The Causes and Impacts of the Controversy Over the Chinese Government's Requirement for Mandatory Social Insurance Contributions, and How It Reveals China's Structural Injustice and the Vulnerability of Its Lower and Lower-Middle Classes (Part 1)

[u/Slow-Property5895]

Differentiated and Hierarchical Social Insurance Benefits Among Different Status Groups in China: Enormous Gains for Elites Within the System, Mere Scraps for Ordinary People Outside It — Taking Medical and Pension Insurance as Examples　1
ㅤ
The Burden of Social Insurance Contributions on Workers Outside the System and in the Lower and Middle-Lower Classes, and the Limited and Uncertain Benefits They Receive　2
ㅤ
Mandatory Social Insurance Contributions Also Increase the Burden on Business Owners, Weaken Corporate Competitiveness, and Ultimately Shift Costs onto Employees　3
ㅤ
The Real Motive Behind the Authorities' Mandatory Social Insurance Contribution Policy: Financial Strains on Social Insurance Funds, Rising Expenditures, and Declining Revenues　3
ㅤ
Misuse of Social Insurance Funds and the Lack of Oversight　4
ㅤ
Severe Inequality and Unfairness in Social Insurance Benefits: "Negative Welfare" and "Robbing the Poor to Enrich the Rich"　4
ㅤ
China's Economic Downturn and Government Fiscal Strains: The Social Insurance System Faces a Greater Crisis and the Risk of Financial Collapse　5
ㅤ
Mandatory Social Insurance Contributions Enrich Privileged Elites Within the System While Increasing the Burden on Ordinary People: Benefiting Officials Rather Than Citizens, and the Rich Rather Than the Poor　5
ㅤ
The Roots of the Social Insurance Controversy Lie in Unfair Distribution, Stagnant Reform, and the Absence of Democracy: Distribution Is Controlled by Vested Interests, While Ordinary People Are Left as Lambs to the Slaughter　6
ㅤ
Not long ago, China's Supreme People's Court (最高人民法院) issued a judicial interpretation declaring that any employment agreement or labor contract providing for nonpayment of social insurance contributions is invalid. The interpretation officially took effect on September 1. As soon as the news emerged, it sparked enormous controversy.
ㅤ
Social insurance includes pension, medical, unemployment, work-related injury, and maternity insurance. Individuals and enterprises each contribute a portion of the premiums, while the state finances the remainder. Insured individuals receive benefits when they meet the relevant eligibility requirements. Under normal circumstances, such an insurance system should benefit those who participate in it. Why, then, has it provoked such enormous controversy and so many opposing voices?
ㅤ
The reason is that, in China, there are enormous disparities in social insurance benefits among people of different occupational identities and social classes. The benefits are distributed unequally, while social insurance contributions represent a substantial expense for the lower and middle-lower classes, especially those at the bottom of society. Moreover, whether social insurance benefits will be fully honored in the future remains unknown, and the returns on social insurance contributions are fraught with uncertainty.
ㅤ
Differentiated and Hierarchical Social Insurance Benefits Among Different Status Groups in China: Enormous Gains for Elites Within the System, Mere Scraps for Ordinary People Outside It — Taking Medical and Pension Insurance as Examples
ㅤ
Regarding disparities in social insurance benefits, medical insurance and pension insurance provide particularly revealing examples. China's medical insurance system is divided into three categories: employees, urban residents, and rural villagers. Further distinctions exist between civil servants and non-civil servants, employees of state-owned enterprises and those of non-state-owned enterprises, and leading officials and ordinary employees. People of different statuses face enormous differences in reimbursement rates, the range of medications and medical services covered, and the convenience of obtaining reimbursement.
ㅤ
For example, senior officials can enjoy reimbursement rates approaching 100%, with virtually no restrictions on the categories of medications, types of surgery, or medical services eligible for reimbursement. This explains the existence of special hospital wards for senior officials, leading officials staying in intensive care units for extended periods with daily nursing costs reaching five-digit figures, unrestricted access to expensive imported medicines, and hospitals welcoming senior officials as patients. Medical expenses for senior officials are often settled directly between hospitals and social insurance agencies, without requiring family members to run around handling reimbursement procedures. Ordinary people, by contrast, are nominally eligible for reimbursement of only around 60% of their medical expenses. In practice, many high-quality, highly effective medications and essential medical procedures are excluded from coverage, while restrictions based on hospital classification and geographical location also apply. Consequently, most medical expenses actually have to be paid out of pocket. Ordinary people also frequently encounter complicated procedures and bureaucratic obstacles when seeking reimbursement for medical expenses—that is, when trying to claim their medical insurance benefits.
ㅤ
The disparities and inequalities in pension payments are even more pronounced. Pension recipients are divided into four categories: government agencies, state-owned enterprises, and public institutions; employees of non-state-owned enterprises; urban residents; and rural villagers. Among these groups, retirees from government agencies, state-owned enterprises, and public institutions receive the highest pensions, with amounts increasing according to their administrative or professional rank. Employees of non-state-owned enterprises receive significantly lower pensions, while urban and rural residents receive the lowest amounts, with rural residents receiving even less than urban residents.
ㅤ
For example, according to information released by the Social Insurance Bureau of Yingtan, Jiangxi Province (江西鹰潭社保局), concerning pension payments in January 2023, the authorities distributed 69.09 million yuan in pensions to 13,600 retired government officials and public-sector personnel; 178.85 million yuan to 75,500 enterprise retirees; and 28.54 million yuan to 137,800 urban and rural residents who had contributed to pension insurance. Calculations based on these figures show that the average monthly pension was 5,080 yuan for retirees from government agencies and public institutions, 2,368 yuan for enterprise retirees, and 207 yuan for urban and rural residents. In addition, farmers who had not contributed to pension insurance received a basic monthly pension of only 123 yuan.
ㅤ
Other components of social insurance, including work-related injury, unemployment, and maternity protection, likewise provide significantly better benefits to those within the system than to those outside it. Even when both groups pay the relevant insurance contributions, people within the system can obtain generous subsidies relatively easily, whereas those outside it, especially members of the lower and middle-lower classes, encounter numerous procedural and bureaucratic obstacles when applying for subsidies or compensation. Even after considerable effort, the amounts they ultimately receive are very limited.
ㅤ
The inequalities in medical insurance, pensions, and other social insurance programs are not confined to the distribution of benefits; unfairness is already deeply embedded in the contribution process itself. Under normal circumstances, those who contribute more should receive more, or those who are relatively poorer and more vulnerable should receive relatively greater benefits, or the system should combine both principles. These are fundamental characteristics and original purposes of insurance systems. In China's reality, however, there is a serious inversion between insurance contributions and the benefits received.
ㅤ
The most obvious example is the so-called "deemed contribution" policy (视同缴纳). Under ordinary rules, leading officials and senior personnel in government agencies and state-owned enterprises who failed to make regular insurance contributions when they were younger, for various reasons, or whose contributions were interrupted, would not qualify for medical, pension, and other benefits reserved for those who had paid their contributions regularly and on time. However, after the introduction of the "deemed contribution" policy, officials and employees who had not contributed in earlier years or whose contributions had been interrupted could still enjoy normal medical reimbursement and pension benefits. For example, someone who worked for 40 years but did not contribute to social insurance for 30 of those years could nevertheless have their pension calculated and paid, and their medical expenses reimbursed, as though they had contributed for the full 40 years. Moreover, most of these beneficiaries are government leaders and middle- or senior-level personnel in state-owned enterprises, enabling them to receive substantial pensions and enjoy free, high-quality medical care.
ㅤ
The Burden of Social Insurance Contributions on Workers Outside the System and in the Lower and Middle-Lower Classes, and the Limited and Uncertain Benefits They Receive
ㅤ
Meanwhile, ordinary employees, particularly those working for non-state-owned enterprises, as well as ordinary urban residents and farmers, often lose their eligibility for medical reimbursement and pension benefits if they fail to contribute, make payments late, or experience interruptions in their contributions. Some must make retroactive payments covering several previous years of unpaid social insurance contributions before they can regain coverage. For example, the minimum contribution period for China's national pension insurance is 15 years, with additional tiers of 25, 30, and 40 years, and there are substantial differences in the pension amounts received after retirement. If someone has contributed for fewer than 15 years, they cannot receive pension benefits even if they have already paid some contributions. Instead, they must continue contributing beyond retirement age until they have accumulated 15 years of contributions. This is undoubtedly highly disadvantageous to many workers whose employment is unstable, whose employers do not comply with regulations, or who are sometimes forced to suspend contributions because of financial pressures. Such workers are concentrated among the lower and middle-lower classes outside the system.
ㅤ
Particularly noteworthy is the situation of farmers who, before the abolition of the agricultural tax, had to labor hard every year to pay "public grain" (公粮, an agricultural tax paid in kind) and various other burdensome taxes and levies. Their history of paying agricultural taxes is not recognized as social insurance contributions, nor is it treated as "deemed contributions." They can receive only a little over 100 yuan in basic monthly pensions, although previously they could not even receive that amount. Yet the value of the public grain and other miscellaneous taxes they paid in earlier years, adjusted for inflation, far exceeds this meager monthly pension of just over 100 yuan. The government nevertheless disregards these past contributions. Farmers who want medical insurance and reimbursement for medical expenses must enroll in and contribute to the New Rural Cooperative Medical Scheme (新农合). The required contribution has continued to rise, reaching 400 yuan per year this year, which is already a considerable amount for impoverished farmers. For those over 60 who have no other income, this means spending approximately 30% of their pension on the New Rural Cooperative Medical Scheme merely to obtain limited medical coverage.
ㅤ
For most workers outside agriculture, including those in manufacturing and services, contributing to social insurance is likewise not necessarily a matter of benefits outweighing costs, or at the very least requires careful consideration of the trade-offs. According to multiple statistical sources, ordinary workers who contribute to social insurance pay approximately 10% of their wages in contributions (8% for pension insurance, 2% for medical insurance, and 0.5% for unemployment insurance). For middle- and high-income groups, people with relatively stable incomes, and those in relatively comfortable material circumstances, this proportion is still fairly reasonable. (However, if housing provident fund contributions amounting to another 5%–12% of wages are included, the financial pressure becomes considerably greater.)
ㅤ
But for low- and middle-income groups, people with unstable incomes, and those experiencing financial difficulties, this 10% is extremely important, and paying it into social insurance becomes a heavy burden. For workers earning "3,000 yuan a month" or even less, as well as white-collar and blue-collar workers whose incomes may not be particularly low but who must support elderly parents and young children, repay mortgages and car loans, maintain emergency savings in case of unexpected events, and stretch every penny as far as possible, surrendering 10% of their income to social insurance is extremely painful and difficult to accept.
ㅤ
Moreover, interruptions in social insurance contributions caused by resignation or other personal circumstances can affect the accumulated contribution period and a person's ability to claim social insurance benefits. For many people without stable employment, it is difficult to guarantee uninterrupted contributions. Those who contribute intermittently find it even harder to obtain the full protection offered by social insurance. This leads more people to prefer not contributing at all.
ㅤ
Beyond their immediate financial difficulties, many people also worry about the long-term returns and potential losses associated with social insurance. Pension benefits can only be collected upon retirement, at around the age of 60, but individuals do not know how long they will live or whether they might suffer an accident. As for medical insurance, people who do not fall ill, or who are only occasionally ill, may feel that they are "losing out" by paying for coverage. Of course, if they do become ill, especially with a serious disease, they suffer physically and psychologically and still have to pay a substantial portion of their medical expenses out of pocket. Although medical insurance does in fact provide important protection, many people nevertheless feel that they are getting a bad deal. As for unemployment and housing protection, many people cannot obtain unemployment benefits even when they lose their jobs (social insurance authorities often find various reasons to refuse payment), while housing benefits are not necessarily accessible in practice. Work-related injury and maternity insurance likewise involve numerous eligibility requirements and obstacles when people attempt to claim their benefits.
ㅤ
Faced with these risks and uncertainties, as well as immediate pressures in their daily lives, choosing not to contribute to social insurance and instead saving the money for personal use has become a natural choice for many people. Although this is detrimental to their prospects of obtaining stable and adequate social protection in the long run, particularly because they may be unable to receive a pension in old age, it is nevertheless a reluctant choice made after weighing the competing considerations.
ㅤ
For non-state-owned enterprises and small and medium-sized businesses that employ workers, many are likewise unwilling to pay social insurance contributions for their employees in order to reduce labor costs. Compared with individuals, enterprises must contribute a higher percentage for each employee, averaging around 20% of the employee's wages. Combined with the approximately 10% contributed by the individual, this means that roughly 30% of each worker's wages must be paid into social insurance. If housing provident fund contributions are also included, as much as 40% of an individual's wages cannot be "safely pocketed" but are instead "held" by the government.
ㅤ
As the saying goes, "the wool ultimately comes from the sheep." Although employers' social insurance contributions are nominally deducted from corporate profits, in reality, businesses compensate for these expenses by suppressing employees' wages and benefits. Ultimately, it is still employees who bear the costs of social insurance. There are also cases in which an enterprise pays social insurance contributions for its employees while maintaining the same wage levels it would have paid without making those contributions. However, in such circumstances, the enterprise faces increased risks and financial pressures, affecting its ultimate profitability and competitiveness relative to other businesses.
ㅤ
Compared with state-owned enterprises, which are generally larger, possess abundant resources, and enjoy strong policy support, most private enterprises are smaller, face greater operational pressures, and have lower profit margins. If the burden of social insurance contributions increases, private enterprises, which already struggle to survive, will become even more vulnerable. In recent years, the economic downturn, compounded by the impact of the COVID-19 pandemic, has already left many private enterprises in difficult circumstances. Mandatory social insurance contributions will only make their situation worse.

Moreover, because both workers and enterprises must pay social insurance contributions and consequently face greater financial pressure, labor-management tensions will intensify, business operations and development will become less stable, and ultimately both business owners and ordinary workers will suffer.

Although the law requires both workers and employers to pay social insurance contributions, making nonpayment illegal, in practice the authorities have long tended to "turn a blind eye," while judicial authorities have generally followed an approach of "no complaint, no intervention." This has allowed enterprises and individual workers to decide whether to contribute to social insurance according to their own circumstances, giving them greater autonomy and flexibility.

However, the latest judicial interpretation issued by the Supreme People's Court means that companies and individuals must pay social insurance contributions; otherwise, their labor contracts will be invalid, and the legal rights and interests of both employees and employers cannot be protected. In reality, the Supreme People's Court's decision reflects the will of the Communist Party and the attitude of the government.

In other words, the Chinese authorities are requiring workers to make mandatory social insurance contributions. Furthermore, under various local policies, not only employees of formally registered enterprises but also self-employed business owners, small street vendors, and other "flexibly employed workers" (灵活就业人员) must contribute to social insurance. Otherwise, their children's access to education and other rights and benefits may be affected. This means that even more people will face the financial burden imposed by mandatory social insurance contributions.

(Due to character limits, the article has to be published in two parts. This is the first part.)

(This article was written by Wang Qingmin (王庆民), a Chinese writer and international political affairs researcher based in Europe. The original text is in Chinese.)

[u/AutoModerator]

NOTICE: See below for a copy of the original post by Slow-Property5895 in case it is edited or deleted.

Differentiated and Hierarchical Social Insurance Benefits Among Different Status Groups in China: Enormous Gains for Elites Within the System, Mere Scraps for Ordinary People Outside It — Taking Medical and Pension Insurance as Examples　1
ㅤ
The Burden of Social Insurance Contributions on Workers Outside the System and in the Lower and Middle-Lower Classes, and the Limited and Uncertain Benefits They Receive　2
ㅤ
Mandatory Social Insurance Contributions Also Increase the Burden on Business Owners, Weaken Corporate Competitiveness, and Ultimately Shift Costs onto Employees　3
ㅤ
The Real Motive Behind the Authorities' Mandatory Social Insurance Contribution Policy: Financial Strains on Social Insurance Funds, Rising Expenditures, and Declining Revenues　3
ㅤ
Misuse of Social Insurance Funds and the Lack of Oversight　4
ㅤ
Severe Inequality and Unfairness in Social Insurance Benefits: "Negative Welfare" and "Robbing the Poor to Enrich the Rich"　4
ㅤ
China's Economic Downturn and Government Fiscal Strains: The Social Insurance System Faces a Greater Crisis and the Risk of Financial Collapse　5
ㅤ
Mandatory Social Insurance Contributions Enrich Privileged Elites Within the System While Increasing the Burden on Ordinary People: Benefiting Officials Rather Than Citizens, and the Rich Rather Than the Poor　5
ㅤ
The Roots of the Social Insurance Controversy Lie in Unfair Distribution, Stagnant Reform, and the Absence of Democracy: Distribution Is Controlled by Vested Interests, While Ordinary People Are Left as Lambs to the Slaughter　6
ㅤ
Not long ago, China's Supreme People's Court (最高人民法院) issued a judicial interpretation declaring that any employment agreement or labor contract providing for nonpayment of social insurance contributions is invalid. The interpretation officially took effect on September 1. As soon as the news emerged, it sparked enormous controversy.
ㅤ
Social insurance includes pension, medical, unemployment, work-related injury, and maternity insurance. Individuals and enterprises each contribute a portion of the premiums, while the state finances the remainder. Insured individuals receive benefits when they meet the relevant eligibility requirements. Under normal circumstances, such an insurance system should benefit those who participate in it. Why, then, has it provoked such enormous controversy and so many opposing voices?
ㅤ
The reason is that, in China, there are enormous disparities in social insurance benefits among people of different occupational identities and social classes. The benefits are distributed unequally, while social insurance contributions represent a substantial expense for the lower and middle-lower classes, especially those at the bottom of society. Moreover, whether social insurance benefits will be fully honored in the future remains unknown, and the returns on social insurance contributions are fraught with uncertainty.
ㅤ
Differentiated and Hierarchical Social Insurance Benefits Among Different Status Groups in China: Enormous Gains for Elites Within the System, Mere Scraps for Ordinary People Outside It — Taking Medical and Pension Insurance as Examples
ㅤ
Regarding disparities in social insurance benefits, medical insurance and pension insurance provide particularly revealing examples. China's medical insurance system is divided into three categories: employees, urban residents, and rural villagers. Further distinctions exist between civil servants and non-civil servants, employees of state-owned enterprises and those of non-state-owned enterprises, and leading officials and ordinary employees. People of different statuses face enormous differences in reimbursement rates, the range of medications and medical services covered, and the convenience of obtaining reimbursement.
ㅤ
For example, senior officials can enjoy reimbursement rates approaching 100%, with virtually no restrictions on the categories of medications, types of surgery, or medical services eligible for reimbursement. This explains the existence of special hospital wards for senior officials, leading officials staying in intensive care units for extended periods with daily nursing costs reaching five-digit figures, unrestricted access to expensive imported medicines, and hospitals welcoming senior officials as patients. Medical expenses for senior officials are often settled directly between hospitals and social insurance agencies, without requiring family members to run around handling reimbursement procedures. Ordinary people, by contrast, are nominally eligible for reimbursement of only around 60% of their medical expenses. In practice, many high-quality, highly effective medications and essential medical procedures are excluded from coverage, while restrictions based on hospital classification and geographical location also apply. Consequently, most medical expenses actually have to be paid out of pocket. Ordinary people also frequently encounter complicated procedures and bureaucratic obstacles when seeking reimbursement for medical expenses—that is, when trying to claim their medical insurance benefits.
ㅤ
The disparities and inequalities in pension payments are even more pronounced. Pension recipients are divided into four categories: government agencies, state-owned enterprises, and public institutions; employees of non-state-owned enterprises; urban residents; and rural villagers. Among these groups, retirees from government agencies, state-owned enterprises, and public institutions receive the highest pensions, with amounts increasing according to their administrative or professional rank. Employees of non-state-owned enterprises receive significantly lower pensions, while urban and rural residents receive the lowest amounts, with rural residents receiving even less than urban residents.
ㅤ
For example, according to information released by the Social Insurance Bureau of Yingtan, Jiangxi Province (江西鹰潭社保局), concerning pension payments in January 2023, the authorities distributed 69.09 million yuan in pensions to 13,600 retired government officials and public-sector personnel; 178.85 million yuan to 75,500 enterprise retirees; and 28.54 million yuan to 137,800 urban and rural residents who had contributed to pension insurance. Calculations based on these figures show that the average monthly pension was 5,080 yuan for retirees from government agencies and public institutions, 2,368 yuan for enterprise retirees, and 207 yuan for urban and rural residents. In addition, farmers who had not contributed to pension insurance received a basic monthly pension of only 123 yuan.
ㅤ
Other components of social insurance, including work-related injury, unemployment, and maternity protection, likewise provide significantly better benefits to those within the system than to those outside it. Even when both groups pay the relevant insurance contributions, people within the system can obtain generous subsidies relatively easily, whereas those outside it, especially members of the lower and middle-lower classes, encounter numerous procedural and bureaucratic obstacles when applying for subsidies or compensation. Even after considerable effort, the amounts they ultimately receive are very limited.
ㅤ
The inequalities in medical insurance, pensions, and other social insurance programs are not confined to the distribution of benefits; unfairness is already deeply embedded in the contribution process itself. Under normal circumstances, those who contribute more should receive more, or those who are relatively poorer and more vulnerable should receive relatively greater benefits, or the system should combine both principles. These are fundamental characteristics and original purposes of insurance systems. In China's reality, however, there is a serious inversion between insurance contributions and the benefits received.
ㅤ
The most obvious example is the so-called "deemed contribution" policy (视同缴纳). Under ordinary rules, leading officials and senior personnel in government agencies and state-owned enterprises who failed to make regular insurance contributions when they were younger, for various reasons, or whose contributions were interrupted, would not qualify for medical, pension, and other benefits reserved for those who had paid their contributions regularly and on time. However, after the introduction of the "deemed contribution" policy, officials and employees who had not contributed in earlier years or whose contributions had been interrupted could still enjoy normal medical reimbursement and pension benefits. For example, someone who worked for 40 years but did not contribute to social insurance for 30 of those years could nevertheless have their pension calculated and paid, and their medical expenses reimbursed, as though they had contributed for the full 40 years. Moreover, most of these beneficiaries are government leaders and middle- or senior-level personnel in state-owned enterprises, enabling them to receive substantial pensions and enjoy free, high-quality medical care.
ㅤ
The Burden of Social Insurance Contributions on Workers Outside the System and in the Lower and Middle-Lower Classes, and the Limited and Uncertain Benefits They Receive
ㅤ
Meanwhile, ordinary employees, particularly those working for non-state-owned enterprises, as well as ordinary urban residents and farmers, often lose their eligibility for medical reimbursement and pension benefits if they fail to contribute, make payments late, or experience interruptions in their contributions. Some must make retroactive payments covering several previous years of unpaid social insurance contributions before they can regain coverage. For example, the minimum contribution period for China's national pension insurance is 15 years, with additional tiers of 25, 30, and 40 years, and

[u/Slow-Property5895]

Link to the second part of the article:

https://www.reddit.com/r/China/s/01bIwR8FHm

[u/Weakcontent101]

Whats the point of churning out this slop? Are u ai? Be honest.

[u/Slow-Property5895 → u/Weakcontent101]

This certainly isn't AI. I'm simply using GPT to translate the Chinese into English.