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China's social security white paper (full text)
Updated: 2004-09-07 11:23

I. Old-Age Insurance

China is now an aging society. As the aging of the population quickens, the number of elderly people is becoming very large. This trend will reach its peak in the 2030s. To guarantee the basic living standards of the elderly and safeguard their legitimate rights and interests, the Chinese Government has continuously improved the old-age insurance system and reformed the fund-raising mode in an attempt to establish a multi-level old-age insurance system marked by sustainable development. Promoting the Development of a Basic Old-Age Insurance System for Employees in Urban Areas

-- Reforming the basic old-age insurance system for enterprise employees in urban areas. In 1997, the Chinese Government unified the basic old-age insurance system for enterprise employees in urban areas across the country by implementing a social-pool-plus-personal-accounts scheme. Enterprise employees who have reached retirement age as provided by law (60 for male employees, 55 for female cadres and 50 for female workers) and who have paid their share of the premiums for 15 years or more shall be entitled to collect a basic old-age pension every month after retirement. The basic old-age pension consists of two parts: base pension and pension from personal account. The monthly sum of the base pension is tantamount to about 20 percent of an employee's average monthly wage in that area in the previous year. The monthly pension sum from the personal account is 1/120 of the total accumulated sum in the personal account (11 percent of an employee's wage being deposited every month in the pension section). The state adjusts the level of the basic old-age pension with reference to the price index of living expenses for urban residents and employees' pay increases. In 2003, the monthly basic pension for enterprise retirees covered by the basic old-age insurance scheme was 621 yuan on average.

-- Expanding the coverage of basic old-age insurance. Initially, China's basic old-age insurance covered only state-owned enterprises and collectively-owned enterprises in urban areas and their employees. In 1999, this coverage was expanded to include foreign-invested enterprises, private enterprises and other types of enterprises in urban areas, as well as their employees. All provinces, autonomous regions and municipalities directly under the Central Government can make provisions to include persons engaged in individual businesses of industry or commerce in the basic old-age insurance in accordance with the specific conditions in their localities. In 2002 China expanded its basic old-age insurance coverage to all those who were employed in a flexible manner in urban areas. In 2003, the number of people participating in the basic old-age insurance scheme across China reached 155.06 million, 116.46 million of whom were employees.

-- Undertaking experimental reforms in selected areas to improve the basic old-age insurance system. In 2001, the Chinese Government began to carry out pilot projects along this line. The reform includes: gradually establishing personal accounts so that funds can be accumulated, and probing ways of preserving and increasing the value of the funds; changing the way the base pension is calculated and paid, whereby the amount of base pension is more closely linked to the length of time of the employee's premium payment, and if an employee has participated in the basic old-age insurance program and paid the premiums for 15 years, he or she will be entitled to a higher rate of pension for every additional year of payment; unifying the procedures of premium payment by those who are employed in a flexible manner, whereby the base of their premium payment is uniformly set at 20 percent of the average wage of local employees. The pilot project was first conducted in Liaoning Province, and has been expanded to Jilin and Heilongjiang provinces in 2004.

-- Probing the reform of the retirement system of government agencies and public institutions. In China the retirement and pension system in government agencies and public institutions is different from that applied in enterprises. In 2003, there were 670,000 retirees who had joined the revolutionary ranks before October 1949 and 9,310,000 other retirees from these agencies and institutions. In the 1990s, some localities in China began to probe the procedures of reforming the retirement system in such agencies and institutions. Pilot projects were conducted to raise the retirement pension funds through the social pool program. By the end of 2003, some 11.99 million employees and 2.58 million retirees had participated in such pilot projects.

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