China’s ailing social welfare system needs two big fixes, says finance minister
Lou Jiwei wants state firms to contribute profits and employees to have more incentive to pay
The increase in social security spending in China has outpaced its revenue growth over the past five years, posing a major challenge to the country’s welfare system, the finance minister says.
In an article detailing the 13th five-year plan, Lou Jiwei called for a slew of measures to address the problem, including having 30 per cent of state-owned enterprises’ profits go towards covering the shortfall.
The rise in spending on state-owned firms’ employees’ basic pension, also known as “old-age insurance”, was 6.6 percentage points higher than the increase in its revenue, Lou said in the article published this month. Growth in spending on medical insurance for both urban and rural residents was 5 percentage points higher than its revenue increase.
The burden of providing income support and medical care fell too heavily on the government, the finance minister said.
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China’s rapidly ageing population – the result of its decades-old one-child policy – has put great strain on its social welfare system. Some 15.5 per cent of the population was aged above 60 last year. The proportion is expected to rise to 39 per cent by 2050, according to official estimates.
Meanwhile, a slowing economy has cut into the central government’s fiscal revenue and local governments are struggling to cope with rising debt.