Comparison and Evaluation of China’s Urban Social Security Financing System Before and After the Reform

Abstract

The sustainability of China’s urban social security financing system has recently been seriously questioned. This article divides the financing system’s development into two periods (before and after reform). It compares the capital collection and the distribution and circulation structures and reviews the financing system before and after reform. In this study, we also discuss and explain the ‘empty account’ phenomenon, which severely undermines the financing system’s sustainability. We allege that the money accumulation system adopted after reform, which correlates personal accounts with the social pool, is not running as designed but as a ‘pay-as-you-go’ system. After evaluating the efficiency and cost performance of both periods, testing the financing system’s sustainability and correlating the system during both time periods with economic and social development, we find that the financing systems’ operation after reform corresponds with theories proved by case studies in other advanced states.

Understanding Social Security Development: Lessons From the Chinese Case

“…Scholars have also emphasized the importance of kinship and market-support in the operation of social security (Peng & Wong, 2010. For instance, G. Huang (2015) argues that families share responsibility for de-commodification when the governmental system provides low benefits and that citizen benefits from this system are decided by their preexisting contributions. China does not recommend that people treat the government as the final resort (Sun, 2000).…”

“…(Gao, 2006;G. Huang, 2017) Moreover, private sector workers are included to share the cost of the social insurance reform (Gao, 2006;G. Huang, 2018).…”