Enterprise Pensions in China: History and Challenges*

By Zhang, X. Y. | Public Finance and Management, January 1, 2009 | Go to article overview

Enterprise Pensions in China: History and Challenges*


Zhang, X. Y., Public Finance and Management


ABSTRACT

Since the establishment of the People's Republic of China by the Communist Party in 1949, the government has introduced a social welfare system for both urban and rural populations. Before the economic reform and the open door policy that started at the end of the 1970s, enterprises were not concerned about the effect of their payments because their budgets were not completely separated from the government budget. After more than 50 years of changes and reforms to the pension system, the current system in China is still dominated by the public pillar, a largely urban-based, contributory, partially funded and defined contribution system. For the mainstream of the urban working population, the social security system provides the main source of assistance for maternity, medical service, unemployment, work injury and old-age pensions. This paper focuses only on the old-age pension scheme. The evolution of the Chinese insurance-based state pension system is described. As readjustments and restructuring are taking place in politics as well as in the economy, the current pension system faces many challenges, which are also discussed and suggestions are made for further reforms for addressing these challenges.

(ProQuest: ... denotes formula omitted.)

1. THE STATE PENSION BEFORE THE ECONOMIC REFORM

There were no formal arrangements for retirement in China until after 1 October 1949, when the People's Re-public was established. This section describes the evolution of the state pension system from the first regulation in 1951 to the late 1970s.

1.1 THE CREATION OF THE LABOR INSURANCE IN THE 1950s

The first regulation about labor insurance was issued by the State Council in 1951. It introduced an old age al-lowance, disability and survivor benefits as well as other insurance benefits for employees. The 1951 regulation only covered a few service sectors and industrial enterprises with more than 100 employees. The pension benefits were about 35 to 60 percent of individual employee's wages, de-pending on the length of service in the enterprises from which they retired.1 This benefit level increased from 50 to 70 percent in 1953, the first year of the First Five-Year Plan.2 The pension benefits and other insurance benefits were entirely financed by enterprise contributions at a rate of 3 percent of the wage bill. Because of the small number of retirees in relation to workers, the contributions were, of course, sufficient to finance the system on a pay-as-you-go basis. For example, in 1952, one year after the start of the program, there were only 8 million enterprise workers and 20,000 retirees, or over 400 workers per retiree. In 1958 the coverage was extended to enterprises with less than 100 employees and also to government employees. However, few collective-owned enterprises joined the system because of a limited number of workers and small-scale of produc-tion.

The social insurance system was supervised by the Ministry of Labor and jointly administered by the Ministry of Labor and the All-China Federation of Trade Unions (ACFTU). In 1954 the administration was unified and to-tally transferred to the latter. It was required that 70 percent of the contributions were retained by the trade unions of individual enterprises while the remaining 30 percent were transferred to a national master fund and managed by the ACFTU. Pensions and other social insurance benefits were firstly paid from the enterprise funds while the fund man-aged by ACFTU was used as a last resort. Under this ar-rangement, the fund could be balanced at the national level.

1.2 THE PENSION PROVISIONS DURING THE "CULTURAL REVOLUTION"

The state pension system created in the 1950s con-tinued its operation until the beginning of the "Cultural Revolution" that lasted for ten years from 1966. During the period of "Cultural Revolution", the social insurance sys-tem, including pension insurance, was suspended. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Enterprise Pensions in China: History and Challenges*
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.