China’s social security fund is being propped up by local government subsidies, but for how long?
- Without contributions from local governments, national social security funds would have run at a deficit since 2013, a South China Morning Post analysis of records finds
- Beijing exempted companies from paying into the system during the coronavirus, but the move could come at the expense of supporting the nation’s most vulnerable
When the coronavirus began taking its toll on China’s economy earlier this year, one of Beijing’s key policies to reduce the impact was to exempt firms from contributing to the national social security fund for a few months.
But this policy decision has increased the financial burden on already cash-strapped local governments, which have been subsidising the fund for years.
But instead, the fund’s balance was around 9.6 trillion yuan (US$1.39 trillion) at the end of 2019.
And support provided by the fund, which covers pensions, medical insurance, unemployment insurance, work injuries and maternity insurance, became crucial during the pandemic as the economy slowed and unemployment rose.
According to the Ministry of Finance, in the first half of 2020, the fund’s revenue fell by 15 per cent from a year earlier, to 3.5 trillion yuan, mainly because of the pandemic and the exemptions or delays in social security contributions, while expenditures rose by 6.5 per cent to 3.6 trillion yuan. That left a gap of 120 billion yuan to be filled.