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Soci\r Poricv s Anxixis+n\+iox issx 01445596
Vor. 34, No. 1, M\ncn 2000, rr. 115130
Chinas Social Policy: Reform and Development in the
Context of Marketization and Globalization
Xinping Guan
Abstract
This paper offers a wide-ranging review of social policy trends and developments in China. It
details the characteristics of what had been traditional social policy during the rst o years of the
Peoples Republic. It then looks at the pressures on this system in the context of Market Reform
and the Open Door policy, and comments on the changing roles of government, NGOs and urban
employment units, in the societalization of social policy away from the state welfare model. The
general direction of reform is portrayed as neo-liberal, geared to reducing the role of government in
the provision of welfare and to increasing individual responsibility for social security and well-
being. However, there is as yet no prospect of a fully privatized social welfare system, owing to the
continuing weak state of the non-governmental sector. In conclusion, prospects for the future are
analysed and summed up in the light of the governments two overriding policy objectives: economic
development, coupled with the maintenance of social/political stability.
Keywords
Social policy; State welfare model; Societalization; China
During the rst o years of the Peoples Republic of China, the Chinese people,
urban residents especially, enjoyed a higher level of welfare benets, by com-
parison with their lowered economic condition. Since the early :q8os, however,
Chinese social policy has changed considerably, as a result of the Reform and
Open Door policies. In fact, over the past two decades, Chinese social policy has
been shifting, step by step, towards a neo-liberal pattern. This paper offers a
review of such developments and an assessment of prospects for the future.
Traditional Social Policy
Basic arrangements
Before the Reform, the Chinese government operated a large social programme
in both urban and rural areas, which can be summarized, as in table :.
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Address for correspondence: Xinping Guan, Department of Sociology, Nankai University, Tianjin,
Peoples Republic of China.
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Table :
Basic arrangement of welfare provision in China before the reform
Main aspects In urban areas In rural areas
Social security
Education
Health services
Employment
Housing
:. The governmental nancial subsidy
towards food, clothing and other basic
subsistence materials; so that urban
residents could benet from lower prices;
.. Labour insurance for workers in the
state sector and governmental staff,
which covers pension, medical care,
occupational injury, etc.;
. Cash benets for the urban Three Nos
(no working ability, no family and no
income).
:. Public schools and other education
facilities nanced by the government and
state enterprises;
.. Low schooling costs for students in
primary and middle school;
. Free enrolment to higher education
(although only for those who passed the
entrance examination).
:. Preventive health action organized and
nanced by the government and state
enterprises;
.. Public hospital system nanced by the
government and state enterprises; low
prices in medical care as a result;
. Free medical care for state workers and
governmental staff.
:. Full employment policy: all urban labour
could be assigned a job in either state or
collective sectors;
.. Stable employment: state workers were
free from the risk of losing their job,
once they got it.
:. Public housing: most urban houses and
ats were owned by the government and
state enterprises, and distributed to
workers and staff free of charge;
.. Lower rent: the average rent of public
housing and ats is even lower than the
basic maintenance standard.
:. Wu Bao Hu system:
a rural collective-
organization-based social
relief provision for the
elderly and disabled who
had no family support;
.. Natural disaster relief
system: governmental
relief projects for
villagers suffering from
natural disasters.
:. Public primary and
middle schools nanced
mainly by the rural
collective organizations
and subsidized by the
government;
.. Lower schooling costs for
students in primary and
middle schools.
:. Preventive health action
organized and nanced
by the collective
organizations and
subsidized by the
government;
.. Rural cooperative
medical care system,
based on the rural
collective economy.
Full & stable employment
for all rural labour based on
the public ownership of
farmland; all labourers had
the right to work and get
grain and a cash income
from it.
No.
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Table :
(continued)
Main aspects In urban areas In rural areas
Personal
services
:. The public caring facilities and services
nanced by the government and urban
communities for the elderly, the disabled
and orphans, etc. who had no family
support;
.. Daily services in childcare, elderly care,
mess service, etc. by state enterprises and
community organizations.
Some public caring facilities
and services in some rich
villages, nanced by the
collective economy, for the
elderly, the disabled and
orphans, etc. who had no
family support.
A high level of welfare in a low-income country
Without doubt, China enjoyed a high level of welfare provision before the
Reform, by comparison with the low average income of its people. In the
urban state sector especially, levels of welfare were comparable with Euro-
pean welfare states, if measured according to the ratio of social welfare
expenditure to the average level of GDP. That is why many researchers
concluded that Chinese society before the Reform constituted a welfare
society in a lower income country (Liu and Zhang :q8q; Guan :qq;
etc.).
The basic conditions of traditional social policy
Before the Reform, Chinese traditional social policy was based on its
socialist economic system and socialist ideology. The system had three
characteristics:
public ownership of the means of production. As a result of the socialist
reform movement of the mid-:qos, almost all the means of production
had been transferred to public ownership, which took two forms: state
ownership and collective ownership. This public ownership served as a
key foundation for government intervention in social affairs.
a centrally planned economic system. Under this system, the most import-
ant resources and procedures relating to economic activity were control-
led by the government. As a result, it was comparatively easy for the
government to motivate and mobilize such resources and procedures to
develop various kinds of social welfare.
egalitarian ideology. In the three decades before the Reform, egalitarian-
ism was dominant in China. It was seen as the signicant characteristic of
a socialist society. In such circumstances, the government was positively
expected to take an active role in the provision of social welfare.
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Changes in the Socio-economic Characteristics of the
Welfare System since the Reform
As many people had observed, Chinas hitherto high level of social welfare
provision had achieved outstanding results in social development, by com-
parison with other developing countries possessed of a similar per capita GDP.
So much was evident from the improvement in adult literacy, school enrol-
ment, life expectancy rates, etc., over the forty years from early :qos (see the
gures in UNDP :qq; and Smith-Morris :qqo). Despite its great achieve-
ments, however, the traditional social welfare system began to be criticized
for its presumed negative effect on economic development at a time when,
from the beginning of the Reform in the early :q8os, the government and
many researchers were paying special attention to the efciency of the eco-
nomic system.
The government and most of the researchers believed that it was neces-
sary to reform the welfare system for two basic reasons. First, there were
intrinsic features of the traditional system which seemed to run counter to
economic efciency. The welfare system was widely seen as a main source of
reduced economic efciency, because it absorbed too many nancial re-
sources which might otherwise be used to accelerate economic growth. Fur-
thermore, the welfare system encouraged dependency and laziness in the
workplace, especially in the state enterprises. As a result, the government
came to believe that reforming the system was a necessary component of the
Reform movement. Meanwhile, second, and more importantly, the welfare
system had to be reformed in any case, owing to the changes in socio-
economic circumstances brought about by two other profound and lasting
developments: market reform and the Open Door policy.
Market reform
The market reform of the economic system over the past two decades has
effected widespread and profound change in the Chinese economy and soci-
ety. Notably, market reform has meant the loss of the three basic conditions
which had sustained the traditional social policy: public ownership of the
means of production, a centrally planned economic system, and the egalitar-
ian ideology. In other words, the shift to a multiple-ownership economy, a
market-oriented free trading system and the peoples greater tolerance of
inequality, have forced changes in social policy.
From a dominant public ownership to a multiple-ownership economy. As a result of the
economic reforms, the role of the public sector in the national economyof
the state sector especiallyhas become weaker in both urban and rural areas,
whilst the private sector, both the domestically-nanced and that dependent
on foreign investment, has become increasingly important (see table .).
These changes have had at least two signicant impacts on social policy.
First, they have meant weaker governmental control over the nancial re-
sources and the behaviour of many enterprises in social welfare, which had
been a key condition in the old welfare system. Second, the newly developing
private sector was and remains outside the traditional welfare circle, i.e. in
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Table .
Percentage of employees in the public and private sectors in the Chinese
urban economy in :q8o and :qq
:q8o :qq
State-owned Collective Private State-owned Collective Private
Employed workers 6.. ..o o.8 6. :8.o :.o
Note: Private sector includes private enterprises, individual labourers, foreign-invested
enterprises joint-owned shareholding enterprises.
Source: China Statistical Publishing House (:qq6), China Statistic Yearbook (.): o.
most important welfare respects such as pensions, medical insurance, etc.,
its employees cannot be included in the traditional welfare system. It is as a
result of this that the backstop welfare system has had to be changed to cover
more contingencies.
From the centrally planned system to a market-oriented system. Social policy in the
new market economy is quite different from that of the old centrally planned
economy in vital respects. First, as a result of market reform the government
has ceased its traditional policy of price subsidy in respect of food and other
basic commodities; thus the people have lost a basic means of security.
Second, the new market economy has brought new risks for labourers (urban
unemployment) and thus requires unemployment insurance and other wel-
fare benets for the unemployed. Third, in the new market economy, instead
of the traditional direct-planned welfare provision, the government is sup-
posed to follow a redistributive process in welfare provision, i.e. to pool the
nancial resources obtained through taxation, etc., rst, and then redistrib-
ute this according to welfare principles. This new income-transfer procedure
has made the social policy process more complicated than in the traditional
planned economy, and more conicts of interest have made themselves felt,
as a result. Fourth, and most importantly, the market principle, once intro-
duced into economic activities, has not conned itself purely to economic
considerations: it has penetrated into many social elds which ought ideally
to be controlled by principles of welfare. In short, it is possible to observe
more and more market styles of behaviour in areas which should be dened
as social policy.
Open Door policy
As a result of the Open Door policy, which began in the early :q8os, more
and more foreign capital has entered into China, international trade has
been increasing, and the Chinese economy has become, step by step, a part
of the globalizing world economy. This change has exercised a strong inu-
ence on Chinese social policy development in at least three respects. First of
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all, with more foreign capital entering China, foreign investment-backed
enterprises have become an important part of the Chinese economy, meas-
ured by their ratio of workers and GDP to the total. Workers in the foreign
investment-backed economic sector could not be included in most programmes
of the traditional Chinese welfare system from the beginning, since these
were designed solely for state-employed workers. Hence there was a need for
some new systems with regard to pensions, housing, medical care, etc. Sec-
ond, with more foreign products being imported, and with the enlargement
of the foreign economic sectorwith its stronger competitive power on
averagethe state sectors lower efciency has been revealed as being ever more
fatal to its survival and development. It is in such circumstances that the state
sector has been trying its best to boost economic efciency by, for instance,
reducing its payroll of redundant employees and cutting down on luxuri-
ous welfare expenditure. Third, under the pressure of international competi-
tion, the government strives to reduce the labour costs of domestic products,
in an effort to create a more attractive prospect for foreign investors by
restraining the increase in social expenditure in the areas of social security,
housing, public health services and education.
In short, in a more open economy, the government faces pressures from
two sides: one is asking for an enlargement of the welfare programme to
cover the expanding labour force in the foreign-invested sector, and to
relieve increasing urban unemployment caused, at least partly, by the inter-
national competition. The other, however, is insisting that government reduce
its social expenditure, in order to strengthen the economic competitive capa-
city of the country.
Changing Trends in Social Policy
Given such changing socio-economic circumstances, the Chinese govern-
ment had to reform its social policy. The main lines of reform can be sum-
marized as follows.
Societalization of the welfare system
In the traditional system, almost all urban welfare programmes had been
paid for by government, either directly from the government budget, or
through state enterprises. In rural areas, welfare provisions had been paid
for by the collective organizations under governmental regulation. A basic
object of the Reform was to societalize the welfare system, i.e. to reduce the
governments nancial and administrative responsibility and encourage more
actors to participate in welfare provision. In the reformed social policy, the
following actors have seen their roles changed.
Government. Although the government is still the most important actor in the
new system, it has given up its traditional role of being the one and only
nancial provider. In almost all welfare elds, the government has been
reducing its share of nancial provision and, at the same time, individuals
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and other organizations are being asked to pay, to varying extents, for welfare
benets. Taken as a whole, the governments current responsibility can be
summarized under four headings:
regulation-maker: to formulate the rules and set basic standards for wel-
fare projects;
administrator: in charge of most welfare projects, and controlling the
behaviour of related actors in other welfare projects;
nancial provider: although on a reduced level, the governmental budget
is still the most important source for some welfare programmes;
nancial guarantor: in some welfare projects such as social insurance, the
government is still responsible for guaranteeing nancial viability, should
the system get into difculties, even though it is no longer responsible for
normal payments.
NGOs. Before the reform, there were almost no non-governmental organ-
izations operating in social welfare elds in China. In the past decade, how-
ever, NGOs have been developing fast. They exist at various levels. At the
local level, almost all urban community organizations, called resident commun-
ity associations, now provide community services to local residents. After the
Reform, in other words, the urban community organizations have become a
kind of NGO because they can no longer rely on the governmental nancial
budget. Instead, they are encouraged to utilize local nancial resources in
various ways, including undertaking protable activities to help nance com-
munity services for local residents. These so-called community services cover
a wide range of activities, from personal services for the elderly, the disabled,
the poor and children, to the general provision of public sanitation and
public security.
1
In addition to the above, some specialized non-governmental and non-
prot welfare agencies have been set up to provide personal services, mainly
for the elderly. Again, at national and regional levels, some charity societies
and other non-governmental welfare foundations are growing up to provide
social services, such as poverty relief, education, medical care, etc., for poor
people in both urban and rural areas. Finally, some international NGOs
have also come in to provide welfare services and nancial aids for local
socio-economic development, mainly in the remote poverty regions.
Urban employment units. Traditionally these units, including enterprises, gov-
ernmental departments and social organizations (in education, health care,
etc.), took responsibility for welfare provision along with their main business.
Their welfare projects ranged from social security to various services for
employees and their families. Since the Reform, however, urban enterprises
have reduced their welfare responsibilities, whereas government departments
and social organizations have retained it to a large extent. The enterprises
change of role has been for two reasons: First, as a result of economic reform,
the nancial tie between government and the state enterprises has been cut
off, and thus all welfare expendituresif the welfare project remainshave
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to be paid for by the enterprises themselves. At the same time, however, the
government has cancelled the enterprises compulsory obligation to provide
welfare services, except in respect of social insurance for their employees.
Second, the state enterprises were criticized in any case from the early :q8os
on for being too multi-functional, i.e. they had taken on too many social
functionsincluding the provision of social welfare servicesoutside their
main business. Many researchers, both economists and social welfare re-
searchers, insisted that enterprises should stick to their main commercial
business, and convert their welfare functions into separate social organiza-
tions, in order to increase economic efciency. As a result of both these
factors, the provision of welfare by state enterprises is, apart from social
insurance, a matter they decide for themselves. Accordingly, many enter-
prises have reduced their welfare provision (Zheng :qq6).
In the light of the above, we can see that, so far as the principal actors are
concerned, Chinese social policy has been moving away from the traditional
state welfare model, though it has not so far arrived at a private welfare
model. Under the current situation, the non-governmental sector is still very
weak and lacks the institutional infrastructure to achieve a thoroughly private
welfare model. Government allows and even encourages non-governmental
actors to participate in its traditional elds of activity, just because it hopes
that nancial responsibilities will thus be shared and welfare activities will
become more efcient. In short, instead of a privatization approach, as in some
other developing countries, the Chinese government prefers a societalization
approach to welfare reform. It is not yet clear, however, whether this approach
is to be the nal pattern, or just a mid-way stage in a longer-term process
of gradual reform that will nally result in a privatization pattern.
Reduction of average welfare provision in the state sector
Before the Reform, a high level of welfare provision was seen as an advant-
age of socialism system, and the Chinese people, especially those in the
urban state sector, enjoyed universal welfare benets. Although their average
personal income was very low, the governmentdirectly or through the
state enterprises in cities and collective organizations in villagessecured
peoples basic living quite well, and provided sufcient social services in
education, health services and urban housing. There was a big difference
between rural and urban areas in levels of welfare, but the basic pattern was
the same: considering the peoples income, their welfare service was good.
This traditional pattern had two features. One is that the public programmes
covered almost all possible risks and provided services in most, if not all,
important elds in which people were in need, and the welfare pattern was
thus called welfare services from cradle to grave, as the European welfare
state is called. Second, almost all the welfare services were nanced on a
non-contributory basis, since almost all the expenses were covered from
public nancial sources. Moreover, in the traditional economic system, indi-
viduals did not need to pay tax.
2
As a result, it seemed to the Chinese people
that all the benets were from the governments benevolence.
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As a result of the Reform, however, these basic principles have been
changed. The government has no longer to run a universal welfare system;
the governmental welfare provision has thus been reduced to a large extent:
and the people have been required to pay, to different degrees, for their
benets in most elds from social insurance to housing, health services and
education. Changes of this kind have been happening in most elds of social
policy, as follows:
Marketization and privatization of services. In some elds the government has
ceased its nancial responsibility altogether and converted traditional gov-
ernment welfare services into commercial services. A typical example is urban
housing policy whereby, from the late :q8os, the government has pursued a
policy of merchandization of housing, which treats the house as a kind of
commodity to be distributed to people on market principles. Since the mid-
:qqos this policy has accelerated. By :qq8, the traditional welfare housing
policy (free provision of public housing and low rents) had ceased. Most of
the urban public housing has been sold to tenants and urban people have
from now on to buy their house on the open market ( Jiang :qqq).
Beneciaries payments for services. One of the consequences of the Reform is
that beneciaries have to pay a part of the costs for the services in most
welfare elds. Such changes can be seen in social insurance (pension, med-
ical care and the newly created unemployment insurance), higher education,
and many personal services. In these elds, the government is still treating
the services as welfare by nature, but has nevertheless reduced expenditure
on them and requires beneciaries to share the expenses. The basic philo-
sophy here is that, instead of relying on the government, individuals should
take responsibility on their own, at least in part, as far as they can (Guo and
Ge :qq8; Chen :qq6; etc.).
Means-tested benets. To a large extent, the basic principles in means-tested
projects remain unchanged in both urban and rural areas. In urban areas,
the coverage of means-tested benets has been enlarged as a response to
increasing urban poverty. Before the Reform, only those people who had no
working ability (the elderly and disabled), no family and no other income
source (called the Three Nos) were entitled to social relief. But this old project
could not cope with ever enlarging and more complicated urban poverty,
and thus has been replaced by a new minimal living security project,
which provides relief to urban households whose average income falls below
a certain level ( poverty line), irrespective of the Three Nos consideration.
Furthermore, whereas the old urban social relief was centrally planned, cent-
rally regulated and centrally nanced, the new urban minimal living secur-
ity project is basically nanced by local governments. Thus the benet
levels differ according to regional economic conditions and the nancial
capacities of local government. As a result, the nance for the new project is
unstable in many cities. It is reported that, by :qq8, about 8o per cent of
Chinese cities had established this new system, but that only .o. per cent
of the urban poor have been covered in these cities (Tang :qqq).
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Meanwhile, in the rural areas the traditional Five Guarantees system
still operates. This is still just for the people who have no working ability and
family support (mainly the lonely aged). However, the new development in
this social relief system is that the budget is now from a county-level pooling
system, as a result of the increasing inequality of local communities and the
disruption of the collective economic organization which resulted from the
family responsibility reform
3
in rural villages.
The basic nature of the social policy reform
To sum up, social policy reform over the past two decades has obviously
been of a neo-liberal character: the reduction of the governments role in
social welfare; the encouragement of individuals responsibility for their own
security and well-being; and decreasing public provision in most welfare
elds. Even so, there have also been some positive developments, mainly in
social security projects, where coverage has been extended to the non-state
sectors (pension and medical insurance, and the urban social assistance bene-
ts), and some new projects have been created (urban unemployment insur-
ance). This conrms that governments social programmes are increasingly
targeted towards the poor and other vulnerable groups.
Generally speaking, Chinese social policy has receded from the traditional
universal model, but has not moved towards a residual model. Instead, the gov-
ernment prefers to pursue a selective model.
4
Changes of this kind reect the
changing socio-economic environment and the governments declared aims:
to adapt the social welfare system to the new socialist market economic system, to
stimulate economic efciency in a marketizing and globalizing environment,
and to maintain political stability by solving social problems, such as urban
unemployment and poverty, which are mainly caused by the market reform
and international economic competition.
Prospects
Given that the two-decades-long economic reform is still going on, it is
difcult to make a precise forecast about future developments in social policy.
There are three grounds for uncertainty. First, in any long-term gradual
reform process, there are likely to be many unpredictable inuences on social
policy trends.
5
Second, the key approach to this reform has been wading
across a river by touching the stone, which means that the reform is, to a
large extent, not a thoroughly predesigned process, but rather a step-by-step
trial-and-error one. Third and most importantly, Chinas reform, in both
economic and social policy respects, is inuenced, stimulated or restricted,
by a group of economic, political and social variables stemming from both
the internal and external environments. Any change in such variables may
provoke a departure from the prearranged path of reform.
However, this is not to say that we do not have any basis for attempting
a prognostication for the rst decade of the twenty-rst century. From
analysis of the path of change over the past two decades, we can see that the
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changes in Chinas social policy have been basically in response to a group of
socio-economic changes. By analysing trends as regards these inuencing
factors, we can sketch a possible trajectory for Chinas future social policy
development.
The basic principles
First of all, Chinas social policy, as with other policies, should be analysed in
terms of the governments basic economic, political, and social aims. Unlike
before the Reform, when the governments policies were shaped more by
socialist ideology, social policy since the Reform has been shaped by its two
supreme goals of economic development and social/political stability. Chinas
further social policy development should be analysed in the light of these same
two principles since, provided the basic political system does not change, they
will continue at least into the early decades of the twenty-rst century.
Economic development. In accordance with its ambitious economic develop-
ment strategy, which aims to achieve a powerful state and rank China as a
middle-developed country within about half a century, the government re-
gards economic growth as the supreme task on its schedule. For this reason,
the governments basic principle in social policy is, and will remain, that
efciency is prior to justice. This being so, a high-level governmental wel-
fare plan looks unlikely. Instead, governmental welfare provision will be kept
low, and individuals, families and non-governmental organizations will be
encouraged to take on ever more responsibility. Nevertheless, in some spe-
cic elds, such as education, which is seen as conducive to economic growth,
the government may play a more active role as a part of its broader strategy.
Social/political stability. For the Chinese political authorities, social/political
stability is at least of equal importance to economic efciency; or even more
important on occasion. Thus it may prove impractical for government to go
further in pursuing neo-liberal reforms, if these seem to threaten political
risks ahead. Many governmental documents emphasize that the peoples
tolerance should be taken fully into account when considering social policy
reform. Therefore, the governments further progress in efciency-orientated
reform will be determined by the extent to which they can keep control, or
nd new means of control, in the face of possible resistance which may
cause social/political instability. In other words, in a situation which pays
less attention to social justice, it is the governments fear of social/political
instability which may limit the extent to which governmental welfare provi-
sion is scaled down.
These two basic principles will set the upper and lower limits for further
development in social policy. Governmental welfare provision may not exceed
the point above which economic efciency will be threatened; neither may it
fall below a point deemed essential to prevent social unrest. Only between
these points will government have room for manoeuvre in policy-making.
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Considering its ambitious economic strategy, the intense pressure from inter-
national economic competition, plus the resistance to social policy reform
already in evidence, the governments room for manoeuvre may not be large
in the future.
The constraints
Chinas social policy in the early twenty-rst century will be also shaped by
certain limiting factors, as follows:
The labour-intensive economy. As with many other developing countries, the
Chinese economy is, to a large extent, based on its big labour-intensive
sector. Thus the cost of labour is a key inuencing factor in its competition in
the international market. Given this situation, any growth in social expendit-
ure would have a much greater effect on international competitiveness than
it would in those countries with a capital-intensive economy. In the rst
couple of decades of the twenty-rst century at least, it may not be possible
for a country as large as China to turn itself into a capital-intensive economy,
and it will thus be less possible for Chinese policy-makers to envisage high-
level welfare provision in the near future.
The rapidly ageing population. As a result of successful economic and social
development, especially the strict birth-control policy over the last two dec-
ades of the twentieth century, China, with almost :o per cent of people over
6o, is now on the threshold of having an ageing population. It will reach its
highest proportion of older people.o or even . per centwithin two or
three decades (Sha :qq). That is to say, in the rst two or three decades of
the twenty-rst century, China, as a developing country, will have to provide
a large elderly poopulation with social security, health care, housing and
personal services, etc. Although the traditional means will keep working to
some extent, the government will denitely face more and more social and
political pressures in the future to increase social expenditure directed at the
problems of ageing.
Other inuencing factors
The most important forces, which will have the strongest effects on social
policy, will be the market reform, globalization, the trends in social inequal-
ity and the ideological response to it.
Market reform. We have observed that there has been a continuous encroach-
ment of market principles into most elds of welfare. In key areas of social
policy, such as social security, health services, housing, and personal services,
market principles have been introduced and welfare provisions reduced to a
low level, leaving not much room for further reduction. On the other hand,
market reform has given rise to a series of social problems, such as inequal-
ity and poverty, which are harmful not only to the individual victims but
also to the stability of society. Therefore, more social protectionsuch as
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unemployment benets and social assistance to the new poorwill be re-
quired in response to the negative effects of market reform.
Globalization. Given the labour-intensive nature of the economy, the gov-
ernment would like to prevent the labour price from going up fast, in order
to promote exports and create favourable conditions for foreign investment.
Therefore, the negative effects of globalization on Chinese social policy could
be increased as Chinas economy meets stronger economic competition while
entering into the world economy more and more. It can be expected that, if
other factors remain the same, the governments social expenditure rate may
be further reduced as this country enters the WTO. Nevertheless, this pro-
cess may also have some positive effects, in respect of expenditure on social
security (to counter the harmful consequences of world competition) and on
education (to improve the human capital).
Furthermore, much will depend on the pace at which China enters the global
economy. Learning from the negative consequences of the Asian nancial
crises, China has slowed down its pace of entry into the global economy in
recent years, although the Open Door will remain a basic policy.
International bargaining in social policy. So far, Chinas social policy has been
basically an internal affair, little affected by international factors. As the
world and regional economies become ever more closely related, however,
internal social policy issues may possibly come to be discussed at an inter-
national level, regionally or even globally, in order to avoid social dumping,
seen as so unfair in international economic competition. International organ-
izations, such as the UN and the World Bank, have been paying more
attention to the social policy of individual countries, and some Western
researchers have even proposed the idea of an international social policy,
to create an international welfare standard. Although such ideas are still a
long way from being put into practice, international pressure will have inu-
ence on Chinese social policy the more the country becomes involved in the
global economy.
The ideological response to social inequality. Social policy reform has, to a large
extent, been rendered possible by changes in the traditional egalitarian ideo-
logy. Any further changes in social policy will likewise be affected by ongoing
attitudes towards social inequality. In the early :q8os, we saw an overwhelm-
ing attitude among people against the over-egalitarian economic system of
the time. This provided an ideological base for the governments policy of
allowing a part of the people to get better-off rst. As a result, social
inequality has become even greater, as indicated by the gures in table ,
which are from two nationwide surveys.
Moreover, the inequality between urban and rural residents is also very
pronounced. According to one estimate, the income gap between urban and
rural residents was .6o per cent in :qq8, even higher than the gure of .6 per
cent in :qq.
6
In response, more and more scholars and ordinary people worry now-
adays about this increasing social inequality, which is seen as harmful to both
:.8 Blackwell Publishers Ltd. :ooo
Table
Urban inequality in :qqo and :qq8
Year Income ratio of top .o% to Income share of Income share of N
bottom .o% bottom .o% top .o%
:qqo .o% q.o% 8.:% :,o8.
:qq8 q6o% .% ..% .,:8
Source: Xu, Xinxin, and Li, Peilin (:qqq), :qq8:qqq: An analysis and forecast of Chinas
employment, income and information industry. In Ru, Xin, et al. (eds), China in .:
Analysis And Forecast of Social Situation, Social Science Literature Press: .
social development and political stability. According to a survey in cities
in :qq8, only ::. per cent of the .,o respondents expressed themselves
satised with the social equality status quo. Another survey in o cities in
:qq8 shows that 8.8 per cent of the .,.q respondents answered that they
saw social inequality as a big problem in present-day China ( Xu :qqq: 8,
table .). That is to say that the Chinese public now objects to there being
any further increase in inequality. In this ideological situation, the government,
although still putting economic efciency before social justice, may refrain
from further neo-liberal reform, because of the high political risk.
Conclusion
Although there may be many unpredictable changes affecting the above
variables in the future, we may assume that there will be no great changes in
major internal and external economic and political conditions. Thus we can
offer a rough summary forecast for Chinas social policy in the early twenty-
rst century, as follows:
:. The social welfare system will continue to be adapted to the economic
market system, especially in elds so far less exposed to reform, such as
higher education.
.. The government will pursue a strategy of moderate development in
welfare provision, in which the average level of provision, measured
either by per capita social expenditure or its ratio to GDP, would be
prevented from going to either of the two extremes, remaining instead
on roughly the current level.
. It will be an important part of the governments social policy agenda to
adjust the structure of welfare provision. Two strategies will be of the
greatest importance in this development. One will be to ensure social
policy is better targeted at the most needy, i.e. at the growing numbers in
poverty. The other will be to make it more suited to economic develop-
ment by maintaining a high level of expenditure in education, training
and related elds.
Blackwell Publishers Ltd. :ooo :.q
Notes
:. Actually, the urban community services include both commercial and welfare (non-
prot) services in practice, although the initial aim, dened by the government, is
to provide welfare services to the local residents.
.. In the traditional planned economic system, the governments scal revenue was
mainly from the prots of state-controlled enterprises.
. The family responsibility reform was a fundamental economic system reform in
China. It began in the late :qos, and changed the old rural collective economic
system into an individual household economic system.
. Selective model means here a social policy model between the universal and
the residual models. In a selective model, the social policy tends to emphasize
some special elds according to the governments choice of priority in socio-
economic development, and tends to target more the people in most need.
. About Chinas gradual reform strategy, see Andrew G. Walder (ed.), Chinas
transitional economy: intepreting its signicance. In Chinas Transitional Economy,
Oxford: Oxford University Press, :qq6 (Introduction), and many others.
6. :qq8:qqq: An analysis of Chinas social circumstancethe nal report. In Ru,
Xin, et al. (ed.), China in .: Analysis And Forecast of the Social Situation, Social
Science Literature Press, :qqq, p. ::.
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