Develop Quality and Sustainable Social Security

Develop Quality and Sustainable Social Security*

February 26, 2021

Today, at the 28th group study session of the Political Bureau, we will discuss the topic of building a social security system that covers the entire population. To achieve the goals set for the 14th Five-year Plan period (2021-2025), we will analyze the current status of our social security system and its problems, and lay out a plan for ensuring future quality and sustainable development.

Social security is a system for ensuring people’s basic needs, improving their wellbeing, and safeguarding social equity. It is an important institutional framework for social and economic progress, and for allowing the people to share the fruits of reform and development. As a social safety net, an income distribution regulator, and an economic shock absorber, it is of overarching importance to national stability and governance.

Our Party has always attached great importance to social security and people’s wellbeing. At its Second National Congress in 1922, the CPC proposed to improve workers’ benefits through measures such as providing factory insurance and protecting the unemployed. The Labor Law of the Chinese Soviet Republic, promulgated in 1931 when the soviet government was seated in Ruijin, Jiangxi Province, had a special chapter on social security. In 1951, shortly after the PRC was founded, the central government enacted the Regulations of the People’s Republic of China on Labor Insurance, in accordance with the stipulation on introducing a labor insurance system in the Common Program of the Chinese People’s Political Consultative Conference. Since reform and opening up began in 1978, we have made steady and significant progress in developing the social security system as a pillar for improving people’s lives.

Since the Party’s 18th National Congress in 2012, the Central Committee has brought social security to the top of its agenda to ensure faster progress. At the meetings of the Political Bureau and of its standing committee, and meetings of the Central Commission for Further Reform, plans for reforming basic pension schemes and guidelines for deeper reform of medical insurance have been discussed and reviewed, to form the top-level design for improving the social security system and to make reform more systematic, holistic and coordinated.

We have unified the basic pension schemes for rural and nonworking urban residents, merged the pension schemes for staff of government offices, public institutions and enterprises, and established a regulatory system for the central government to balance pension funding for enterprise employees across provinces.

We have integrated the basic medical insurance system for nonworking urban residents and the new rural cooperative medical care system to form the basic medical insurance for rural and non-working urban residents. We have introduced critical illness insurance for rural and non-working urban residents and formed the National Healthcare Security Administration.

We have extended social insurance coverage across the whole population, reduced social insurance contributions, and transferred state capital to replenish social security funds. We have developed social welfare undertakings to care for the elderly and children and to help people with disabilities. With institutional support in place, all citizens, whether they are rural or urban residents and regardless of their region, gender and occupation, can feel secure when they get old, fall ill, lose their job, suffer a work-related injury or disability, or fall into poverty.

A complete social security system has taken shape. Social insurance is the mainstay while social assistance, social welfare, and benefits and services are provided for eligible groups. With basic medical insurance covering 1.36 billion people and basic pension schemes covering nearly 1 billion people, China has the world’s largest social security net. This has laid solid foundations for a better life, provided strong support for eliminating extreme poverty, and facilitated efforts to achieve all-round moderate prosperity and the First Centenary Goal on schedule.

While celebrating our achievements, we need to be aware that as the principal challenge facing our society has changed and urbanization, population aging, and employment diversification accelerate, the weaknesses in our social security net are becoming more apparent, and these call for our attention and action. The main weak points are:

• unsatisfactory transition between different social security arrangements due to incomplete integration;
• failure to cover all migrant workers, those in flexible employment, and those engaged in new forms of business;
• the over-reliance on basic social security services initiated and managed by the government and the inadequate
   provision of supplementary insurance by market players and the private sector;
• pressure on balancing regional social security receipts and payments due to lack of high-level coordination;
• differential benefits for urban and rural residents, between regions, and between groups;
• the gap between social security services and people’s needs;
• insufficient social security funding in some places.

At the Fifth Plenary Session of the 19th CPC Central Committee in 2020, a blueprint was drawn up for China’s development in the next 5 to 15 years, aiming for more tangible progress towards common prosperity. Social security directly concerns the people’s most immediate interests. We need to strengthen income redistribution as a tool of mutual assistance, include more people in the social security net, and provide them with reliable and satisfactory services. To meet people’s diverse needs, we need to develop a fair, unified, sustainable, and multitiered social security system that covers both urban and rural areas and forms a tight-knit safety net for the entire population.

First, we should build a social security system with Chinese characteristics. It is natural that different countries have different social security systems, as they differ in level of development, social conditions, and culture. Learning from foreign experience does not mean mechanically copying their models, but exploring and creating a distinctively Chinese social safety net based on the conditions in our country.

Leveraging the strengths of CPC leadership and our socialist system, we have been able to pool resources from around the country to develop social security in a solid and steady manner. Following a people-centered approach and the principle of common prosperity in developing social security, we have focused on improving people’s wellbeing and upholding social equity, so that all our people can enjoy the benefits of reform and development in a fairer way. We are strengthening the institutional network for social security to become an inclusive, multitiered, and sustainable system that ensures basic living needs. Adapting the system to the needs of the times, we have addressed problems and broken through institutional barriers by means of reform and innovation. Seeking truth from facts and doing all we can within our capacity, we have based improvements in social security on sustainable economic and financial growth – always respecting our realities and never transcending our stage of development. These successful experiences must be continually enriched and applied in future work.

Second, we should be forward-looking in planning for social security during the 14th Five-year Plan period and beyond. The outline for developing social security during the 14th Five-year Plan period, passed at the Fifth Plenary Session of the 19th CPC Central Committee, should be incorporated into our overall planning and implemented in full.

We should apply systems thinking and understand the requirements to implement the new development philosophy and create a new development dynamic in the new development stage. Furthermore, social security should proceed in the context of the Five-sphere Integrated Plan and the Four-pronged Comprehensive Strategy. This requires strategic thinking, commitment to meeting people’s expectation for a better life, and alignment with the goals of well-rounded individual development and common prosperity. It should sustain progress in providing better access to childcare, education, employment, medical services, elderly care, housing, and social assistance.

To be better prepared for new social security challenges and to be able to take preemptive action against risks, we should remain alert and analyze the trends of population aging, growing average life expectancy, the increase in years of schooling, and changes in the workforce structure for the next 5, 15 and 30 years. We should employ an international perspective, and draw lessons and insights from the past and present practices of other countries. In particular, we should avoid the blind pursuit of better welfare that has led some countries into the middle-income trap, and the provision of excessive social welfare that has caused the loss of dynamism in some societies. We must always remember that the economy and social security are like water and a boat – shallow water allows for a small boat, and deeper water allows for a larger boat. If this rule is not respected the boat may be swamped, or run aground.

Third, we should extend social security reform. Our reform in social security is targeting greater integration and efficiency. It calls for improved planning and coordination between different elements of social security and between social security and other related sectors, so that reform in all areas builds a strong synergy. We should focus on the people’s most immediate concerns in social security, and remove the obstacles hindering its development.

We will establish a multi-pillar, multitiered old-age pension system, improve the mechanisms for adjusting funding and benefits for basic pension and medical insurance, and expand the coverage of enterprise annuities. Third-pillar pension plans will be developed under regulation, and commercial health insurance will be promoted to meet the people’s diverse needs. Basic medical insurance, unemployment insurance, and work-related injury insurance will be brought under unified management at the provincial level, and the respective powers and expenditure responsibilities of central and local governments will be further clarified.

Social assistance for rural residents should be planned as part of the rural revitalization strategy, and the system for social assistance in rural areas should be improved by putting in place measures for providing regular assistance. Improvements to social security should be made to cover all migrant workers, those in flexible employment, and those engaged in new forms of business. Similarly, improvements should be made in providing support and services for veterans, care and services for the elderly, and social assistance and welfare benefits for orphans and those with disabilities.

After we introduced the central regulatory system for pension funding in 2018, RMB176.8 billion was transferred last year alone from the more developed eastern regions to the less developed central and western regions and provinces with old industrial bases. This has mitigated the structural imbalance in social security funding between regions, and ensured pensions are paid on time and in full. To end the regional imbalance in social security, basic pension premiums should be brought under unified management at the national level as soon as possible. This conforms to the law of large numbers and constitutes a prerequisite for creating a new development dynamic.

China is now faced with greater pressure from rising medical insurance expenditure due to a rapidly aging population, the growing prevalence of chronic diseases among the elderly, and advances in medicine, which has made more previously untreatable diseases treatable and controllable. We should continue to connect and coordinate reforms in medical treatment, medical insurance, and medicine supply, and improve the mechanisms for adjusting funding and benefits for basic medical insurance. Further reform will be carried out in government bulk purchase of medicines and medical consumables and in the payment methods of basic medical insurance. The pricing mechanism for medicines and medical services will be improved, and the basic medical insurance funds will operate with greater efficiency.

In recent years, many developed countries and emerging economies with aging populations have introduced reform plans to raise the statutory retirement age. Not all their plans have gone well, and some have experienced setbacks. In China, we should set the right direction, tempo and intensity, strengthen guidance of public opinion, and build a broad consensus to maximize the synergy for achieving this reform.

Fourth, we should advance law-based governance in social security. Social security should be strengthened in legislation, law enforcement, judicature, and law observance. Its healthy development should be guided by the rule of law.

Legislation on social insurance, assistance, and welfare should be enacted or revised. For individuals, employers, governments, and other sectors of society, their legitimate rights and interests in social security should be guaranteed, and they should also fulfill their statutory obligations and responsibilities.

Supervision of social security funds should be improved in accordance with the law, to defuse operational risks and ensure that the funds remain secure. There will be zero tolerance for insurance fraud or embezzlement of social security funds, and every coin from the funds, as well as social aid and charity, will be guarded and put to good use.

Fifth, we should take a more targeted approach to social security management. Aiming for high efficiency in social security governance, improvements should be made to the management and services network at the central, provincial, city, county, and township/subdistrict levels, with greater attention to the precision of management and the quality of services.

As population flows increase and people change their jobs more frequently, social insurance registration, transfer, and renewal should be updated accordingly. We will optimize the mechanism for accurately identifying the recipients of social assistance and welfare benefits, and ensure that our social security net provides everyone with the insurance, assistance, and services to which they are entitled.

The unified national platform for social security services should be upgraded to enable better handling of social security matters online by incorporating internet, big data, and cloud computing technologies. Traditional services should be provided in the same measure to ensure ease of access for the elderly, people with disabilities, and other groups with special needs.

Sixth, we should leverage the positive role of social security in our Covid-19 response. Since the coronavirus struck last year, social security has made a major contribution to effective epidemic prevention and control in the all-out people’s war on the virus, and to our success in achieving moderate prosperity and eradicating extreme poverty in China.

As the virus continues to spread around the globe, we still face grave challenges in preventing inbound cases and domestic resurgence; here social security can offer help in containing the virus and stabilizing economic and social development. When the situation improves, reductions or exemptions of social security contributions and other temporary relief measures should be withdrawn progressively in coordination with similar measures in other areas.

We should improve the social security response to major emergencies based on our successes in Covid-19 prevention and control, and mitigate conventional and foreseeable risks such as illness and death as well as exceptional challenges that are hard to foresee.

Lastly, I would like to emphasize the importance of building a social security system with unified standards throughout the country. When social security had just been established, local governments were encouraged to innovate and try new approaches. As the social security system has developed and expanded, top-level design should now be followed to ensure unified management.

Mandatory institutional requirements must be executed, and operations should be brought under strict management and supervision. All localities must have the broader picture in mind and enforce institutional reform as instructed; no unauthorized local alterations can be allowed. There can be regional differences in social security standards for some time, but the goal of achieving a unified system is not open to debate. No one is allowed to deviate from this principle or go their own way.

Party committees and governments at all levels should gain a deeper understanding of how important social security is and how it works, coordinate all efforts to implement the decisions, plans and reform measures formulated by the Party Central Committee, and make steady progress in building a social security network for all our people.

* Speech at the 28th group study session of the Political Bureau of the 19th CPC Central Committee.

(Not to be republished for any commercial or other purposes.)