Enforcing filial piety is no solution to China's pension shortfall

Chang Ping says the new law requiring people to take care of their parents may have something to do with the yawning gap in China's pension fund, plagued by corruption and inefficiencies

PUBLISHED : Monday, 08 July, 2013, 12:00am
UPDATED : Monday, 08 July, 2013, 1:35am

Lawyer Zhou Litai became famous over a decade ago for being a champion of workers' rights. Based in Shenzhen, he fought for compensation for dozens of young workers who lost limbs or suffered other serious injuries at work.

Their cases were not complicated. All employers were required by law to contribute to their employees' social security fund, which, in the event of an accident that led to injury, would pay for their medical expenses and part of their living costs. But this rarely happened in reality.

A judge I interviewed for the story said that injured workers did not receive their rightful compensation for the simple reason that there were too many workers for the too few resources in the social security fund. So workers whose bosses flouted the law - by not paying the insurance - were in fact lucky: in these cases, the judges would be free to impose hefty damages on the employers for a quick resolution.

It was only when I read a China Business Times report this May that I finally understood why the Shenzhen social security fund was so poor. It was not only because there were many injured workers, but also because much of the money had been used elsewhere.

Between 1982 and 1996, the Shenzhen social security authority was found to have taken a total of 1.76 billion yuan (HK$2.2 billion using current exchange rates) out of the fund for investment in 145 projects. Officials said all money had since been returned, along with a profit of about 1 billion yuan over 14 years - a rate of return which internet users noted was even lower than bank interest.

Shenzhen officials also stressed that the money was taken out of the work injury fund, and not the pension fund.

The misuse of social security funds is not new, of course. The corruption case of former Shanghai party secretary Chen Liangyu in 2006 involved the misappropriation of billions of yuan of the city's pension fund. In the end, nearly 30 officials were arrested and more than 20 of them were convicted. In 2007, then Shanghai mayor Han Zheng said all the money taken had been recovered, plus interest, to the tune of 3.7 billion yuan.

The enactment last Monday of an amended law for the "Protection of the Rights and Interests of Elderly People" has renewed public interest in China's social security fund. The law says "elderly people should live out their years in the family home, where members of the family should respect and care for them". This was an improvement from the wording of the original law, which simply stated that care of the elderly should be the family's responsibility.

A new provision of the law also requires children to take care of the "psychological needs of elderly people" so they don't feel neglected, and says those who don't live with their parents must visit them often and send them greetings.

This quickly became known as the "Visit Home Often" provision. The diffi-culty of enforcing such a law has made it a joke among internet users. Just how often is "often"? A visit once or twice a year would already be plenty for Chinese working overseas. Migrant workers who take up jobs in the coastal cities may live closer to home, but the travel expense and time away from work are still too hefty for them to bear more than once a year, even if they long to see the parents and children they've left behind.

Many people believe the government is resorting to the law to regulate moral behaviour because of worries over the social security fund. They say the government is essentially telling its citizens: forget about relying on social security for your pension needs, as people in modern societies do; just make sure you have children to fall back on, as in the old days.

In old photos now posted online, officials promoting birth control are seen holding up banners with the slogan that promised people they could "rely on the government in old age". That has morphed through the years to become "rely on yourself in your old age, don't ask the country for help".

The truth is that, even if there were no corruption, China's social security fund would still fall short. A report published this year by the China Research Centre on Ageing forecast that the number of elderly people would top 200 million for the first time, to reach 202 million, or some 14.8 per cent of the population.

In a report on China's "pension black hole" last year, Capital Week magazine said a study jointly led by Bank of China chief economist Cao Yuanzheng suggested that the pension shortfall this year could reach a hefty 18.3 billion yuan.

At the China Development Forum in March, the newly appointed minister of finance, Lou Jiwei , said there were too many loopholes in China's administrative systems, including the social security fund. "If we don't fix these systemic loopholes and put in place good management and the appropriate limits and incentives, no matter how much money we put in, the fund would still be drained," he said.

At the Boao Forum for Asia held in April, Dai Xianglong , party chief of the National Council for Social Security Fund, said two things should be done to tackle the problem: postpone the retirement age at an appropriate time, and increase the strategic reserves in the fund.

Frankly, for many internet users, a first step would be for government officials to disclose their assets.

Chang Ping is a current affairs commentator writing on politics, society and culture. This commentary is translated from the Chinese