Labor and Social Security in China

Foreword

The right to work and enjoy social security is a fundamental right of citizens, having a direct bearing on their vital interests. As the most populous and largest developing country in the world with a relatively low level of economic development, China is faced with an onerous task of promoting its work in this regard.

Proceeding from China's actual conditions, and in accordance with the Constitution of the People's Republic of China and the Labor Law of the People's Republic of China, the Chinese government has made remarkable achievements in ensuring its citizens' right to work and enjoy social security, and in improving labor and social security management and services.

Immediately after the founding of the People's Republic of China in 1949, the Chinese government took a series of effective measures, successfully solving the serious problem of unemployment left over by the old China and ensuring the people's basic livelihood. Under the planned-economy system, China adopted highly concentrated employment, wage and labor insurance systems, which played a positive role in making comprehensive arrangements for employment, guaranteeing the livelihood of employees, and promoting economic construction and social stability at that time. However, with the progress of history, the old labor and social security system had become unadaptable to the requirements of economic and social development.

Since 1978, China has adhered to the policy of reform and opening-up, with the focus on economic construction, and has gradually stepped onto the road of establishing a socialist market economy system. As a result, labor and social security undertakings have developed rapidly. By rationally readjusting the employment structure, increasing overall employment and setting up a market-oriented employment mechanism, the Chinese government has brought about a basically stable situation in employment. By maintaining harmonious and stable labor relations and reforming the wage and income distribution system, the government has improved the labor standards system step by step, and helped to basically establish a new type of labor relations. The reform and improvement of the social security system has enabled the social insurance system to cover the vast majority of employees and retirees in urban areas. The system for ensuring a minimum standard of living for residents has been set up in cities, and the building of a social security system is being vigorously promoted in rural areas. After years of trial and effort, a labor and social security system corresponding to the socialist market economy system is now basically in place.

Based on the principles of mutual respect, equality and mutual benefit, the Chinese government actively participates in international labor affairs. In the field of labor and social security, China has conducted fruitful exchanges and cooperation with many countries and international organizations, such as the International Labor Organization, United Nations Development Program, World Bank and Asian Development Bank. It has played a positive role in the international community in promoting employment, eliminating poverty and protecting the legal rights and interests of workers.

Entering the 21st century, China has embarked on a new development stage, the stage of starting the full-scale construction of a comparatively well-off society and accelerating modernization. The major goals of China's labor and social security efforts at the beginning of the new century are promoting employment, protecting employees' rights and interests, coordinating labor relations, raising people's incomes and improving social security.

I.Overall Stability in Employment Situation

Employment presents a great pressure on China due to its huge population, abundant labor resources and economic restructuring. The Chinese government regards increasing employment opportunities as a major strategic task in economic and social development, and controlling the rate of unemployment as a main target in macro-economic regulation and control. It has rationally readjusted the employment structure, established a market-oriented employment mechanism, put great efforts into increasing overall employment and maintained basic stability in the general employment situation. By the end of 2001, the country's population had reached 1.27627 billion (excluding the populations of the Hong Kong and Macao special administrative regions and Taiwan Province), and 730.25 million people were employed, accounting for 77.03 percent of the total labor force. Employees in urban areas accounted for 32.8 percent of the total, and those in rural areas for 67.2 percent. The unemployment rate on record in urban areas was 3.6 percent.

Implementing the Policy of Vigorously Increasing Employment

Focusing on economic construction, the Chinese government promotes employment through economic growth, carries out an active policy of employment, and adopts various effective measures to increase the rate of employment.

Rationally readjusting the employment structure. In line with the readjustment of the industrial structure, the government guides the development of industries and enterprises capable of offering more job opportunities. While increasing capital construction investment, vigorously expanding the domestic demand and maintaining the high-speed development of the national economy, the government stresses the development of labor-intensive enterprises with comparative advantages and market potential, especially service enterprises and small and medium-sized enterprises capable of offering employment to a large number of people, through readjustment of its industrial policies. It also increases employment and expands employment channels by vigorously developing the economy with diverse forms of ownership, such as collective, private and individual ownerships, and by encouraging various forms of employment.

Establishing a market-oriented employment mechanism. Carrying out the employment policy of "laborers finding employment on their own initiative, the market adjusting the demand for employment and the government promoting employment," the Chinese government encourages securing employment through fair competition, encourages employers to decide the number and quality of their own employees, and adopts measures to promote the shaping of a market-oriented employment mechanism. In the meantime, the labor market information network has started to display its worth, promoting exchanges of information concerning labor supply and demand, and helping the jobless find employment or reemployment through the labor market. In order to set up a labor market with a sound mechanism, standardized operation and good service, and under effective supervision, the Chinese government has conducted trials to set up a scientific, standardized and modernized labor market in 100 cities. In recent years, the Chinese government has started to trial-implement a pricing mechanism for the labor market, in order to enable the market mechanism to play its basic regulatory role in the allocation of labor resources, wage formation and labor flow.

Enhancing workers' quality. In order to raise the cultural level and professional skill of the work force, the Chinese government has striven to promote all forms of education through various channels, and laid equal stress on academic and vocational qualification credentials. At present, the system of nine-year compulsory education covers 85 percent of the total population, and the illiteracy rate among the young and middle-aged has dropped to 5 percent. There are currently 1,225 regular institutions of higher learning, with 7.19 million students; 686 adult institutions of higher learning, with 4.56 million students; and 80,400 regular middle schools, with 79.19 million students. China is aiming to establish an all-round, multi-level vocational and technical education and training system by developing higher vocational and technical schools, secondary vocational and technical schools, secondary polytechnic schools, technical schools, employment training centers, community-run vocational training institutions and enterprise-run on-the-job training centers, thereby strengthening the training of new workers, on-the-job employees and laid-off workers. Pre-job training courses of one to three years are offered to secondary-school graduates who have failed to gain higher education. Technical schools and employment training centers are being readjusted and restructured into comprehensive training bases. A mechanism by which "the market guides training, and training promotes employment" is being formed. The vocational qualification credentials system is being introduced, and a vocational qualification system has been set up covering workers at all levels, from basic workers to senior technicians. At present, in urban areas over 80 percent of newly employed people are graduates of senior high schools or above, or have received job skill training. Nearly 35 million people have obtained vocational qualification credentials.

Developing the employment service system. Since the 1980s, China has set up and improved the employment service system, which includes employment agencies, employment training, unemployment insurance and employment service enterprises. The system offers guidance, consultancy and agency services to job seekers and employers, offers pre-job training and vocational training courses to seekers of employment and reemployment, and provides unemployment insurance. The system also offers job openings to those of the weak group in the employment field. In the meantime, the government encourages the formation of community-run employment agencies as a part of the multi-level employment service network.

Making overall plans for urban and rural employment. China has a serious problem of insufficient employment opportunities in rural areas, where there are abundant labor resources. Attaching great importance to the employment of the rural labor force, the Chinese government has explored new ways for comprehensive employment planning in urban and rural areas in line with the urbanization and western development strategies. Two basic policies have been worked out. The first is to encourage the rural labor force to find work locally. Making full use of the advantages of local resources in rural areas, the government will vigorously readjust the structure of agriculture and that of the rural economy; develop profitable and labor-intensive agriculture alongside non-agricultural industries in rural areas; guide township enterprises to develop in line with the construction of small cities and towns; enlarge the construction scales of infrastructure facilities such as water conservancy, communications and transportation, and electricity in the rural areas; and promote elementary education and vocational training in the rural areas. The second is to guide the rural labor force to find employment in other areas. As success in rural reform has greatly raised agricultural productivity, the surplus agricultural labor force has started to flow from rural to urban areas, and from western inland to eastern coastal areas. The Chinese government guides the flow of rural labor to different areas according to need, and, by strengthening information network building and employment agency services, offers pre-transfer training to rural workers and organizes an orderly flow of the rural labor force, so as to ensure the highest possible level of employment in this regard. The government has also established an employment mechanism for the two-way flow of rural workers, whereby to help the latter to find jobs in other areas or return to their native places to start businesses. At present, 1,000 rural labor flow and employment monitoring stations have been set up in 100 counties and cities around the country to analyze the flow of and demand for workers from the countryside and regularly release information, so as to guide the rational flow of migrant rural labor force.

Enlarging Employment Scale, Optimizing Employment Structure

Through the common efforts of the government and all sectors of society, total employment in China has grown remarkably. Since 1978, the number of employees in urban and rural areas has increased by 328.73 million, of which 144.26 million are urban employees.

The employment structure, too, has changed dramatically. In 2000, employees in the primary, secondary and tertiary industries accounted for 50 percent, 22.5 percent and 27.5 percent, respectively. In recent years, the employment percentage of the primary industry has dropped markedly, while the employment percentages of the secondary and tertiary industries have risen rapidly. Particularly, the growth rate of the employment percentage of the tertiary industry has been higher than that of the secondary industry. The employees of state and collective enterprises and institutions accounted for 37.3 percent of the total urban employees in 2001, down from 99.8 percent in 1978. Meanwhile, the number of employees of private, individually owned and foreign-invested enterprises has increased drastically. In the countryside, the household is still the dominant unit of agricultural employment. However, with the implementation of the urbanization strategy and the development of non-agricultural industries, non-agricultural employment and the transfer of rural labor have increased rapidly. By the end of 2000, the number of employees of township enterprises had reached 128.195 million, of which 38.328 million were employed by township collective enterprises, 32.525 million by township private enterprises and 57.342 million by individually owned township enterprises. Since the 1990s, the labor force transferred from rural to urban areas has topped the 80-million mark.

Promoting Reemployment of the Laid-off and Unemployed

With the speeding up of the economic restructuring, the long-accumulated contradictions in the operating mechanism of enterprises have become increasingly apparent, and large numbers of redundant employees in enterprises have been laid off. Most of the laid-offs from state-owned enterprises are relatively older, poorly educated and skilled in few jobs. Therefore, it is rather difficult for them to find reemployment. To settle the problem of the laid-off and unemployed personnel, the Chinese government, while guaranteeing their basic livelihood, has formulated a whole slue of policies, complete with a variety of measures, to ease the way for their reemployment.

Adopting active employment service measures. Reemployment service centers have been established in all those state-owned enterprises that have laid-off workers and staff members. After they have registered with the centers, governmental public employment service organs will provide them once with occupational guidance, thrice with employment information and once with free job training, all on a six-month basis. Beginning in 1998, the government started to implement the first phase of the "ten million in three years" reemployment training program, which was aimed at training ten million laid-off jobless persons in the course of three years. By mobilizing all the training forces in society, employing the beneficiaries of training and other effective measures, the government has convinced laid-off and unemployed persons to participate in reemployment training. From 1998 to 2000, more than 13 million laid-off and unemployed persons nationwide had taken part in retraining, and the reemployment rate after six months of training had reached 60 percent. The government began to carry out the second phase of the reemployment training program in 2001. Moreover, a total of 30 cities so far have carried out a "starting a business" training program, offering training to laid-off and unemployed persons who wish to establish small businesses, helping them register with the industrial and commercial administration authorities and acquire small loans after the completion of training, thereby to increase their reemployment opportunities through the establishment of small businesses.

Improving and implementing preferential reemployment policies. By simplifying the procedures of registration with industrial and commercial administration authorities, arranging business premises, reducing or waiving taxes and fees, and granting loans, the government helps laid-off and unemployed people set up economic entities or labor organizations to support themselves, seek reemployment or otherwise to find their own means of livelihood. Taking employment in community services as the main orientation of the reemployment efforts, the government has spared no pains to develop those small enterprises and employment service enterprises that can provide more employment opportunities.

Unfolding the "Reemployment Assistance Action." To appropriately resolve the practical difficulties laid-off employees face after they leave reemployment service centers, the government has organized a "Reemployment Assistance Action" drive to extend prompt and effective service to guarantee their basic livelihood, reemployment and social insurance through various assistance measures.

From 1998 to 2001, over 25.5 million people were laid off from state enterprises, of whom over 16.8 million have been reemployed.

Guaranteeing Women's Right to Employment

Special concern has been given to the employment of women in China. The Constitution of the People's Republic of China, Labor Law of the People's Republic of China, and Law of the People's Republic of China on the Protection of the Rights and Interests of Women all contain special provisions on the protection of women's right to employment. The state protects the right of women to work on equal terms with men, applies the principle of equal pay for equal work to men and women alike, and gives special protection to women during the menstrual period, pregnancy, maternity and breastfeeding. The Chinese government and all sectors of society energetically conduct job skill training for women, develop and expand the fields and trades suitable for women to work in, and adopts more flexible forms of employment, so as to provide employment opportunities for women to meet their different requirements.

Helping the Disabled and Other Special Groups to Find Work

The Chinese government attaches great importance to the rights of the disabled to social labor and employment. China adopts the principles of combining centralization and decentralization and encouraging seeking employment on one's own initiative to help the disabled find work. Welfare enterprises are an important form of centralized employment for the disabled. The government grants preferential policies, such as reducing and waiving taxation, to encourage the development of welfare enterprises, so as to increase employment for the disabled. Meanwhile, the government requires all enterprises and institutions to hire a certain proportion of disabled persons, and those which fail to do so must pay a certain amount of money to the employment guarantee fund for the disabled. In the five years of 1996-2000, more than 1.1 million disabled persons were given skill training, and another 1.1 million found jobs, on the strength of government allocations and the employment guarantee fund for the disabled, and the employment rate of the disabled jumped from 70 percent to 80.7 percent.

In addition, the government has established an employment service system for badly-off jobless urban residents, and for older laid-off and unemployed persons. It seeks to arrange jobs for destitute persons by providing funds to support community welfare-type employment organizations, developing community environmental protection, hygiene, security and other services, and providing free employment services. All these measures have achieved the desired effects.

II. Formation of New Labor Relations

In the course of establishing and improving the socialist market economy system, labor relations in China have become increasingly complicated and diversified. China commits itself to the maintenance of harmonious and stable labor relations. It has formed an initial system of laws and regulations, with the Labor Law of the People's Republic of China as the main body, to adjust labor relations, and has established the labor contract and group contract systems, tripartite coordination mechanism, labor standard system, labor dispute handling system and labor protection supervisory system, basically shaping up a new type of labor relations in consonance with the socialist market economy.

Instituting a Labor Contract System

China started to try out a labor contract system in the mid-1980s, and energetically promoted it in the 1990s. As a result, the labor contract system is now universally implemented in urban enterprises of every description. Chinese laws stipulate that employers and employees shall establish labor relations in accordance with the law, and conclude written labor contracts, with or without fixed periods, or with a period to complete the prescribed work; during the conclusion of the labor contract, the two parties to the contract must abide by the principles of equality, voluntariness and reaching unanimity through consultation. The labor contract system clarifies the rights and obligations of the employers and employees, and safeguards the employees' right to select jobs and the employers' right to select employees.

Establishing a Group Contract System

The Chinese government encourages enterprises to continuously strengthen the functions of the workers' congresses and trade unions, and improve the system of employees' democratic participation. To form a self-coordination mechanism of labor relations in enterprises, China has trial-implemented and promoted a group contract system through equal consultation. Chinese laws and regulations stipulate that employees of an enterprise may conduct equal consultation and sign group contracts with that enterprise via trade union representatives or representatives directly recommended by the employees themselves, with regard to labor remuneration, working hours, rest and vacation, labor safety, labor hygiene, insurance, welfare and other matters. Equal consultation takes diversified forms, and group contracts have wide-ranging contents. Signing group contracts through consultation between the trade union and the enterprise has now been adopted by most enterprises.

In recent years, the group contract system has not only been popularized in non-state enterprises, but also been gradually carried out during the reform of state-owned enterprises. By the end of 2001, the number of group contracts signed by enterprises nationwide and submitted to the labor and social security administration departments for the record had reached 270,000.

Setting Up a Tripartite Coordination Mechanism

China has made active efforts to establish a government-trade union-enterprise tripartite coordination mechanism in conformity with its actual conditions. In this mechanism, representatives from government labor and social security departments at all levels, trade unions and enterprises constitute a coordination organ to conduct communication and consultation on major problems relating to labor relations, and put forth suggestions on the drafting of labor and social security regulations, major reform programs, policies and measures concerning the interests readjustment of the three parties.

In August 2001, the Ministry of Labor and Social Security, All-China Federation of Trade Unions and China Enterprise Association jointly established the State Tripartite Conference System of Labor Relations Coordination, and convened the first national tripartite conference of labor relations coordination, setting a standard and stable operating mechanism for China's labor relations coordination. So far, a dozen provinces and municipalities, including Beijing, Tianjin, Hebei, Shanxi and Jiangsu, and the two cities of Shenzhen and Dalian have set up regional tripartite coordination mechanisms for labor relations. Among them, Shanxi and Jiangsu provinces have established such mechanisms at the provincial, prefecture/city, and county/district levels.

Bettering the Labor Standard System

The Chinese government attaches great importance to rationally determining, legally promulgating and timely adjusting labor standards to guarantee the lawful rights and interests of workers and promote economic and social development. At present, a labor standard system is basically in place, centering on the Labor Law of the People's Republic of China and covering areas such as working hours, rest and vacation, wage, prohibition of the use of child labor, special labor protection for women employees and under-age workers, work quotas and job safety and hygiene. The system has been adjusted and improved along with the country's economic and social development.

To ensure that all workers enjoy the right to work, rest and vacation, China adopts an eight-hour-day, 40-hour-week system. When the employing unit needs to extend working hours, they must consult with the trade union or the workers, and generally the extension should not surpass one hour a day, in special cases not more than three hours a day or not more than 36 hours a month. All workers are entitled to enjoy legal holidays and at least one day off a week.

The state prohibits hiring people under the age of 16, and punishes the illegal employment of child labor. The state prohibits all employers from hiring women and minors (ages 16 to less than 18) for tasks explicitly prohibited by state regulations. China has formulated national, trade and local standards on job safety and hygiene. In order to improve the management system of job safety and hygiene, in 1999 the Chinese government promulgated related standards, at the same time starting attestation work. So far, China has worked out more than 200 national and trade standards on work and personnel quotas. It has also promulgated other labor standards, such as job classification standards and job skill standards.

To ensure that labor standards are scientific and rational and that they are implemented smoothly, the government solicits suggestions from trade unions, enterprises, specialists and scholars while formulating, promulgating or adjusting labor standards. The Chinese government has always maintained that labor standards must be in sync with the country's level of economic and social development, that they should guarantee basic human rights and promote economic development and social progress, and on this basis should be gradually improved. China values the experience of other countries in formulating and implementing labor standards and, in time, will accede to relevant international labor conventions in line with the actual conditions of its economic and social development.

Improving the System for Handling Labor Disputes

The Chinese government holds that all labor disputes should be handled according to law and in a timely fashion, and that the lawful rights and interests of both parties involved should be protected. It encourages both parties in a dispute to solve their problems through negotiation and consultation. Chinese laws and regulations clearly define the procedures and organs responsible for the settlement of labor disputes. According to the regulations, whenever a labor dispute arises between a worker and an enterprise, either party may apply to the labor dispute mediation committee at the enterprise for mediation. If the mediation fails or if neither party wants mediation, then they may apply to the local labor dispute arbitration committee for arbitration. If either party is not satisfied with the decision of the arbitration committee, he or she may file a lawsuit with a people's court.

By the end of 2001 China had established 3,192 labor dispute arbitration committees at the county-level or above, consisting of nearly 20,000 full-time and part-time arbitrators. From August 1, 1993, when the Regulations of the People's Republic of China Concerning the Handling of Labor Disputes in Enterprises was promulgated, to the end of 2001, labor dispute arbitration committees across the country officially handled 688,000 labor disputes, which involved 2,368,000 workers. More than 90 percent of these disputes were settled. Besides, labor dispute arbitration committees at various levels handled 503,000 labor disputes that did not officially file for the record with them.

Setting Up a Labor Security Supervision System

In 1993, China embarked on the establishment of a supervision system for labor security. The Labor Law of the People's Republic of China and Law of the People's Republic of China on Administrative Punishment stipulates the responsibilities and work procedures of labor security supervision organs. Labor and social security administration departments supervise all employers to make sure they observe labor and social security laws and regulations. They have the right to halt any violation of these laws and regulations and order the violator to correct it; they may also issue disciplinary warnings or impose fines on the violator. Any organization or individual has the right to report or file a complaint about any act that violates labor and social security laws or regulations. When a person concerned thinks that a labor and social security administration department has violated his or her legitimate rights in the course of supervision and execution of the laws, he or she may initiate an administrative review or bring an administrative suit.

According to the principle of promoting law-based administration and enforcing laws strictly, labor and social security administration departments at all levels have constantly strengthened their law enforcement and established or improved labor security supervision organizations. By the end of 2001, China had set up 3,174 labor security supervision organs, with 40,000 labor security supervisors.

Reforming the Wage and Income Distribution System

The Chinese government adheres to a diversified distribution system with distribution according to work as the main form. The principle is to give priority to efficiency with due consideration to fairness. Reforms are being made to the wage system so that market mechanism can play its regulatory role in the distribution of income and that workers' incomes can increase as the economy develops and enterprises' economic returns increase. The Labor Law of the People's Republic of China, Regulations on Minimum Wages in Enterprises and Provisional Regulations on Wage Payments contain clear-cut provisions on standardizing the distribution of wages. The Chinese government formulates minimum wage standards according to law and makes timely adjustments to them, standardizes wage payment methods, and regularly issues information regarding wage guidelines, guidance wage levels for the labor market, and labor costs. It encourages enterprises to trial-implement the system of collective wage negotiation and guides them to adopt diverse wage systems and distribution forms. While safeguarding enterprises' right to independent decision-making in the matter of wage distribution, the government also guarantees workers' right to receive the remuneration for their work according to law. At present, a minimum wage system has been basically established across the country, and more than 10,000 enterprises have started to experiment with pilot wage schemes through collective negotiations. Twenty-six provinces, autonomous regions and municipalities directly under the Central Government regularly release wage guidelines, and 88 cities publicize guidance wage levels for the labor market.

Since China adopted the reform and opening-up policy in late 1978, the national economy has developed rapidly, and the wages of urban employees have kept increasing. By the end of 2001, their annual per-capita money wages had reached 10,870 yuan, 16.3 times the figure for 1978. After allowing for inflation, the average annual increase rate was 5.5 percent in real terms.

III. The Establishment of a Social Security System

In order to promote economic development and social stability, and to gradually raise the living standards and social security benefits of the general public, the Chinese government has made every effort to establish a sound social security system that corresponds with the socialist market economy system. After years of exploration and practice, a social security system has been basically set up, consisting mainly of social insurance, social relief, social welfare, social mutual help and special care for disabled ex-servicemen and family members of revolutionary martyrs, and featuring the raising of funds through various channels and the gradual socialization of management and services.

Reforming the Social Security System

Since the early 1980s, the Chinese government has carried out a sequence of reforms in its social security system with the goal of establishing a standardized social security system independent of enterprises and institutions, funded from various channels, and with socialized management and services - a system characterized mainly by basic security, wide coverage, multiple levels and steady unification. Under this mandatory state basic security, people's basic living needs will be met corresponding with China's economic development level, and the social security network will cover all citizens step by step. Besides basic security, the state will actively promote other types of social security so as to form a multi-level social security system. Through reform and development, a nationally unified social security system will be put into practice step by step. Through more than a decade's efforts, basic social insurance policies have been formulated, and successively promulgated and implemented, covering the vast majority of urban staff and retirees, and in some regions even rural people working in cities are included. A social security system that guarantees urbanites a minimum standard of living has been established across China. In 2001, the Chinese government began a pilot program in Liaoning Province, aimed at improving the existing social security system in cities.

Since the mid-1990s, the Chinese government has undertaken reforms to the social security management system in order to bring all social security systems under unified planning, and better manage and supervise the use of social security funds. Social insurance, which was previously governed by a number of administrative departments, is now under the centralized management of the labor and social security administration departments. Labor and social security administration departments at all levels have established offices to handle the daily routine of social insurance. The handling of social insurance affairs that used to be the responsibility of enterprises are gradually being transferred to social organizations, namely beneficiaries now get their social insurance benefits from organizations in their own communities and are subjected to the latter's administration. The Chinese government has strengthened administrative and social supervision over social insurance funds. These funds have been orbited into special accounts and a system has been set up, whereby revenue and expenditure are managed separately and the funds are used for specified purposes only. Labor and social security administration departments at all levels have established supervisory organs to examine and supervise the collection, management and payment of social insurance funds. They also investigate and punish those who violate the pertinent laws and regulations. In addition, the Chinese government has adopted a large body of measures to increase the sources of social security funds, such as strengthening the collection of social security funds and raising the ratio of such funds in the overall financial expenditure. In 2001, the central finance allocated 98.2 billion yuan to be used for social security payments, 5.18 times the figure for 1998. The Chinese government has established a National Social Security Fund Executive Council specially responsible for the operation and administration of the funds acquired from reducing state shareholding, the funds put in by the central finance and social security funds collected from other channels. The National Social Security Fund comes from the central finance appropriations as well as from other channels.

Since 1998, the Chinese government has adopted a "two guarantees" policy. The first is a guarantee of the basic livelihood of the laid-off personnel from state-owned enterprises. Reemployment service centers for those laid-offs have been established in all state-owned enterprises. They give laid-off personnel allowances for basic living expenses and pay social insurance premiums for them, with the required funds coming from the government budget, enterprises and other sources (mainly unemployment insurance funds). They also provide job guidance and organize reemployment training programs to help laid-off personnel find new jobs. The second guarantee is to ensure basic livelihood for all retirees and that they receive basic pensions in full and on time. To ensure the implementation of the "two guarantees," the Chinese government has put forth three corresponding policies: Laid-offs from state-owned enterprises can receive a basic living allowance from the reemployment service centers for a maximum of three years; if they still haven't found a job by then, they can receive unemployment insurance payments for a maximum of two years; at the end of the two-year period, if they still haven't been reemployed, they can apply for the minimum living allowance paid to urban residents. By 2001, the vast majority of people laid off by state-owned enterprises were receiving a basic living allowance, and retired personnel were receiving their pensions in full and on time. Thus the "two guarantees" policy has played a major role in safeguarding the legitimate rights and interests of laid-off and retired personnel, and in maintaining social stability.

The Old-Age Insurance System

Reform of the old-age insurance system was initiated throughout China in 1984. In 1997, the Chinese government adopted a Decision on Establishing a Uniform Basic Old-Age Insurance System for Enterprise Employees, in light of which efforts were started along this line in urban areas nationwide.

The basic Chinese old-age insurance system combines mutual assistance programs with personal accounts. Employees of all urban enterprises may participate in the basic old-age insurance program, and all enterprises and employees in towns and cities have the obligation to pay the basic old-age insurance premiums. At present, about 20 percent of the enterprise wage bill and 8 percent of personal wage should go to such insurance. Part of the basic insurance premiums from enterprises is used to set up mutual assistance funds, and the rest goes to personal accounts. The basic old-age insurance premiums paid by the individuals go entirely to their personal accounts. The basic old-age pension is in two parts: the base pension and the pension in personal accounts. The base pension is covered by the mutual assistance funds, the monthly sum amounting to 20 percent of the average social wage of the employees and the monthly pension in personal accounts come to 1/120 of the accumulated amount in personal accounts. Pensions in personal accounts can be inherited. Those who started working before, and retired after, the implementation of this new system are entitled to an additional pension for the transitional period.

Employees participating in the old-age insurance program increased from 86.71 million in late 1997 to 108.02 million by the end of 2001, after several years of implementation of the program. The number of those enjoying basic old-age pension also increased from 25.33 million to 33.81 million, with the average monthly basic pension per person growing from 430 yuan to 556 yuan. To ensure the timely and full payment of the pension, the Chinese government in recent years has tried to raise the basic old-age insurance fund under the mutual assistance program gradually to the provincial level, coupled with a steady increase of the financial input in that direction. From 1998 to 2001, the subsidy outlay for this from the central finance alone attained the grand total of 86.1 billion yuan. Now basic old-age pensions are mostly delivered through social service institutions, such as banks and post offices. In 2001, 98 percent of these pensions were delivered in this way. The existing old-age security system for employees and retirees from government institutions remain unchanged.

In 1991, China began to try out the old-age insurance system in some of the rural areas. The basic principle for the rural old-age insurance system is that the premiums are to be paid mainly by the beneficiaries themselves, supplemented by collectively pooled subsidy and supported by government policies, the accumulation of funds taking the form of personal accounts.

The Medical Insurance System

In 1988, the Chinese government began to reform the free medicare system in government institutions and the labor protection medicare system in state-owned enterprises. In 1998, the government issued the Decision on Establishing the Basic Medical Insurance System for Urban Employees, enforcing a basic medical insurance system for urban employees throughout the country.

China's basic medical insurance system also combines social mutual assistance programs with personal accounts. In principle, the basic medical insurance funds come in the form of mutual assistance programs at prefectural and city levels. The basic medical insurance covers all urban employers and employees, and all enterprises, state administrative departments, institutions and other organizations and their staff members and workers have the obligation to pay the basic medical insurance premiums. At present, about 6 percent of the wage bill of employing units and 2 percent of personal wages should be paid as part of the medical insurance premiums. Part of the insurance premiums from employing units goes to the funds under the mutual assistance program, and the rest to the employees' personal accounts. The personal insurance premiums go entirely to personal accounts. The mutual assistance funds and personal accounts are used to pay for different types of medical costs: The former mainly for hospitalization and outpatient services in the case of certain chronic diseases, with a set starting standard and a maximum norm, and the latter mainly for general outpatient services.

To ensure that employees covered by the insurance program enjoy basic medical service and the service charges do not increase too rapidly, the Chinese government has strengthened its administration of medical services by specifying a list of medicines, medicare service items and standards of medicare facilities to be covered by basic medical insurance and evaluating the qualifications of the medical institutions and pharmacies that provide basic medical insurance service, and allowing those who participate in the program the right to make their own choices. To support the reform of the basic medical insurance system, the government has also initiated a reform of the medical institutions and the medicine production and circulation system. A mechanism of competition between medical institutions and a market operating mechanism for medicine production and circulation have also been set up for "better medical service at lower cost."

Apart from the basic medical insurance, a system of mutual help in the case of large-amount medical costs has been set up throughout the country to cover medical costs in excess of the maximum coverage under the mutual assistance program. The state has also set up a medical subsidy program for civil servants. Enterprises are encouraged to set up enterprise supplementary medical insurance for their employees, where conditions permit. The state will also, step by step, institute a social medicare assistance system to provide basic medical security for the impoverished population.

The reform of the basic medical insurance system is being carried out steadily in China, with a continued increase in the coverage of basic medical insurance. By the end of 2001, 97 percent of prefectures and cities had started such reform programs, and 76.29 million employees had participated in basic medical insurance programs. In addition, free medical service and other forms of medicare security systems cover over 100 million urbanites. The Chinese government is now working to incorporate these people gradually in the basic medical insurance system.

The Unemployment Insurance System

Shortly after the founding of the People's Republic of China in 1949, an unemployment relief system was introduced for a short period of time. Later, with the institution of the employment system featuring unified job assignment under the planned economy system, the relief system had gradually gone out of the picture. Following the adoption of the reform and opening-up policy the Chinese government began to set up an unemployment insurance system in 1986 to adapt to the changes in the operating mechanism of state-owned enterprises and the major reform of the labor system, so as to guarantee basic livelihood for laid-off employees.

In 1999, the Chinese government issued the Regulations on Unemployment Insurance, pushing the unemployment insurance system building onto a new stage of development. This system covers all urban enterprises and institutions and their staff, whereby all enterprises and institutions and their staff must pay the insurance premiums, the former paying 2 percent of their wage bill and the latter 1 percent of their personal wages. Three conditions are to be met to enjoy the benefits of the unemployment insurance: One full year of the insurance premium has been paid; suspension of employment is not voluntary; and unemployment has been registered and application for reemployment filed. Unemployment insurance benefits consist mainly of unemployment insurance money, which the beneficiary can draw every month, with the standard lower than the minimum wage but higher than the minimum living allowance for urban residents. The period for drawing insurance money depends on the length of period for which one has paid the premiums, the maximum being 24 months. If the employed person is ill during the period he or she is entitled to draw unemployment insurance money, he or she is also entitled to medical subsidies. If the unemployed person dies during this period, his or her family can receive funeral subsidies and his or her dependants can receive pension for the deceased. In addition, the unemployed person may receive vocational training and subsidies for job agency services when drawing the unemployment insurance money.

In recent years, the coverage of unemployment insurance has grown continuously, with the number of the insurance policy underwriters increasing from 79.28 million in 1998 to 103.55 million in 2001. The number of people who did not draw unemployment insurance money was 3.12 million in 2001. With the improvement of the unemployment insurance system, the basic livelihood guarantee system for laid-offs from state-owned enterprises is being gradually orbited into this system.

The Industrial Injury Insurance System

In the late 1980s, the Chinese government began its reform of insurance covering injuries suffered on the job. In 1996, the government issued the Trial Procedures for Industrial Injury Insurance for Enterprise Employees, to be followed by the establishment of relevant systems in some of the regions. In the same year, the Standards for Appraising Industrial Injuries and Disabilities Caused by Occupational Diseases was adopted by the government department concerned, providing the basis for such appraisal.

The Trial Procedures for Industrial Injury Insurance for Enterprise Employees states that industrial injury insurance premiums shall be paid by enterprises instead of by employees themselves. The rate of industrial injury insurance premium varies according to different trades, and it may fluctuate with the situation of the individual enterprise. The rate of premiums is determined on the basis of the level of industrial injury risks and that of occupational danger in different trades. Based on the trade insurance rates, the specific premium rate of the year for an enterprise is decided according to its actual number of industrial injuries and risks and the outlays of the insurance funds in the previous year.

Payment of industrial injury insurance funds covers mainly medical costs sustained during the treatment of the injury, and the injury or disability subsidies, pension for the disabled person or family of a deceased person, and injury or disability nursing charge, all of which are to be determined according to the degree of disability upon termination of the medical treatment. By the end of 2001, the national average rate of industrial injury insurance premium was about 1 percent, with over 43.45 million employees covered by the industrial injury insurance scheme. Enterprises not having acceded to such scheme are responsible for covering the industrial injury expenses themselves.

The Childbirth Insurance System

Reform of the childbirth insurance system started in some enterprises in China in 1988. Based on a summing-up of the experience gained, the Chinese government mapped out the Trial Procedures for Childbirth Insurance for Enterprise Employees in 1994, which stipulates that the childbirth insurance premiums shall be paid by enterprises instead of by employees themselves. The insurance benefits cover mainly medical treatment for childbirth and monthly childbirth allowance for employees during maternity leave. By the end of 2001, the national average childbirth insurance expense rate was 0.7 percent, with 34.55 million employees covered by the insurance scheme. Enterprises not having acceded to such scheme are responsible for paying the childbirth expenses for their employees.

The Minimum Living Standard Security System

In the early years after the founding of the People's Republic of China, the government set up a social relief system for the urban and rural poor. In 1993, it began to reform the social relief system in cities, at the same time seeking to try out a minimum living standard security system. In 1999, this security system was established in all cities and organic county towns throughout the country. In the same year, the Chinese government officially promulgated the Regulations on Guaranteeing Urban Residents' Minimum Standard of Living to ensure the basic livelihood of all urban residents.

Funds for this purpose are included in the fiscal budgets of the local people's governments, which determine the minimum living standard according to the cost necessary for maintaining the basic livelihood of the local urbanites. Urban residents whose average family income is lower than the minimum living standard can apply for the minimum living allowance. Investigation of the family's income shall be conducted before issuance of the minimum living allowance, the level of which is calculated in terms of the difference between the family per-capita income and the minimum living standard.

In 2001, there were 11.707 million urban residents nationwide drawing the minimum living allowance, with 2.301 billion yuan for the minimum living allowance coming from the central finance. In recent years, part of the rural areas has started to set up a similar minimum living standard security system.

The Social Welfare System

The social welfare system is a system established by the Chinese government to provide funds to ensure the livelihood of senior citizens, orphans and the handicapped persons who are in extraordinarily straitened circumstances. To protect the rights and interests of this special group of people, the government issued the Law of the People's Republic of China Guaranteeing the Rights and Interests of Senior Citizens, Law of the People's Republic of China on Protection of the Handicapped and Regulations Concerning Work on Providing "Five Guarantees" in the Rural Areas. The laws stipulate that in cities elderly widows and widowers who are childless and helpless and living alone, and eligible handicapped persons and orphans shall be supported and reside in special concentrated homes, while a combination of concentrated and scattered forms shall apply to those in the rural areas. Concentrated establishments include social welfare homes, old-age homes, sanatoriums, and children's welfare homes. For handicapped persons, government aid efforts include the formulation of preferential policies for establishing social welfare enterprises of diverse types to help create job opportunities for those who are able to work.

China has achieved marked progress in its social welfare work. By the end of 2001, there were 3,327 government-run social welfare institutions with 191,000 inmates, 35,000 collective-run social welfare institutions with 668,000 inmates, 934 private-run social welfare institutions with 34,000 inmates, and 38,000 social welfare enterprises employing 699,000 handicapped people. Meanwhile, special lotteries have been instituted to collect funds for social welfare undertakings. In 2001 alone, the funds raised for these undertakings reached 4.2 billion yuan.

The Special Care and Placement System

This refers to the system aimed at compensating or commending the special group of people who have rendered meritorious services to the state and society. At present, more than 38 million people are included in this category. To ensure their rights and interests, the government has issued the Regulations on Honoring Revolutionary Martyrs, Regulations on Special Care and Treatment for Servicemen and Regulations on the Resettlement of Ex-Servicemen in Cities and Towns. These regulations stipulate that a regular and fixed-amount subsidy shall be given to the key recipients, such as dependents of fallen servicemen, disabled revolutionary servicemen and demobbed veterans, that dependents of conscripts be granted special allowances; that medical costs be reduced or waived for disabled revolutionary servicemen and other key special-care recipients; that demobbed soldiers shall enjoy a just-for-once job assignment from the government and those who wish to find jobs on their own be given subsidy in one lump sum. Special-care allowances to the tune of 29.2 billion yuan were allocated from state budgets at all levels from 1996 to 2001.

The Natural Disaster Relief System

China frequently suffers the ravages of natural disasters, such as floods, droughts, windstorms and hailstorms, which have adversely affected people's lives. The Chinese government has set up a special social relief system to relieve the sufferings of victims of unexpected natural calamities. Every year, relief funds are allocated from government budgets at central and local levels for this purpose. From 1996 to 2001, such expenditures reached 21.26 billion yuan-worth nationwide, providing food, clothing and quilts for 390 million disaster victims. This disaster relief system has gone a long way toward guaranteeing the basic livelihood of the people in the disaster-stricken areas.

The Social Mutual Help System

Mutual help among neighbors is one of the Chinese nation's fine traditions. Issued in 2000, the Law of the People's Republic of China on Public Welfare Donations institutionalizes and encourages regular donations for social welfare. In 2001, civil affairs departments received 1.59 billion yuan of donations from the general public (including goods converted into money). The Chinese government also encourages enterprises, institutions and mass organizations to organize efforts to help the poor shake off poverty and get rich. Governments at the grassroots levels also operate community services for the poor and needy. Since 1994, trade unions at all levels have organized "heart-warming activities" every year to offer help to badly-off families. Over the past few years, a total of 10.44 billion yuan for this purpose have been raised and sympathy visits paid to families of 39.75 million poverty-stricken employees, model workers, retirees, and injured, sick or disabled employees.

IV. Development in the Early Period of the 21st Century

With the implementation of the Tenth Five-Year Plan, for National Economic and Social Development (2001-2005) in 2001, China's labor and social security buildup has entered a new phase of development. During the early stage of the new century, these efforts face both problems to be solved and new opportunities for development. The overall progress of the reform and opening-up and modernization drive has created favorable conditions for solving the problems of employment and social security. The further growth of the national economy and the increase of economic strength have provided a firm material foundation for the enlargement of employment and the improvement of social security. The market-oriented employment mechanism and social security system now basically in place across China have already laid a good foundation for further promotion of the labor and social security undertakings. At the same time, the Chinese government is also fully aware that the employment problem in both the rural and urban areas will remain sharp, and structural unemployment will become more serious for a long time to come. Labor relations are expected to become more complicated, the aging of the population and the increase of unemployment will put more pressure on social security, and promotion of social security in rural areas will still have a long way to go.

Targets and Tasks

The targets for labor and social security development in the early part of this century are as follows: initially forming a comparatively complete labor and social security system corresponding to the development level of China's productive forces and meeting the requirements of the socialist market economy; ensuring well-nigh full employment and basic social security for the majority of workers; safeguarding the legal rights and interests of both employees and employers; enhancing the material and cultural wellbeing of rural and urban residents; and promoting economic development and social stability. The main tasks are to gradually improve the quality of workers and the employment structure, initially form a market-oriented employment mechanism, strive to promote employment, standardize and improve the statistics on unemployment rate, and control the registered rural and urban unemployment rate to within 5 percent; actively adjust labor relations and keep them harmonious and stable; improve the macro regulation and control system of income distribution, work out a rational income distribution relationship, and achieve an approximately 5 percent annual increase in both the per capita disposable income of urban residents and the net per capita income of rural residents; speed up the development of the urban social security system, improve the methods and operating mechanism of fund raising, and promote the socialization of social security management and services; with farmers' old-age security and health security of multiple forms as the guide, actively explore in rural areas a basic security system suited to the socialist market economy system and the country's economic development level and set up a system to help the weak group in society to take care of their own life and work.

Policies and Measures

·Carry out an active policy for promoting employment and do everything possible to enlarge the scale of employment. Rapid economic growth shall be maintained, domestic demands shall be expanded, and new employment opportunities created to the full, so as to increase total employment. The employment structure for labor force should be improved, and great efforts made to develop labor-intensive industries and enterprises. Tertiary industry, small and medium-sized enterprises and the non-public sectors of the economy shall be taken as the main channels for the enlargement of employment. Preferential policies shall be further carried out so as to help laid-off and jobless people to find reemployment.

·Establish a unified and standardized labor market, make a unified plan for rural and urban employment, and ameliorate the employment service system. The reform of the labor personnel system and the household registration system shall be deepened, and efforts made to guide the orderly flow of the labor force between urban and rural areas or between regions so as to promote the transfer of surplus agricultural labor. The service of public job agencies shall be improved and community-run job agencies encouraged to develop along healthy lines.

·Improve the quality of workers in an all-round way and adopt flexible forms of employment. The labor reserve system and employment permit system shall be carried out. Vocational education, continuing education and reemployment training shall be strengthened, and the professional qualification certification system enforced. More attention shall be paid to job skill training for rural workers, and a sound job training system established and improved in rural areas step by step. Flexible forms of employment shall be adopted, and finding employment on one's own encouraged.

·Consolidate and improve the labor contract system, make great efforts to carry forward the group contract system and promote the establishment of a tripartite coordination mechanism for labor relations. Active efforts shall be made to formulate and revise the state's basic labor standards, and a labor standard system suitable to China's actual conditions be perfected. The system of handling labor disputes shall be further improved, gradually enhancing the comprehensive ability to prevent and handle labor disputes.

·Promote the reform of the wage and income distribution system and establish an incentive and restraining mechanism for income distribution. The minimum wage system shall be improved and the wage guidelines and the guidance price level system for the labor market be enforced across-the-board. Efforts shall be made to continue the experiments in the collective wage consultation system, standardize the payment of wages and guarantee the legal rights and interests of employees with respect to their work remuneration.

·Deepen the reform of the social security system, speed up the building of the social security system and actively implement the pilot program for its improvement. For this, we need to establish a reliable and stable social security fund-raising mechanism, restructure financial expenditure, increase necessary input and the amount of social security funds, and rationally adjust the payment rate and substitution level, and improve the operational efficiency of social security funds and the efficiency rate of investment. The social security macro-regulation and supervision system shall be bettered and its management level and efficiency raised, so as to ensure the stable, healthy and orderly operation of the social security system.

·Improve the basic old-age insurance and basic medical insurance systems and encourage employing units, where conditions are favorable, to set up annuity and supplementary medical insurance programs for their employees. Further steps shall be taken to improve the unemployment insurance system and make the basic livelihood guarantee system for laid-off personnel from state-owned enterprises part of the unemployment insurance scheme. Development of the industrial injury and childbirth insurance systems shall be accelerated. The basic old-age pension insurance system for employees of state organs and institutions shall be improved. The system for ensuring a minimum standard of living for urban residents shall be standardized. We shall accelerate community building and promote the socialization of social security. We shall explore diverse forms of security and push forward the building of the basic security system in the rural areas. We need to improve our policies concerning social relief, social mutual aid, the special care and placement system and social welfare, and safeguard the legal rights and interests of women, minors, the elderly and the handicapped.

·Establish a supervision and management system concerning social security funds through a combination of administrative supervision, social supervision and internal institutional control. While establishing and improving the social security system, we shall explore the right path for investment management and establish a fund supervision and management system coordinative with the fund management system in accordance with the fund management principles of different security projects. We shall work hard to guarantee or increase the value of the social security funds and resolve the operational risks of the security funds, so as to safeguard social safety and stability.

·Press ahead with the legal system building in the labor and social security fields, improve the labor and social security supervision system, steadily enhance the overall quality of supervision and law-enforcement personnel, carry out supervision activities of diverse forms, and push forward the organic integration of labor security supervision and law-enforcement departments with all social sectors in implementing legal supervision. We shall strengthen the building of the labor security management information system and the popularization of the scientific findings in this aspect so as to improve the scientific, standardized, institutionalized and IT management of the labor and social security undertakings. China will continue to actively participate in international activities in the fields of labor and social security, and expand cooperation and exchange with other countries, so as to continue to play its promotional role in international labor affairs. We will adapt ourselves to the new situation arising from our WTO entry, and work hard consistently to carry our labor and social security cause further forward.

Information Office of the State Council
of the People's Republic of China

April 2002, Beijing