With the deepening of the reform of state-owned enterprises (SOEs), it has become extremely difficult to guarantee the basic standard of living of laid-off people and retirees by relying on the state and enterprises alone.

Economists say that now is the best time to establish a social security system because China has adequate grain reserves, stable prices and sustained growth of financial revenues. The establishment and improvement of the social security system will in turn boost the development of productivity. The work, they say, should not be delayed, lest it encounters more difficulties and risks.

The trial undertaken by China is consistent with the World Bank’s proposal, that is, to establish and improve a practical social security system bolstered by three pillars—public funding, individual compulsory saving and individual voluntary saving.

Statistics from the Ministry of Labor and Social Security show that in recent years, basic pension insurance coverage in cities has continued to expand. By the end of 2000, a total of 104.48 million active employees and 31.7 million retirees throughout the country had participated in the unified plan for basic pension insurance.

The pace of reform of the medical insurance system has quickened. By the end of last year, 320 regions at and above the prefectural level put forth plans to reform the medical insurance system and the revenue of the basic medical insurance fund reached 17 billion yuan, with expenditures standing at 12.4 billion yuan.

To establish a stable and reliable mechanism for raising social security funds, the coverage of social security should be expanded according to law so that all people in society will eventually jointly bear the costs of reform. This requires that all enterprises and institutions and their staff in cities and towns participate in social security programs according to law and turn over in full social security fees.

In the meantime, state financial support is crucial. Lin Yongsan, vice-minister of labor and social security, said that in the current stage, the reform of social security should be conducted in two aspects. On one hand, there should be a mechanism where enterprises, individuals and the state jointly raise funds. On the other hand, the government should raise funds through other channels to make up for shortages and bear the transition costs.

Lin said that the government plans to set up a social security fund committee, which will be responsible for the management and use of raised funds in order to ensure the safety of such funds from embezzlement.

Last year, China promulgated five departmental regulations in relation to social security, such as the Methods Concerning the Application and Provision of Unemployment Benefits and the Regulations on Management of the Labor Market. Localities, in accordance with their specific conditions, have also drafted and promulgated rules and regulations in relation to pensions, medical care and unemployment.

According to Zhang Zuoji, minister of labor and social security, the Chinese government is speeding up the pace in drafting the Social Security Law so that the legal system for social security can basically be formed in the next three years.

(Beijing Review 06/13/2001)