching rights with obligations; and sought to strike a balance between reform, development, and stability.

We have prioritized efforts to address the absence of the social security systems for rural residents and non-working urban residents, as well as efforts to solve issues concerning social security for people with special needs. Over the past decade, taking rural residents, non-working urban residents, and people with special needs as the focus of our efforts, we have accelerated the development of various social security programs and succeeded in establishing the largest social safety net in the world. Owing to these efforts, the number of people covered by social security programs in China has increased exponentially. Moreover, by making use of funds raised through various channels in addition to funds from the central government, we have been able to resolve several longstanding issues with regard to social security. These pertain to the inclusion of retirees from closed or bankrupt state-owned enterprises and employees from struggling enterprises under the program of basic medical insurance for urban workers; the inclusion of people that sustained a work injury prior to the implementation of the Regulations on Workers’ Compensation under the program of work injury insurance; and the inclusion of the employees of collectively owned enterprises under the program of old-age insurance. Relieving these people of their worries and providing them with a stronger sense of security has helped to promote social harmony and stability.

We have addressed major issues concerning systems and mechanisms through efforts in reform and innovation. Taking new trends such as rapid urbanization, an aging population, and a growing floating population into account, we have made greater efforts to develop social security programs in rural areas; formulated and implemented measures allowing urban workers to transfer their basic pension insurance and basic medical insurance from one part of the country to another; and introduced measures for the settlement of medical bills incurred by retirees in areas outside the jurisdiction of their insurance coverage. These measures have allowed us to provide the floating population with more convenient, more efficient, and faster services, thereby effectively reducing the burden that participants of social security assume. 

Increased government expenditure has allowed us to make constant enhancements to the level of assurance and benefits that are provided. As part of a commitment to putting people first, the CPC Central Committee, the State Council, and all levels of Party committee and government regard the accelerated development of a social safety net as a major part of their efforts to safeguard and improve the living standards of the people. On this basis, public finance has been tilted towards social security programs so that the general public may benefit more from economic and social development. Over the past 10 years, a total of 1.4542 trillion yuan in public finance has been spent on the five social insurance programs for urban workers alone, of which 1.0881 trillion yuan was allocated by the central government. This expenditure has powered the sustainable development of social security programs and ensured the timely and full payment of benefits.

We have promoted the steady and sustainable development of our social security programs on the basis of law through efforts to improve the legal system. Over the past decade, we have stepped up our efforts to establish laws on social security in line with the constant development of social security programs. The passage of legislation has been helping us to promote the steady and sustainable development of social security programs on the basis of law and better guarantee citizens’ right to social security.

(Originally appeared in Qiushi Journal, Chinese edition, No.18, 2012)

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