China reduces social security contributions to shore up growth
CGTN Global Business
The decision to lower the rates of social security contributions paid by employers officially took effect on Wednesday. The move is part of a broader effort to reduce corporate burden while shoring up growth and employment.
The Chinese government cuts the share of enterprise contributions to urban workers' basic aged care insurance from 20 to 16 percent starting May 1. A measure has also been adopted to lower the social security wage base for different provincial areas, lowering the wage earner's contributions to their pension fund.
You Jun, vice minister of Human Resources and Social Security, cited the social security contribution rate has been lowered five times since 2015.
"The new policies will cut aged care insurance fees by more than 190 billion yuan (about 28 billion U.S. dollars), and unemployment and work-related injury insurance by more than 110 billion yuan (about 16 billion U.S. dollars) by the end of 2019," he added.
As China's pension system is currently coordinated at provincial levels, there's doubt whether these provinces will struggle to meet their pension liabilities. An official said lowering the contribution rates paid by employers will not result in operating shortfalls of the pension funds.
"Till the end of 2018, the basic pension funds stood at a surplus of five trillion yuan… Also, if we look into the structure, most provinces who have executed the new policy still perform well financially," said Fu Jinling, director of the social security department at the Ministry of Finance.
To tackle the increasing pressures of revenue and expenditure, financial and human resources regulators vowed to offer effective actions. The central government has planned to provide about 75 billion U.S. dollars assistance in pension funds for enterprises in 2019, and the central adjustment fund to balance the payment burdens of local governments is expected to settle at about 89 billion U.S. dollars.