The Chinese Government recently took a significant step forward in improving its social safety net: A pension program benefiting the country's 50 million unemployed urban residents was launched on July 1.
The new program, covering unemployed urban residents above the age of 16, excluding students, will be implemented in 60 percent of the country's cities and townships this year. Starting in 2012, it will be effective across the country.
By then, the country's pension umbrella will cover the last demographic—unemployed urban residents, indicating the completion of China's basic pension framework.
China established a basic pension system for urban employees in 1997 and it had covered 257 million urban residents by the end of 2010. For the country's large rural population, the government also launched a pension program on a trial basis in 2009. About 143 million rural residents had joined that program by the end of 2010.
The pension program for the unemployed urban residents adopts a practice similar to the one for rural residents, with pension funds coming from both individual contributions and government subsidies.
Under the new program, unemployed urban residents aged 60 or older can directly receive a monthly basic pension of 55 yuan ($8.5) from the government. Other participants should make contributions to their personal accounts and can start drawing pensions from those accounts after turning 60 when they also start to receive the basic monthly pension payment of 55 yuan ($8.5). Local governments are encouraged to raise this standard in accordance with local conditions.
Although the basic monthly amount of 55 yuan ($8.5) is too small for an urban resident to cover basic living expense, especially when inflation looms large in China, it's still a big step for the Chinese Government in weaving its social safety net to cover all 1.3 billion of its citizens.
An incomplete social safety net has long been a foot of clay for China, which has experienced fast economic growth during the past three decades and has gained remarkable economic strength. It's also the main reason why the Chinese dare not spend their hard earned money, opting instead to save every cent.
Therefore, the government has the obligation to let its people share the wealth and reap more benefits by establishing a complete social security system.