China Makes a Cautious Move Toward Social Security

China is gradually moving toward the adoption of a new form of welfare benefit that most Americans take for granted: a nationwide social security system to provide income for retired workers.

Over the past few weeks, first newspaper commentaries and then the Chinese Communist Party’s proposed five-year economic plan have acknowledged that the nation’s pension system needs to be overhauled.

“It’s funny, but this is a socialist country that has been without a social security system,” a Western economic specialist said recently. “This is long overdue. They can’t completely reform their economy until the country has some sort of retirement system.”

The problem of providing financial support for the elderly has taken on increasing social importance in China because of the nation’s strict family-planning policies, which limit most couples in urban areas to a single child.

Chinese social scientists have begun worrying about what may happen when the elderly become an increasingly large percentage of the population. According to the 1982 census, 49.5 million, or about 4.9% of the population, were over the age of 65.

That is less than the percentage in developed countries but it is increasing so fast that some studies suggest that within 50 years the elderly could represent more than 20% of the population.

“China must pay urgent attention to the aging of her population and begin studying the possible impact this problem will have on the whole society,” the demographer Wu Cangping wrote last year.

During the past three decades, the government has left the ultimate responsibility for providing support for the elderly to individual families, in effect perpetuating the Confucian tradition of filial piety.

The obligation to support elderly parents is even written into the Chinese constitution, which says that “children who have come of age have the duty to support and assist their parents.”

The Chinese government provides pensions for many workers but not by means of a nationwide scheme like the U.S. Social Security system. Instead, each state-owned enterprise is responsible for providing a pension to its own employees. It is this system that is now under attack. Critics argue that it creates two different kinds of anomalies.

First, older state-owned enterprises have many more retirees to support than those that were established more recently.

“In some of the older enterprises, one worker now has to cover the retirement fund for one and a half pensioners, while some new plants have next to no pensioners,” the official New China News Agency reported.

Second, economic reforms here have opened the way for the creation of many small-group enterprises (collectives) and private businesses. Many of these ventures are not financially strong enough to set up pension systems.

“So far, more than 10 million workers and staff members in township units under collective ownership and individual workers do not participate in the labor insurance system, and so their livelihoods are not secure after they retire,” the Communist Party newspaper People’s Daily reported recently.

“Most of the units under collective ownership which have instituted the labor insurance system also find it very difficult to pay for pension and other insurance expenses all by themselves because of unstable economic development, poor foundation and little accumulation.”

A Peking-based diplomat said he believes China is pushing hard for a nationwide system now because the government wants to make its industrial enterprises financially self-sufficient--and to let the least successful ones go out of business.

“They keep talking about letting some enterprises go bankrupt and you can’t have bankruptcy without some kind of social security system (to take care of workers thrown out of work),” he said.

Chinese authorities apparently intend to proceed cautiously in the creation of a nationwide retirement system. A draft of the 1986-1990 economic plan approved by the Communist Party calls for research and experimentation with different kinds of social security systems.

But the government’s aims were spelled out in the People’s Daily article last month, which surveyed social security systems around the world and concluded that the central government should set up a retirement system managed in a “unified way.”