China Briefing's October 2011 issue provides an overview of the new Chinese Social Security Law, emphasizing its implications for foreign nationals and employers. The article highlights that the Ministry of Human Resources and Social Security confirmed in September 2011 that foreign residents would participate in the Chinese social security system, which was expected to take effect from July onwards.
The new Social Insurance Law (SIL), implemented on July 1, 2011, aims to control the injection of funds into the system more strictly, strengthen administrative management to ensure full employer contributions, and improve overall social security coverage for all Chinese residents. This law is seen as a step towards the ultimate goal of improving social security for all, with the first two objectives being means to achieve this end.
Key points include:
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Contributions: The employer's contribution is based on the total salaries paid to employees, while the employee's contribution is their salary. The method of calculation will be detailed later, but it is anticipated that this will lead to a significant increase in employer contributions.
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Transferring Savings: Employees moving between jurisdictions can transfer their savings, and at retirement, they receive a pension equivalent to the total amount of their contributions. However, details on how savings from different regions are merged will be outlined in a future law, yet to be finalized.
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Implementation Challenges: The law itself presents numerous challenges, and its implementation will be a complex task. The government had prepared prior to drafting and adopting the law, but coordinating and reaching agreements among numerous local governments on practical details of these transfers will take time. There's little chance that China will achieve the government's ambition of facilitating seamless retirement savings transfers between jurisdictions before several years.
The article also touches upon other aspects such as unemployment insurance, work accident insurance, health insurance, maternity insurance, and the implications for foreign residents and employers. It discusses the five mandatory insurances in China, with a focus on reforms aimed at correcting issues in the current system and enhancing mobility of the workforce, a critical challenge in a country experiencing a shortage of skilled labor.
