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Social Security & Taxation

Social Security in China

Social Security in China has been hailed by some and heavily criticized by others. Either way, expats should be aware that they can be included in the system. Before you sign your name on the dotted line, you should probably know what you’re agreeing to. Luckily the InterNations Expat Guide has you covered!

Social security in China is an impressive accomplishment, although it is extremely important to note that it is still a developing system. In just over two-decades, the country has constructed a rather extensive social security system that covers a large portion of its citizens. Social security in China is premised on a ‘rolling-out’ policy, defined by prioritizing urban workers and slowly extending coverage and policy to those in the rural areas. While the system faces many challenges, the government seems committed to improving it and, in 2013, spent 1.59 trillion CNY to meet this endeavor.

Expats moving to, or indeed already living in, the PRC, should be aware that as per government regulations issued in October 2011, they can be included in system of social security in China. However, they might find it difficult to avail of these services due to a variety of reasons. First and foremost among these is the convoluted nature of the laws. Policies regarding social security in China can be difficult to understand and is further complicated by the fact that variables and contributions vary both by locality and by sector. Moreover, due to the fact that some insurance policies are managed locally, and some federally, finding accurate information can be difficult to attain. According to the Ministry of Human Resources and Social Security, only 33% of foreigners working in China joined the country’s social welfare system in 2013.

A Brief History

Since the formation of the People’s Republic in 1949, social security in China has been perpetually restructured, premised on a series of different and conflicting philosophies and policies. The first began with the move toward the socialist economy. It was based upon two pillars, those of the ‘iron rice bowl’ and the Confucian ideology of children taking care of their parents in their old age. The iron rice bowl is a term used to denote the principle of lifelong employment through state-owned enterprise. Able-bodied workers were structured into danweis through which they could avail of state provided welfare packages.

Farmers in rural areas were also organized into groups based on collective land ownership. Despite a strong urban/rural divide, which still exists in the system of social security in China today, it worked reasonably well and afforded welfare for most people. Even those who fell outside the system of worker-farmer, were supplied with some basic social relief.

However, after the failure of the Great Leap Forward and the Cultural Revolution, social security in China began to fall to the wayside and policies continually floundered. After 1978, market reforms meant that the policy of lifelong employment and the iron rice bowl were at an end, replaced by merit based contracts. Moreover, as a result the grouping structure through which the population could secure welfare benefits was disbanded. Although the years after 1978 were marked by exponential economic growth, social welfare was tied to this success and those who were not carried out of poverty were left without reliable social protection, especially those in rural areas.

The Current Policy

Social security in China is the responsibility of the Ministry of Human Resources and Social Security, although different elements are administered on the federal or local level. Social security in China falls into three categories – social assistance, welfare services, and social insurance (which, as the largest category, will be discussed separately).

The strongest feature of social assistance is the Minimum Subsistence Guarantee. The Minimum Subsistence Guarantee is a promise by the state to ensure that the population has the minimum income required to live in their territory – a figure decided by local authorities. If an individual, or family, falls short of this figure, than the local authorities should issue a subsidy sourced from the local relief fund. As far as expats are concerned, migrant workers can be covered depending on the local practice. According to official reports, the Ministry allocated 174 billion CNY to help China’s poorest residents in 2013.  

Welfare also remains within local responsibility and is directed toward the most disadvantaged groups, including, but not limited to, orphans, the disabled, and the elderly poor. These services come mainly in the forms of designated ‘homes’ and assistance allowances.

 

We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete. 

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