1. The Reform and Development of China’s 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 Multi—layer 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 China’s Social Security Programs Some Difficulties for Social Security Construction in China Suggestions for the Future Development of China’s 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 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 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 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.

7. 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

8. 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.

9. 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

10. Table1 Participants in Social Security System (million) YearPensionMedical care Unemploym ent MLSGS in Urban 1998 84.76 79.28 1999 95.02 15.0998.522.66 2000 104.47 28.63104.084.03 2001 108.02 54.71103.5511.71 2002 111.28 69.26101.8220.65 2003 116.46 79.75103.7322.47 2004.9 120.3792.24103.67

11. The Multi—layer System of Pension Insurance Basic pensions The supplementary pension insurance by the enterprises Commercial pension insurance

12. Table 2 The Development of China’s Basic Pension System YearTotal 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 84.76 145.90 135.30 151.2051.81 1999 124.85 95.02 196.50 159.50 192.5072.70 2000 136.17 104.47 227.90 186.90 211.55 94.71 2001 141.82 108.02 248.90 209.20 232.13105.41 2002 147.36 111.28 317.15 255.14 284.29160.80 2003 155.06 116.46368.00 304.40312.20 220.70

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 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 ．

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. 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.

21. . 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?

22. Some policy suggestions of old- age security program construction ： 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

23. Table 3 Social Public Expenditure in OECD and EU countries 1997(% of GDP) 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 18.09 19.25 日本 14.43 14.76 奥地利 25.42 26.25 卢森堡 23.87 23.87 比利时 23.62 25.11 荷兰 25.10 25.86 英国 21.59 21.93 新西兰 20.70 20.70 加拿大 16.95 16.95 挪威 25.37 26.45 丹麦 30.48 30.85 葡萄牙 18.71 19.06 芬兰 29.33 29.49 西班牙 20.88 20.88 法国 29.64 29.64 瑞典 33.67 33.67 德国 25.56 27.75 瑞士 22.40 27.21 希腊 22.19 22.19 美国 16.03 16.54 冰岛 17.96 19.20 捷克 19.77 19.77 爱尔兰 17.90 17.90 波兰 25.85 25.85 意大利 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 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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