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UPDATED: February 24, 2014 NO. 9 FEBRUARY 27, 2014
A Fair Share
China will unify pension plans for urban and rural residents across the country
By Lan Xinzhen

A BENCHMARK FOR PROPER CARE: Elderly people chat at a home for the aged in Dongwei Village, Zouping County of Shandong Province. The province has set up 29 homes in the countryside for the elderly to live in for free (DONG NAIDE)

The State Council, China's cabinet, decided at an executive meeting on February 7 to integrate the basic pension systems for urban and rural residents. This is considered to be an important step by the Chinese Government in pushing forward social reform. It indicates that China has begun the arduous task of comprehensively deepening its reforms.

The urban-rural gap is commonly considered to be the most visible sign of inequality in China, and the disparity in the pension program between urban and rural residents is one of the most pressing issues related to this area which has been called into question in recent years. "To establish a unified basic pension system for urban and rural residents is a significant breakthrough. This means China will step into a new stage of advancing urban-rural integration," said Li Guoxiang, a researcher with the Rural Development Institute of the Chinese Academy of Social Sciences (CASS).

To accelerate the integration of pension systems for urban and rural residents, the Chinese Government requires strong budgetary support. The State Council executive meeting stressed that the Central Government will fully subsidize the basic pension for the central and western regions and offer a 50-percent subsidy to the basic pension for the eastern region. At the meeting, it was specifically stated that local governments would be required to pay part or all of the minimum pension for low-income groups and encourage charitable organizations to give financial assistance to participants in pension schemes.

In 2009, China initiated pilot projects for unifying pension plans for urban and rural residents in Shanxi, Anhui and some other provinces. Li Zhong, spokesman of the Ministry of Human Resources and Social Security (MOHRSS), said that at present, 15 provinces have established uniform basic pension systems for urban and rural residents, offering examples to the rest of the country.

Bridging the divide

Currently in China, the pension plans for government officials, public institution staff, enterprise employees, rural residents and unemployed urban residents are different. A unified pension system for urban and rural residents will integrate pension plans for rural residents and unemployed urban residents, which were introduced in 2009 and 2011, respectively, and which now cover the majority of the country's population.

Under the dual pension system, rural residents and unemployed urban residents are subject to unequal treatment, and pensions for urban residents are five to 10 times the amounts farmers can get.

More importantly, such inequality has already had negative impacts on economic and social development. According to the MOHRSS figures, there are over 200 million migrant workers in China, 70 percent of whom are working permanently in cities. However, they can only participate in pension schemes in their hometowns, and not the places in which they are working. According to the MOHRSS, more than 30 million migrant workers have abandoned their pensions.

Li said after urban and rural pension plans are integrated, urban and rural residents will be able to enjoy the same rights and almost the same amount of pension entitlement. The State Council executive meeting proposed the introduction of uniform social security cards across the country, which will remarkably improve the management of pensions and prepare for the free transfer of pensions between different regions in the future.

In short, the fact that the pension system will become more equitable and that pensions can be freely transferred as participants move will better meet the demand of the labor flow required for China's economic growth.

More benefits

Yang Yansui, Director of Research Center of Employment and Social Security at Tsinghua University, said a unified basic pension system reflects social equality. The Third Plenary Session of the 18th Central Committee of the Communist Party of China proposed to "establish a fairer and more sustainable social security system." Therefore, integrating the pension system for urban and rural residents is but one step toward fully achieving this goal.

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