China's welfare policies: the future of welfare?


by Dr. Beatriz Garcia Carrillo
CSC academic group: Social and Political Change

old and young

Beatriz is a Lecturer in China Studies. She has been jointly appointed to China Studies Centre and the Department of Sociology and Social Policy. Her research has concentrated on two projects: one looking at the impact of social policy on health and welfare provision; the other examining the interactions between the new rich and the state, especially in relationship to class formation. She is the author of Small Town China: Rural Labour and Social Exclusion (Routledge 2011).

Since the 1980s the welfare state in the West has gradually seen its benefits eroded. Meantime, in the developing world we are seeing a quiet revolution emerge in social welfare provision. Globally there are now between 0.75 and 1 billion people receiving direct social assistance from their governments. China's welfare programs are an important part of this revolution.

After two decades focusing primarily on economic growth, China's leadership, like that of other developing countries, has realised not only that growing social inequalities represent a threat to their legitimacy but that inequality is actually negatively affecting economic growth by limiting the productive capacity of the poor. Social welfare seems to have become part of the development strategy of many countries in the Global South, although it is still to be seen whether the newly implemented social assistance and social insurance programs become institutionalised.

In China, with the implementation of economic reform in the late 1970s, the Chinese Communist Party increasingly built its legitimacy on maintaining the expansion of market mechanisms. But as marketisation spread, particularly to the provision of public services such as health and education, and as China became more integrated into world markets, the resulting social inequalities made a social contract based on market rule unsustainable.

quote Since the late 1990s the Chinese leadership has been talking about the need to move away from the primacy of economic growth and about the need to foster social harmony.

Since the late 1990s the Chinese leadership has been talking about the need to move away from the primacy of economic growth and about the need to foster social harmony. Widening social inequalities have resulted in an explosion in the number of social protests from almost all social quarters, while the growing wealth of a small privileged group has also eroded social trust. Over the first two decades of reform China's Gini coefficient, which measures the degree of inequality in a society, went from 0.288 in 1981 (making it one of the most equal societies at the time) to 0.447 in 2001, on par with highly unequal societies such as Mexico and Brazil.

In 1998, with the consolidation of state owned enterprise reform, China put in place a new social security system for urban workers in all sectors of the economy. The large number of lay-offs from state owned enterprise reform resulted in the inclusion of an unemployment insurance scheme, a very progressive provision, one that only a few countries in Asia and the rest of the developing world have put in place.

Since then, over a very short period, China has implemented a series of social assistance programs, alongside the expansion of universal basic social insurances. The target of those programs was initially the urban poor, with the implementation in 1999 of the minimum livelihood guarantee or dibao, a means-tested cash transfer, which China had never had in the past. Dibao recipients were initially middle-aged laid off workers from state owned enterprises, who, without the necessary skills, were unable to find jobs in the new economy.

While the new urban poor were seen as a potentially destabilising social group, the Party-state had later to expand its focus to rural dwellers, whose income had consistently lagged behind that of urbanites, as the gap between the two groups continued to grow. In 2003 the rural cooperative medical system was reintroduced, after it was dismantled in the early 1980s. Two years later the dibao was introduced to rural areas, alongside a rural medical assistance program from which dibao recipients could benefit. In 2006 the government also introduced its New Socialist Countryside campaign, which included the elimination of all agricultural taxes on peasants. Medical assistance was in turn expanded to those in urban areas. In order to guarantee the sustainability of these program and to signal its commitment to more redistributive policies, in 2009 the government announced a substantial increase in funding for health, while signalling a move towards integrating urban and rural social security and welfare programs.

quote Though China continues to be in relatively stronger financial position from that of Europe, it has also felt the pressures of the 2008 global financial crisis and its aftermath, but has nevertheless continued to support and expand its welfare programs.

Although these programs might appear as both reasonable and even necessary on social justice and on political grounds (to maintain the Party-state's political legitimacy), they may seem more difficult to defend on economic efficiency grounds. Current austerity measures being imposed on Greece have sent out the message that during a difficult financial period a country cannot afford a welfare state. Though China continues to be in relatively stronger financial position from that of Europe, it has also felt the pressures of the 2008 global financial crisis and its aftermath, but has nevertheless continued to support and expand its welfare programs.

So have less well-off countries in all continents. Most of these countries had originally modelled their social security and to a lesser extent their welfare systems on the experience of the European welfare state. As this system continues to be attacked or at least its benefits eroded, the developing world seems to have become a new source of welfare program innovation. Mexico's Seguro Popular (a universal basic medical insurance system), Brazil's Bolsa Familia (cash transfers to poor households), South Africa's Children's act (cash grants to support children in poor households), and China's dibao system have all been praised by international organizations such as the World Health Organisation, the World Bank and the UNDP and promoted in other development settings.

Like China, these countries have experienced rapid socio-economic and political changes since the 1980s, which have led them with the need to create their own strategies to adapt to the changes brought about by industrialisation, rapid urbanisation, income inequality, demographic changes, population ageing (in some cases), and even climate change. These are changes that took place over a much longer period and under very different circumstances in Europe, North America and Australia. Though far from the comprehensive coverage offered by Western welfare systems, the future of welfare may well lay in the innovations being carried out in developing countries. The scale of China and the range of social realities there make it an important case study for welfare state scholars and policy makers. Watch this space!