It's Time for Universal Social Security Coverage

By EO Editorial Board
Published: 2009-08-12

Cover Editorial - EO print edition no. 431
Translated by Tang Xiangyang
Original article:

Recently, the Standing Committee of the State Council examined and gave in-principle support to adopting a new piece of legislation entitled Guiding Opinions on the New Rural Social Old-age Insurance Pilot.

The new rural pension scheme referred to in the legislation will include both a basic pension alongside a system of individual retirement fund accounts.

The funding for this future basic pension will come directly from central government coffers, ensuring that all rural residents will be able to receive a pension after they turn sixty.

The plan has been universally praised and welcomed.

As one of four recent developments that have benefited rural citizens - the others being the elimination of agricultural tax, the subsidizing of grain producers and the gradual improvement of the rural health care system - the coming of an old age pension is indeed a very important development for the 800 million people who live in rural China.

The implementation of these major improvements has not only established a new platform on which the national identity of rural citizens can be built, but has also modernized the relationship between the government and rural people.

A social security system plays an important role in allowing a nation to realize social equality and at the same time its a sign of a country's social development and progress.

The rapid industrialization and urbanization of China has, for a long time, been at the expense of rural citizens. Therefore, the most real and pressing economic concern should be to provide support to rural residents.

Every rural citizen should be able to enjoy the benefits of reform and development.

In fact, this goal of making public services and social welfare equally accessible across the country, in both rural and urban areas, has already received broad social support.

As the nation becomes increasingly wealthy, China already has the capacity to set up a basic social welfare system that covers rural areas.

Of course, providing rural citizens with basic social security is not only a matter of a country's financial resources. The real issue has more to do with adhering to principles of "Putting People First," of concerning ourselves with social justice and harmony.

If a nation's wealth continues to grow, while a sizable portion of its people still don't receive even the most basic social security, than it's clear that this kind of society is neither harmonious nor stable.

With the development and maturing of the Chinese economy, the natural insurance provided by working the land is growing weaker and weaker. Especially in this era of rapid urbanization, where land serves as nothing more than a productive input for farmers. In this modern society, it is very difficult for land to assume the role of an insurance policy for rural workers.

Aside from this, the increase in internal migration, especially of young rural residents migrating to urban centers, has led to a weakening of the traditional methods used by rural families to safeguard their welfare.

This means that social security in rural areas relies more and more on the government and government policies.

Setting up a robust social security system should be a central part of any attempt to realize a Chinese style market economy.

The Third Plenary Session of the Fourteenth Central Committee of the Chinese Communist Party outlined a tentative sketch of what a socialist market economy might look like, they described six main "pillars."

The basic economic system involving varied forms of ownership, a modern market system, a modern enterprise system, a distribution system that united both labor and productive factors, macroeconomic control and a social security system.

Since the global financial crisis broke out, more and more economists have recommended solving current social problems as a way to boost demand and also boost confidence.

The economy of various European and American countries were at a similar level of development as China is today when they founded their rural social old-age pension systems.

Moreover, many countries introduced similar programs during times of economic crisis or social upheaval.

In these cases, the government was the main financial backer of the social insurance funds. If you look at the various social security systems established in the 131 countries that have kept records, 129 of them either relied completely on government funds, or relied on government fund for the majority of their social welfare payments.

Britain, Sweden and various other countries have long had government-funded social security systems. Australia's pension system is also funded by the government and provides senior citizens with subsidised water, electricity and transportation.

To prevent senior citizens from sliding back in to poverty, the Indian government offers a monthly payment of 5 US dollars for every rural resident that is over 65. Vietnam has also set up an old-age insurance system that provides social welfare to its rural citizens.

A large-scale pilot program of this new rural social old-age insurance system will soon be launched across China, but when compared to stated goal of the Seventeenth National Conference of the Chinese Communist Party of establishing "a universal social security coverage" by 2020, it's a modest beginning.

The new rural old-age insurance system requires both financial support from the central government and a sense of urgency from local governments - especially in terms of implementing the new system at a local level.

It's time for universal social security coverage.