Hostname: page-component-78c5997874-t5tsf Total loading time: 0 Render date: 2024-11-13T04:05:08.594Z Has data issue: false hasContentIssue false
  • English
  • Français

The Social Benefit System in Urban China: Reforms and Trends from 1988 to 2002

Published online by Cambridge University Press:  24 March 2016

Qin Gao
Get access Rights & Permissions [Opens in a new window]

Abstract

This article systematically reviews the macrolevel social policy changes in urban China during recent years. It also provides empirical evidence on how such policy changes reflect on microlevel family benefit levels from 1988 to 2002 using the national China Household Income Project data. The social policy reform process gradually shifted away from welfare provision through work units to greater emphasis on individual taxes and contributions. The government has also taken a more active role in providing a safety net for the urban poor. Empirical results show that even though the real value of social benefits increased over time, its increasing pace was laggard by that of market earnings, yielding a smaller share in final household income since the reforms. Pensions, public assistance, health, and education benefits increased during the period, while housing, food assistance, and supplementary income decreased.

Keywords

social benefitssocial policy reformurban China
Type
Articles
Information
Journal of East Asian Studies , Volume 6 , Issue 1 , April 2006 , pp. 31 - 67
Copyright
Copyright © East Asia Institute 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Notes

I thank Enid O. Cox, Irwin Garfinkel, Stephan Haggard, Sheila B. Kamerman, Andrew J. Nathan, Carl Riskin, Michael Sherranden, Jane Waldfogel, Fuhua Zhai, and two anonymous reviewers for very helpful comments and suggestions. Financial support for this project was generously provided by the V. K. Wellington Koo Fellowship through the Columbia University Weatherhead East Asian Institute.Google Scholar

1. This article studies the social benefit system only in mainland China, given that Hong Kong, Macao, and Taiwan have different political and economic schemes as well as different social benefit systems. For simplicity, “China” in this article refers only to mainland China. The unit for the Chinese currency renminbi is yuan, or denoted as “¥.” The current exchange rate is 1 US Dollar = 8.09 yuan.Google Scholar

2. Croll, Elisabeth J., “Social Welfare Reform: Trends and Tensions,” China Quarterly 159 (1999): 684–699; special issue, The People's Republic of China After 50 Years. Google Scholar

3. Yu, Wei, “Financing Unemployment and Pension Insurance.” In Nathan, A. J., Hong, Z. & Smith, S. R., eds., Dilemmas of Reform in Jiang Zemin's China (Boulder: Lynne Rienner, 1999), p. 127.Google Scholar

4. Guan, Xinping, “China's Social Policy: Reform and Development in the Context of Marketization and Globalization,” Social Policy and Administration 34, no. 1 2000): 115–130.Google Scholar

5. Leung, Joe, “Social Security Reforms in China: Issues and Prospects,” International Journal of Social Welfare 12 (2003): 73–85; Saunders, Peter and Shang, Xiaoyuan, “Social Security Reform in China's Transition to a Market Economy,” Social Policy and Administration 35, no. 3 (2001): 274–289.Google Scholar

6. Leung, , “Social Security Reforms in China”; Tang, K. L. and Ngan, R., “China: Developmentalism and Social Security,” International Journal of Social Welfare 1, no. 10 2001): 253–259; Li, X., “The Transformation from Ideology from Mao to Deng: Impact on China's Social Welfare Outcome,” International Journal of Social Welfare 8 (1999): 86–96; Wong, L. J., “Privatization of Social Welfare in Post-Mao China,” Asian Survey 34, no. 4 (1994): 307–325; Wong, L. J., Marginalization and Social Welfare in China (London; New York: Routledge/LSE, 1998).Google Scholar

7. Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy.” Google Scholar

8. Guan, , “China's Social Policy”; Leung, , “Social Security Reforms in China: Issues and Prospects,” p. 77.Google Scholar

9. Information Office of the State Council (IOSC), White Paper on Labor and Social Security in China, Information Office of the State Council of the People's Republic of China (Beijing: IOSC, 2002).Google Scholar

10. China Labor Statistical Yearbook Editorial Office, China Labor Statistical Yearbook 1988–1989 (Beijing: China Labor Press, 1991), p. 500; and author's calculation from pp. 487, 502.Google Scholar

11. However, the housing reform process largely favored the economically well-off groups through discounted prices and purchasing subsidies offered by work units; I return to this in more detail below.Google Scholar

12. Guan, , “China's Social Policy.” Google Scholar

13. Ibid., Leung, , “Social Security Reforms in China”; Li, B. and Piachaud, D., Poverty and Inequality and Social Policy in China (London: Centre for Analysis of Social Exclusion, London School of Economics, 2004), available at http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper87.pdf.Google Scholar

14. Li, Shi and Yue, Ximing, “The Latest Changes of Individual Income Inequality in China,” China Academy of Social Science, Institute of Economics, 2004, p. 127; Guan, , “China's Social Policy”; Park, A. and Wang, S., “China's Poverty Statistics,” China Economic Review 12 (2002): 384–398; World Bank, Old Age Security: Pension Reform in China (Washington, DC: World Bank, 1997); Bian, Y., Work and Inequality in Urban China (Albany: State University of New York Press, 1994).Google Scholar

15. IOSC, White Paper on Labor and Social Security in China.Google Scholar

16. Leung, , “Social Security Reforms in China.” Google Scholar

17. Leung, , “Social Security Reforms in China”; IOSC, White Paper on Labor and Social Security in China; IOSC, White Paper on China's Social Security and Its Policy, Information Office of the State Council of the People's Republic of China (Beijing: IOSC, 2004); Zhu, Y., “Recent Developments in China's Social Security Reforms,” International Social Security Review 55, no. 4 (2002): 39–54.Google Scholar

18. Ibid. 19. Ibid. Google Scholar

20. Rösner, H. J., “China's Health Insurance System in Transformation: Preliminary Assessment and Policy Suggestions,” International Social Security Review 57, no. 3 2004): 65–90; Duckett, J., “Political Interests and the Implementation of China's Urban Health Insurance Reform,” Social Policy and Administration 35, no. 3 (2001): 290–306.Google Scholar

21. Ibid. Google Scholar

22. World Bank, Financing Health Care: Issues and Options for China (Washington, DC: World Bank, 1997).Google Scholar

23. Zhu, J. and Zhang, S., Encyclopedia of China's Social Insurance [Zhongguo shehui baoxian gongzuo quanshu] (Beijing: China Statistical Press, 1995), p. 385.Google Scholar

24. Duckett, , “Political Interests.” Google Scholar

25. Ibid.; Li, and Piachaud, , Poverty and Inequality and Social Policy in China. Google Scholar

26. Duckett, , “Political Interests”; Zhu, and Zhang, , Encyclopedia of China's Social Insurance. Google Scholar

27. Ibid.; Rösner, , “China's Health Insurance System in Transformation.” Scholars documented different starting times of individual city's reform trials. For example, Rösner reported earlier times for both Shenzhen, and Shanghai, (1992 for Shenzhen and 1994 for Shanghai) than Duckett (1995 for Shenzhen and 1996 for Shanghai). I took the earlier dates here because Rösner also provided procedural details. The inconsistency may be due to (a) the lack of formal documentation by local governments and (b) selection of different personnel that the authors interviewed to collect data. However, the authors' descriptions of the reform contents remain mostly consistent.Google Scholar

28. Ibid. Google Scholar

29. Rösner, , “China's Health Insurance System in Transformation”; Duckett, , “Political Interests,” p. 296; Zhu and Zhang, Encyclopedia of China's Social Insurance. Google Scholar

30. Duckett, , “Political Interests,” pp. 296–301; Zhu, and Zhang, , Encyclopedia of China's Social Insurance; Rösner, , “China's Health Insurance System in Transformation,” pp. 81–82.Google Scholar

31. Ibid. Google Scholar

32. Administrative data on national government education expenditure help explain how big such an omission is. The share of government input on higher education in total education expenditure was strikingly high at 58 percent in 1988, while it dropped to only 23 percent in 2002. Therefore, the omission of higher education from this analysis hugely underestimates education benefits, to a larger degree in 1988. Government spending on early childhood education constituted only 1 percent of total education expenditures in both years and thus may not incur as big an omission. However, it is an important government benefit for families with young children and should be studied in future work. Sources: China Provincial Education Expenditure Annual Development Report 1989 and China Statistical Yearbook 2004. Google Scholar

33. Davis, D., “Chinese Social Welfare: Policies and Outcomes,” China Quarterly 119 (1989): 577–597.Google Scholar

34. Ministry of Education, People's Republic of China Law on Compulsory Education, 1986 (Beijing: Ministry of Education); Hannum, E. and Park, A., “Children's Educational Engagement in Rural China,” China Human Capital Projects, Philadelphia, 2003.Google Scholar

35. Davis, , “Chinese Social Welfare,” p. 581.Google Scholar

36. Tsang, M., “Education and National Development in China Since 1949: Oscillating Policies and Enduring Dilemmas” China Review (2000): 579–618; “Ministry of Education Action Plan for Revitalizing Education for the 21st Century” (Beijing: Ministry of Education, 1999).Google Scholar

37. Tsang, M., “Financial Reform of Basic Education in China,” Economics of Education Review 15, no. 4 1996):423–44, citation from p. 423.Google Scholar

38. Ibid. Google Scholar

39. Ibid. Google Scholar

40. Ibid. Google Scholar

41. Zhang, Xing Quan, A Study of Housing Policy in Urban China (New York: Nova Science Publishers, 1998), pp. 134–139.Google Scholar

42. Lee, J., “From Welfare Housing to Home Ownership: The Dilemma of China's Housing Reform,” Housing Studies 15, no. 1 2000): 61–76; Wang, Y. P. and Murie, A., Housing Policy and Practice in China (New York: St. Martin's Press, 1995).Google Scholar

43. Ibid. Google Scholar

44. Guan, , “China's Social Policy”; IOSC, White Paper on China's Social Security and Its Policy; Zhu, Y., “Recent Developments in China's Social Security Reforms,” International Social Security Review 55, no. 4: 39–54.Google Scholar

45. IOSC, White Paper on China's Social Security and Its Policy; Zhu, , “Recent Developments in China's Social Security Reforms.” Google Scholar

46. IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

47. Leung, , “Social Security Reforms in China”; Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy.” Google Scholar

48. Fung, H., “The Making and Melting of the ‘Iron Rice Bowl’ in China 1949 to 1995,” Social Policy and Administration 35, no. 3 2001): 258–273.CrossRefGoogle Scholar

49. Leung, , “Social Security Reforms in China”; Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy”; Zhu, , “Recent Developments in China's Social Security Reforms”; IOSC, White Paper on Labor and Social Security in China.Google Scholar

50. Leung, , “Social Security Reforms in China”; Fung, , “The Making and Melting of the ‘Iron Rice Bowl.”’ Google Scholar

51. Leung, , “Social Security Reforms in China”; Zhu, , “Recent Developments in China's Social Security Reforms”; IOSC, White Paper on Labor and Social Security in China; IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

52. Eligibility for unemployment benefits was up to twelve months for those who had continually paid unemployment insurance premiums for one to five years, eighteen months for those paid for five to ten years, and twenty-four months for those paid more than ten years. See IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

53. The official unemployment rate was 4% in 1997, 3.1% in 1999 and 2000, 3.6% in 2001, and 4.0% in 2002, while Chinese economists estimated that the actual rate was 8.7% in 1999 and above 8.5% in 2002. See Leung, , “Social Security Reforms in China”; Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy”; Zhu, , “Recent Developments in China's Social Security Reforms”; IOSC, White Paper on Labor and Social Security in China; IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

54. Ibid.; Fung, , “The Making and Melting of the ‘Iron Rice Bowl.”’ Google Scholar

55. Leung, , “Social Security Reforms in China”; Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy”; Zhu, , “Recent Developments in China's Social Security Reforms”; IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

56. Leung, , “Social Security Reforms in China”; Saunders, and Shang, , “Social Security Reform in China's Transition to a Market Economy.” Google Scholar

57. Leung, , “Social Security Reforms in China,” p. 83; IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

58. Primary factors considered included local residents' average income and consumption level per capita, the price level of the previous year, the consumption price index, the local cost necessary for maintaining a basic livelihood, materials for the basic needs of food, clothing, and housing, and the expenditure on children's compulsory education.Google Scholar

59. Ru, X. et al., The Blue Book of Chinese Society 2002 [Zhongguo shehui lanpishu 2002] (Beijing: Chinese Social Science Press, 2002).Google Scholar

60. Leung, , “Social Security Reforms in China”; IOSC, White Paper on Labor and Social Security in China; IOSC, White Paper on China's Social Security and Its Policy.Google Scholar

61. Ibid. Google Scholar

62. Tang, J., Sha, L., and Ren, Z., Report on Poverty and Anti-Poverty in Urban China [Zhongguo chengshi pinkun yu fanpinkun baogao] (Beijing: Huaxia Chubanshe, 2003).Google Scholar

63. The CHIP study also includes a survey of 1995, but because the welfare reforms happened since the early 1980s and the most significant changes occurred from the late 1980s, this study tries to approximate the urban social benefits before and since the reforms while ignoring the 1995 picture since it was in the process of transition. Li, S. and Knight, J., China Household Income Project 2002, Chinese Academy of Social Sciences (Beijing: Institute of Economics, 2004); Griffin, K. and Zhao, R., Chinese Household Income Project, 1988 computer file, Inter-university Consortium for Political and Social Research distributor, Ann Arbor, MI, 1993.Google Scholar

64. Riskin, C. R., Zhao, R., and Li, S., “Introduction: The Retreat from Equality: Highlights of the Findings.” In Riskin, C., Zhao, R., and Li, S., eds., China's Retreat from Equality: Income Distribution and Economic Transition (Armonk, NY: M. E. Sharpe, 2001).Google Scholar

65. More details on the design and sampling methods of the CHIP surveys can be found in Eichen, M. and Zhang, M., “Annex: The 1988 Household Sample Survey—Data Description and Availability.” In Griffin, K. and Zhao, R., eds., The Distribution of Income in China (New York: St. Martin's Press, 1993); and Gao, Qin, The Chinese Social Benefit System and Its Impact on Income Inequality: From 1988 to 2002 (New York: Columbia University Press, 2005).Google Scholar

66. Smeeding, T. M., Rainwater, L., and Burtless, G., “U.S. Poverty in a Cross-national Context.” In Danzinger, S. H. and Haveman, R. H., eds., Understanding Poverty (New York: Russell Sage Foundation, 2001).Google Scholar

67. Kamerman, S. B., “Social Policy.” In Bahr, L. S. and Johnston, B., eds., Collier's Encyclopedia (New York: Collier's, 1995); Maitre, B., Wheland, C. T., and Nolan, B., Household Income Packaging in the European Union: Welfare State Income and Welfare Regime, European Panel Analysis Group (EPAG) Working Paper No. 35 (Colchester: University of Essex, 2002); Rainwater, L. M., Rein, M., and Schwartz, J. E., Income Packaging in the Welfare State (Oxford: Clarendon Press, 1986).Google Scholar

68. Kamerman, , “Social Policy,” pp. 138–139.Google Scholar

69. Different equivalent scales have been proposed and adopted in the existing literature, mostly when studying the Western industrialized nations. Some scales are proposed for studying developing countries, but there seems no particular fit for urban Chinese households. I also ran the results using the OECD equivalent scale that accounts for household size by dividing household income by the square root of household size, and the result patterns largely remain the same. All missing values—except for health benefits in 1988 and education benefits in both years that are imputed using administrative data— are imputed using multiple regression models controlling for individual and household sociodemographic characteristics.Google Scholar

70. These included salary (including bonus) from working for an employer, wage from secondary jobs, and other “income from compensation” (buchang shouru), fees paid by relatives or friends who regularly ate in, and in-kind incomes from others as a form of payment.Google Scholar

71. In 1988, taxes and fees paid for private enterprises or self-employment were asked separately, and then subtracted from the total reported gross income from this type of employment. In 2002, families were directly asked to report the net income from private enterprises or self-employment. Thus, the two years' data are compatible in this regard, but it was impossible to know the amount of taxes and fees paid for private enterprises or self-employment in 2002.Google Scholar

72. The 1988 market value of rent was not directly asked in the survey and thus is estimated by a formula adopted by the CHIP Research Team, accounting for both provincial construction cost at the time and sanitary facilities of the house as reported by survey participants. In 2002 families were asked to estimate the market rental value of the housing. Rental value of owner-occupied housing is then imputed by subtracting self-reported debts or loans on housing from the estimated market rental value of housing. The rental value of owner-occupied housing made up 8 percent of total household market income in 1988 and 5 percent in 2002.Google Scholar

73. This article relies on these self-reported data on taxes and fees, but I should note that these data are neither fully comparable across the two waves nor complete. Future work is needed to address this limitation.Google Scholar

74. Administrative data on public health expenditures for retirees from different types of employers do exist. However, the survey data do not contain information on retirees' employer type. Therefore provincial per capita public health expenditure on retirees is computed by dividing total public health expenditures on retirees across employment types by the total number of retirees.Google Scholar

75. National Statistical Bureau and Ministry of Labor, China Labor and Wage Statistical Yearbook 1989 (Beijing: Labor and Personnel Press, 1989); China Labor Yearbook Editorial Group, China Labor Yearbook 1988–1989 (Beijing: China Labor Press, 1991).Google Scholar

76. One is to assign the provincial per capita health expenditure to individuals who reported that they contributed to health insurance, which results in a per capita health benefit of ¥118. The other is to estimate the provincial level proportion of contributors among all employees and retirees, and then impute provincial per capita health expenditure to all employees and retirees adjusted by the proportion. The imputed individual level benefits are then summed at the household level and divided by household size to get the per capita measure. This approach yields a per capita health benefit of ¥174.Google Scholar

77. Provincial per capita education expenditure data are derived from the China Education Expenditure Statistical Yearbook (CEESY) 2003, and the China Provincial Education Expenditure Annual Development Report 1989. Google Scholar

78. I use the following formula to calculate: where E denotes per capita education expenditure, N denotes total number of students enrolled, all denotes overall provincial level, urban denotes urban areas within a province, rural denotes rural areas within a province. The numbers of enrolled students are from China Statistical Yearbook (CSY) 2003. CSY 2003 provides data on the number of combined senior high school and junior high school enrolled students as well as the number of senior high school students only at each of the three areas. I subtracted senior high school students from the total to yield the number of junior high school students. The CSY 2003 provides the number of students by three geographic classifications: urban areas (chengshi), counties and towns (xianzhen), and rural areas (nongcun). There is no formal documentation on the classification rules of the three areas. Because the majority of enrolled students in “county and town” schools are from villages, and the county and town per capita expenditures are closer to those in rural areas, I assume the counties and towns are part of rural areas. I also tried treating “counties and towns” as part of urban areas, and it did not make a big difference in the final results.Google Scholar

79. ECEC benefit was asked in the 1988 survey but not in 2002, while there is a lack of administrative data on ECEC in China to do imputation. Administrative data on higher education (technology or vocational school, normal school, and college or university education) are available in both years. However, students in such higher education institutions often lived in campus dorms both years and thus were most likely not covered in the household surveys. Some employers—particularly public institutions and state and collective enterprises—often provided other cash or in-kind education benefits such as advanced training and educational materials to employees, especially before and during the early stages of the reforms. The 2002 survey asked about such education benefits from employers, but such questions were not included in the 1988 survey. To be consistent, this study does not count this type of education benefits.Google Scholar

80. CHIP Research Team, The Chinese Household Income Project (1988) extended definition of income, Inter-university Consortium for Political and Social Research (ICPSR 9836): Ann Arbor, MI, 1993.Google Scholar

81. From the calculations based on official urban CPI data in National Statistical Bureau, China Statistical Yearbook 1996 (Beijing: China Statistics Press, 1996); and National Statistical Bureau, China Statistical Abstract 2004 (Beijing: China Statistics Press, 2004). In 1988 39.7 yuan is equal to 100 yuan in 2002 in constant value. Thus, all 1988 nominal values are divided by 39.7 and multiplied by 100 to be transformed to 2002 constant values. It is important, however, to bear in mind that there are always debates about whether the official CPI truly reflects the living standard changes over the years. In future work, some sensitivity analyses can be done by adopting different deflation rates such as the city minimum living standard established according to necessary food consumption established during recent years such as in Hussain, A., Urban Poverty in China: Measurement, Patterns and Policies, in Focus Programme on Socio-Economic Security (Geneva: International Labour Office, 2003).Google Scholar

82. National Statistics Bureau, China Statistical Yearbook 2003 [Zhongguo Tongji Nianjian 2003]. Beijing: China Statistical Publisher [Zhongguo tongji chubanshe], available as Form 11–1, “Historic Figures of Retirees at the Year-end” at the Ministry of Labor and Social Security, www.molss.gov.cn/tongji/2003nj/11/11-01.htm.Google Scholar

83. Liu, Y., “Development of the Rural Health Insurance System in China,” Health Policy and Planning 19, no. 3 2004): 59–165.Google Scholar

84. Ibid. Google Scholar

85. For more details about their sample, measuring methods, and results, refer to Khan, A. R. and Riskin, C., “Income and Inequality in China: Composition, Distribution and Growth of Household Income, 1988 to 1995,” China Quarterly 154 (June 1998): 221–253; Khan, A. R. and Riskin, C., “China's Household Income and Its Distribution, 1995 and 2002,” China Quarterly 182 (June 2005): 356–384.Google Scholar

86. Garfinkel, I. et al., “Social Welfare Expenditures in New York City and Beyond.” In Meyers, M. K. and Garfinkel, I., eds., New York City and the Welfare State (New York: Russell Sage Foundation, forthcoming).Google Scholar

87. Solinger, D. J., “Labour Market Reform and the Plight of the Laid-off Proletariat,” China Quarterly 170 (2002): 304–326.Google Scholar

88. Liang, Z., “The Age of Migration in China,” Population and Development Review 27, no. 3 2001): 499–524.Google Scholar

89. Zhu, Y. and Zhou, T., “Total Number of Migrants Doubled Within 10 Years, Making Up More than 10% of Total Population,” in Xinhua Net, as cited by China Web, 2005, at www.china.org.cn/chinese/renkou/748584.htm.Google Scholar

90. The same provinces as in the urban survey were covered, and a total of 2,000 households (5,318 individuals) were included in the sample. For more details about the sampling design of the migrant survey, see Khan, and Riskin, , “China's Household Income and Its Distribution”; and Khan, A. R. and Riskin, C., Inequality and Poverty in China in the Age of Globalization (New York: Oxford University Press, 2001).Google Scholar