Corporate contributions to China’s state pension, unemployment and health care funds will be lowered marginally from May 1 onwards to help cut some of the costs facing businesses. Beijing’s efforts to “reduce the burden” on companies is one of the economic priorities listed by China’s President Xi Jinping for 2016. The social welfare payment requirements imposed on employers, which jointly make up about 40 per cent of all labour costs, are viewed as a key factor in eroding China’s traditional labour cost advantages. Social welfare priority for China’s five-year plan, says Communist Party mouthpiece The move by the Ministry of Human Resources and Social Security, which is responsible for China’s labour policy standards, regulations and for managing its social security system, was announced on the central government’s website. In provinces and cities where the local pension fund balance is able to meet payments for nine months or more, the corporate contribution can be reduced from 20 per cent to 19 per cent of an employee’s salary; for the mandatory unemployment insurance, corporate contributions can be lowered from 2 per cent to 1-1.5 per cent of an employee’s salary. The government is also trying to merge childbirth insurance, at 0.25 per cent of an employee’s salary, into health care insurance. “China’s social welfare contribution imposed upon employers, in essence, is a tax,” said Hu Xingdou, an economics professor at Beijing Institute of Technology. “It’s quite meaningless to talk about tax cuts in China without necessary government reforms.” While China has been paying lip services to cuts to “structural” tax and fees to reduce the burden on businesses over recent years, the real change remains minor. The nominal cuts in ratio of social welfare contributions can be easily offset by the basic income of most mainlanders, which currently rises by about 10 per cent a year. At the time the ministry announced the small reductions, it also said that local governments would have to ensure “timely and sufficient social welfare payments” were made to those covered by China’s state welfare system. The cut to unemployment fund contribution requirement would be only for two years, the ministry said, suggesting that such contributions could be increased again after that time. China’s ailing social welfare system needs two big fixes, says finance minister As China’s population has rapidly aged – partly as a result of the now-abandoned decades-long one-child policy – and the country’s economic growth has slowed, China’s fragmented state welfare system has come under increasing pressure. China officially ends one-child policy At least nine provinces were unable to meet local pension payment last year and had to rely on central government funds to cover the shortfalls. The fragmented nature of the welfare system heavily discriminates against different social groups by design. One common complaint among the Chinese public regarding the state pension system is that government employees do not have to pay any pension contributions before they retire, but are generally able to receive a much larger pension than private and corporate employees. The everyday challenges of China's ageing population demand attention While the collection of social welfare payments is mandatory,conditions are often imposed involving the use of insurance. For example, it is very difficult for a migrant worker to enjoy full social welfare benefits in cities even if they are paying into such funds. “The government is deliberately making very simple things look complicated … since China is so rich now, why can’t the nation do free health care?” one comment on the leading Chinese news portal, Netease.com, said. Traumas of China’s one-child era will live on in the two-child policy China’s government fiscal revenues rose 7.1 per cent in 2016’s first quarter to 1.15 trillion yuan (HK$1.4 trillion) compared with the same period in 2015, while the nation’s gross domestic product expanded during this year’s first quarter by 6.7 per cent, compared with January to March last year.