The Truth About Pensions in China

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Recently, in the Russian media and even in some scientific publications, when discussing the topic of raising the retirement age in Russia (for men - up to 65 years, for women - up to 63), statements began to appear that it is necessary to take an example from China, where there is supposedly a large part of the population is not covered by the social insurance system at all.

And, in general, the success of the PRC in the economy is associated with the fact that the state and entrepreneurs almost do not bear the costs of the social insurance system of the population, and only a small part of civil servants (primarily cadres and workers of large public sector enterprises) use the social insurance system. …

I must say that such statements are not true. Currently, the majority (58, 52%) of the PRC population lives in cities. The standard of living of the population has noticeably increased not only in comparison with 1978, the first year of the reform, but also since 2000.

According to the average salary of workers and employees in cities at the end of 2016: 67,569 yuan per year, or 5,630 yuan per month (about 56 thousand rubles per month), - China has already overtaken Russia (about 30 thousand rubles per month), although back in 2010, China's lag behind Russia in terms of the average wage level was noticeable: 36,539 yuan per year (about 3,000 yuan, or 18-20 thousand rubles per month at the yuan-to-ruble exchange rate for that period).

As noted in the documents of the 1st session of the 13th National People's Congress (NPC) (March 2018), the social insurance system in China now covers 900 million people, and 1.3 billion people are covered by various types of health insurance. Human. In addition, as part of the fight against poverty, subsidies for the rural and non-working population were increased from 240 to 450 yuan per person per year.

Such indicators of coverage of the population with the social insurance system in the PRC were not immediately achieved. In the course of the reform, it was required not only to achieve significant economic growth, but also over 40 years to carry out a number of measures aimed at ensuring social guarantees for a significant part of the country's population.

The foundations of the PRC's social insurance system were laid back in the 1950s. Workers were covered by the Labor Insurance Law of 1951 and 1953. with amendments made to it in the form of the Provisional Resolutions of the State Council of the People's Republic of China from 1958. And the Directive of the State Council of the People's Republic of China from 1952 "On medical care and preventive treatment at the expense of public funds for senior officials of all levels of the people's government, the apparatus of political parties, public organizations and subordinates enterprises and institutions ", signed by the Premier of the State Council of the People's Republic of China Zhou Enlai, provided that" workers of trade unions, youth and women's organizations, other public organizations, workers in culture, education, health care, enterprise administration and military specialists will enjoy free medical care."

In the course of the economic reform, some changes were made to the provisions on social insurance for workers and employees. In particular, in May 1978, the 2nd session of the NPC Standing Committee approved the "Temporary Pension Forms for Workers" adopted by the State Council of the People's Republic of China. As a result, men were entitled to a pension from 60 years of age with 10 years of continuous work experience and 25 years of total work experience, women from 50 years of age (employees - from 55 years) with 10 years of continuous work experience and 20 years of total work experience. For those working in difficult conditions (cold and hot workshop, in the air, on water and underground), the retirement age was set 5 years lower while maintaining the same length of service as the rest of the workers.

In case of injury at work and complete disability, the worker was paid a pension in the amount of 60 to 80% of his wages. In the event that a worker completely lost his ability to work outside of production, but did not reach retirement age and had 10 years of continuous work experience at the enterprise, he was paid a pension in the amount of 40% of his salary (sometimes up to 60%). If the worker completely lost his ability to work, he was paid a pension for life, and if he was able to work, then he had to be provided with a suitable job for him and paid a certain amount to his salary in the form of benefits. In the event of the death of a worker or employee, all funeral expenses went at the expense of the enterprise, which was supposed to pay the pension to the family members of the deceased.

Absolute and relative growth in the number of pensioners in the 80s. demanded constant additional costs for the formation of the pension fund on the part of enterprises. Experimental forms of pension funds began to emerge. For example, in the 1980s, joint pension funds of state enterprises were created in some large cities, but they turned out to be insolvent. In the 90s, the amount of contributions to pension funds began to depend on the number of pensioners at each enterprise, but in conditions of market competition and an increase in the number of pensioners, not all enterprises, especially large ones, could allocate the necessary funds for the payment of pensions.

In 1991, the State Council of the PRC adopted "Decisions on the reform of the system of payment of pensions to workers and employees of enterprises", which provided for the widespread introduction of a new procedure for the payment of pensions, divided into three types:

1) uniform for all workers and employees;

2) special pension programs of enterprises (implemented by individual enterprises if they have funds for additional pension insurance for their employees);

3) individual pension insurance (insurance policies that are purchased by individual employees).

An important new point was that the unified pension fund was formed not only at the expense of enterprises 'contributions, but also at the expense of employees' contributions (percentage of wages).

The scheme assumed that part of the collected funds goes to the general fund for current pension payments, and the other part remains for accumulation on the employee's personal account. To a large extent, the burden began to fall on the shoulders of workers during the period of labor activity until they reach retirement age.

At the III Plenum of the 14th CPC Central Committee (November 1993), a course was taken to reform the compulsory pension insurance system, combining public distribution with individual accounts. By the mid-90s, the new pension system was extended to employees of all enterprises, regardless of the form of ownership. In 1996, the Ministry of Labor of the PRC and other departments prepared a number of changes in the system of insurance retirement insurance for workers at industrial enterprises, which were approved by the State Council. According to the Decree “On the Creation of a Unified System of Basic Pension Insurance for Employees of Enterprises” (published by the State Council of the People's Republic of China in July 1997), a compulsory pension insurance system (“Decree No. 26”) began to be introduced.

A person starting to participate in pension insurance in the first year transferred 3% of his salary to his personal insurance account, then every two years his contribution increases by another 1%, until 10 years later it reached 8% of his salary. At the same time, the contribution of the company to the personal account of the employee accordingly decreased from 8% of the salary in the first year of participation to 3% - in total, both contributions always amounted to 11% of the employee's salary. Contributions of enterprises to the general fund, the funds of which go to current pension payments, are determined by the local people's government and should be no more than 20% of the average salary of each employee. The pension, which the pensioner began to receive, consisted of two parts: 1) basic pension - no more than 25% of the average salary in a given area; 2) an amount equal to 1/120 of the funds accumulated on the personal account of a pensioner (this figure was determined based on the average life expectancy in 1996 - 70, 8 years).

For rural areas, the Ministry of Labor of the PRC and the Chinese People's Insurance Company have developed an old-age insurance system, which makes it possible for everyone to secure their own pension payments. All citizens between the ages of 18 and 60 living in rural areas, regardless of the nature of their work, can participate in pension insurance. Local governments can also participate in the formation of local pension funds together with citizens in accordance with economic conditions, but the share of contributions from citizens must be at least 50%. Contribution amounts can range from RMB 2 to RMB 20 per month, which can be paid monthly or quarterly. The right to receive a pension begins at the age of 60 for men and women, provided that pension contributions are made within the required period and is valid until death; the remaining funds can be transferred to another account.

Thus, the material support of elderly people living in both rural and urban areas of China is carried out from three sources: 1) funds of children and relatives of elderly people; 2) the insurance pension system corresponding to the place of residence; 3) for a small part of the elderly: lonely, disabled and without means of livelihood - the system of "five types of support" (food, clothing, housing, medical care and funds for funerals).

According to the State Committee on Fertility Planning of the PRC, in 2014, over 95% of rural residents were covered by the social insurance system; subsidies from local budgets were 320 yuan per person, and insurance payments covered 75% of the cost of hospitalization and 50% of the cost of outpatient services. Also, the system of payment for medical services was changed from postpaid to prepaid, which allowed the population to seek medical help in a timely manner and control the costs of diagnostics and treatment.

In July 2011, the Social Insurance Law was adopted. As a result of its implementation at the end of 2016, the compulsory health insurance program covered an additional 120 million people among urban residents and 88.7 million people with pension provision. China plans to expand the system of social benefits for the elderly, both in health care and in the pension system. First of all, it is planned to provide additional social benefits to individual entrepreneurs and those employed in enterprises of non-state forms of ownership, including housewives, rural migrant workers and working "on remote access" via the Internet.

In February 2014, the State Council of the People's Republic of China issued an Interim Order on Social Assistance, which referred to the allocation of social benefits to families whose incomes are below the subsistence level in the region, elderly people requiring constant care, as well as children and seriously ill patients. In addition, this decree provided for the allocation of special subsidies for medical care, payment of utility bills for housing and other types of temporary social assistance for the poor.

As a result of the measures taken in the field of social policy in the 21st century, the size of the pension has grown significantly. If in 1998 the average pension in China was only 413 yuan, now the average pension is already noticeably higher than the average Russian pension - 14,200 rubles a month. Of course, the average monthly pension in China differs markedly by region. For example, in Beijing it is 3,050 yuan (in terms of rubles at the current exchange rate - 30,500 rubles), in Qinghai - 2,593 yuan (25,930 rubles), in Xinjiang - 2,298 yuan (22,980 rubles), in Jiangsu - 2,027 yuan (20,270 rubles), in Yunnan - 1,820 yuan (18,200 rubles). It should be borne in mind that, despite the general rise in prices, the retail prices of the consumer sector in the PRC are noticeably lower than in Russia.

The main problem with the social insurance system in China at present is the existence of a dual social insurance system in the country. One system is in place for employees of state-owned enterprises, who mainly receive all types of benefits from state social insurance funds. The other is for the rest, including enterprises of other forms of ownership and the majority of rural residents who receive benefits from local funds. In the future, it is planned to increase the level of social security. The new social insurance system in the PRC will not be linked to economic growth indicators, but will directly depend on the size of payments by enterprises and workers to social insurance funds. It is envisaged to create a multi-tiered social insurance system, consisting of three parts: a program for those employed in the public sector, a social insurance system for those employed in enterprises of other forms of ownership and commercial insurance.

Thus, the Chinese experience shows that over the years of reforms, the coverage of the population by the social insurance system and free medical care (like the Russian compulsory medical insurance) has noticeably increased - from 100 million to 1 billion people. At the same time, the size of monthly pensions and social benefits has noticeably increased, which have already begun to exceed Russian ones. Also, despite the noticeable increase in pensioners, the retirement age established back in the 50s is still maintained in China: men - 60 years, women - 50 years (for employees - 55 years). The main sources of social insurance funds in China, in addition to the state, are the enterprises and workers themselves, who create their own social insurance funds both at the level of administrative units and enterprises. It seems reasonable to make the most of the Chinese experience of the social insurance system for Russia, which allows attracting additional sources of financing for social insurance funds.