Chinas Social Reform and Re-building the Welfare System Lu Mai
Secretary General China Development Research Foundation
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2 Content Chinas Economic Growth and Social Development
Revamping Chinas Social Security System Poverty Reduction Education
Old-age Support Medical Care Housing Characteristics of the Chinese
welfare system and Difficulties in Revamping it Characteristics
Welfare policies towards rural migrant workers Reforming public
finance Reforming government performance evaluation
Conclusions
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3 I.Chinas Economic Growth and Social Development Chinas
economy has been growing rapidly since the start of reform and
opening in 1978.
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4 Chinas Human Development Index increased significantly.
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5 Social reform and the rebuilding of the welfare system: a
matter of great urgency Income gap is widening; Employment
uncertainty and insecurity; Underdeveloped social services;
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6 Income gap is widening.
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7 Human development gap between town and country is
widening
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8 Goal of social development: Common prosperity; Ensuring a
comfortable life for every Chinese; (2002) Harmonious society;
(2006) New phase in Chinas reform and opening: social reform and
revamping of the welfare system
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9 Content Chinas Economic Growth and Social Development
Revamping Chinas Social Security System Poverty Reduction Education
Old-age Support Medical Care Housing Characteristics of the Chinese
welfare system and Difficulties in Revamping it Characteristics
Welfare policies towards rural migrant workers Reforming public
finance Reforming government performance evaluation
Conclusions
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10 II.Revamping Chinas Social Security System Traditional
social security system in China SOEs reform Collapse of peoples
commune Since the 1990s, the Chinese government has taken numerous
steps to revamp the social security system in areas of poverty
reduction, old-age support, education, medical care and housing.
Traditional system State provision Enterprise provision Rural
collective provision
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11 1. Poverty Reduction Reform of the economic and social
system has proven the most effective means of reducing poverty in
China; Two-pronged approach: development and relief
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12 1.1 Development policies Rural areas: three large-scale
relief programmes since 1986; Increase government investment in and
low-interest loans to impoverished rural areas; Enable farmers to
improve production conditions and poor villages to improve
infrastructure; Urban areas: Creating employment; Support for
securing small loans and training and preferential taxation
policies; Paying people to provide public and community
services;
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13 1.2 Relief policies System of subsidence allowances for the
urban poor (1999); System of subsidence allowances for the rural
poor (2004);
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14 2. Education Improve nine-year compulsory education; Support
higher education and secondary vocational education; Education
expenditures accounted for 2.86 per cent of GDP in 2006. The goal
is to increase this to 4 per cent of GDP.
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15 3. Old-age support 3.1 Urban areas: Three-Pillar Model(1997)
A mandatory publicly-managed pillar, a mandatory privately-managed
pillar and a voluntary pillar issues the shortfall in accounts held
by people who worked under the old scheme but will paid under the
new one (the middle men); the endowment insurance scheme still
plagued by limited coverage; the management and investment of the
funds;
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16 3.2 old-age security in the countryside 1992 Funded entirely
by the individuals; Contemporary reform allocate more funds to
subsidize rural endowment Besides, the Chinese Government has also
borne the cost of endowment insurance for two categories of rural
population: Infirm or childless elderly people; rural parents over
60 years old who only have one child or two daughters.
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17 4. Medical care 4.1 Market-oriented reform Significant
expansion of medical resources and improvement in medical
facilities Problem medical expenses grow faster than personal
income; a large part of it is borne by patients.
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18 4.2 Urban and rural medical care system The employed The
unemployed Rural residents Basic medical insurance for urban
workers Insurance covering major illnesses of urban residents
New-type rural co-operative medical care Chinese citizens Urban
residents Medical support and relief for the urban poor Medical
support and relief for the rural poor Commercial medical
insurance
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19 5. Housing Housing reform (1998) the poorest families can
rent subsidised apartments provided by the government or their
employers; the lower-to-middle income households can buy
inexpensive apartments whose cost is subsidised; the more
prosperous can either buy or rent commercial apartments at market
price; Problem:some local governments encouraged the development of
commercial housing at the expense of affordable or low-rent
housing;
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20 Content Chinas Economic Growth and Social Development
Revamping Chinas Social Security System Poverty Reduction Education
Old-age Support Medical Care Housing Characteristics of the Chinese
welfare system and Difficulties in Revamping it Characteristics
Welfare policies towards rural migrant workers Reforming public
finance Reforming government performance evaluation
Conclusions
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21 III.Characteristics of the Chinese welfare system and
Difficulties in Revamping it 1. Characteristics A dual structure on
the way to integration; Wide coverage with low levels of provision;
Rapidly increasing burden on the government; Market-based; Issues:
Welfare policies towards rural migrant workers still almost blank;
Public finance and government performance evaluation reform
needed
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22 2. Welfare polices towards rural migrant workers Still left
to fend for themselves; Urban residentsRural residentsMigrant
workers Old-age securityEndowment insuranceLand Medical careBasic
medical insurance Co-operative medical care Subsidised treatment of
major illnesses EducationFreeFree; subsidies Labour
protectionIndustrial injury insurance HousingSubsidies; low
rentSelf-built Poverty reliefUrban living allowances Rural living
allowances
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23 Involves the value and policies pursued by the government as
much as its financial capacity and governance skills; Budgetary
allocations from both the central and provincial governments
needed;
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24 3. Reforming public finance 3.1 Improve the structure of
public spending; 3.2 Establish sound public finance; 3.3 Improve
the transparency of public finance.
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25 Government revenue increased rapidly.
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26 Government investment in development activities should be
reduced and spending on administrative overhead strictly
controlled.
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27 Encourage greater public participation: Participatory Budget
Reform in China
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28 4. Reforming government performance evaluation Market
failure vs. Government failure Experience of OECD countries be
introduced to China.
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29 Content Chinas Economic Growth and Social Development
Revamping Chinas Social Security System Poverty Reduction Education
Old-age Support Medical Care Housing Characteristics of the Chinese
welfare system and Difficulties in Revamping it Characteristics
Welfare policies towards rural migrant workers Reforming public
finance Reforming government performance evaluation
Conclusions
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30 IV.Conclusions Revamping the welfare system will help
improve the living conditions of all people across China, but
particularly those in the low-income bracket, thus leading to
greater stability and harmony in society; The people will have more
incentives to spend. And as urbanisation advances, the domestic
market will further expand;
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31 Labour productivity will grow, as will labour costs in
China. This will put more pressure on the industries to modernise;
The service sector, from health to education, insurance, banking to
real estate, will register robust growth.
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32 Acknowledgements CDRF has received generous support in its
work from the Government of UK and many British companies: DFID
HSBC Vodafone BP Shell Rio Tinto Anglo American Tesco Cambridge
China Development Trust