Social policy in China: Development and well-being 9781847429599

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Social policy in China Development and well-being Chak Kwan Chan, King Lun Ngok and David Phillips

Social policy in China Development and well-being Chak Kwan Chan, King Lun Ngok and David Phillips

First published in Great Britain in 2008 by The Policy Press University of Bristol Fourth Floor Beacon House Queen’s Road Bristol BS8 1QU UK Tel +44 (0)117 331 4054 Fax +44 (0)117 331 4093 e-mail [email protected] www.policypress.org.uk © Chak Kwan Chan, King Lun Ngok and David Phillips 2008 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested. ISBN 978 1 86134 880 7 paperback ISBN 978 1 86134 881 4 hardcover Chak Kwan Chan is Senior Lecturer in Social Policy at Nottingham Trent University, UK. King Lun Ngok is Associate Professor at the Centre for Public Administration Research, School of Government at Sun Yat-Sen University, The People’s Republic of China. David Phillips is Reader in Social Policy at the University of Sheffield, UK. The right of Chak Kwan Chan, King Lun Ngok and David Phillips to be identified as the authors of this work has been asserted by them in accordance with the 1988 Copyright, Designs and Patents Act. All rights reserved: no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of The Policy Press. The statements and opinions contained within this publication are solely those of the authors and not of The University of Bristol or The Policy Press. The University of Bristol and The Policy Press disclaim responsibility for any injury to persons or property resulting from any material published in this publication. The Policy Press works to counter discrimination on grounds of gender, race, disability, age and sexuality. Cover design by Qube Design Associates, Bristol Front cover: photograph supplied by kind permission of Panos Pictures. Printed and bound in Great Britain by Henry Ling, Dorchester.

To our families

Preface

Contents List of tables and figures List of abbreviations Currency equivalents Preface

vii ix xi xiii

Part 1 Background and framework one

China’s social policy: background and issues Introduction: the emergence of a new era Chinese economic achievements and well-being Understanding China and its policy issues Issues specific to China The structure of the book

3 3 5 6 8 11

two

Social policy and well-being Constraints of GDP and alternative measurements Human Development Index and its limitations Role of subjective well-being Social quality and Phillips’ quality of life approach Human nature and well-being Conclusion

15 15 16 17 18 20 24

three

Social policy in the context of economic reforms The pre-reform economic system Welfare changes and economic reforms Economic reforms, 1978-92 Social policy responses to economic reforms, 1978-92 Economic reforms after 1993 Social policy responses to economic reforms after 1993 Conclusion

27 28 29 30 32 33 37 41

four

The making of social policy in China China’s real policy maker: the Chinese Communist Party The National People’s Congress and its Standing Committee: the highest state organ of policy making The State Council: China’s principal policy maker Key government departments and social policy making Other actors involved in social policy China’s policy-making process: the case of the Labour Contract Law Social policy implementation: the politics of central–local relations Conclusion

45 45 47 48 50 52 54 55 56



Social policy in China Part 2 Key policy areas and well‑being five

Social security policy Social security before the economic reforms Social security after the economic reforms Social security and well-being Conclusion

six

Labour policy Labour policy before the economic reforms Labour policy after the economic reforms Market transition and unemployment in China Surplus rural workers Anti-unemployment policies in China Labour policy and well-being Conclusion

93 93 95 97 100 101 104 111

seven

Health policy Healthcare provision before the economic reforms Healthcare provision after the economic reforms Healthcare reform and well-being Conclusion

115 115 117 130 141

eight

Education policy Education policy before the economic reforms An overview of education policy in the economic reform era Education policy and well-being Conclusion

147 148 149 156 165

Housing policy Housing policy before the economic reforms Housing policy during the era of economic reform Land-losing farmers Housing policy and well-being Conclusion

169 170 171 179 180 188

nine

61 62 62 71 85

Part 3 Conclusion ten

Welfare reforms and well-being Well-being during welfare reforms Conclusion

Index

vi

195 196 217 227

Preface

List of tables and figures Tables 1.1 2.1 3.1 3.2 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 6.1 6.2 7.1 7.2 7.3 7.4 7.5 7.6 8.1 8.2 8.3 8.4 8.5 9.1 9.2 9.3 9.4 9.5 10.1 10.2 10.3 10.4

China’s composition 7 Key areas for achieving autonomy and mutuality 22 A selection of company forms in China 36 The historical development of China’s economic reforms since 1978 37 The design of the pension scheme for employees of 65 urban enterprises (2006) The original design of rural pensions (1991) and later changes up to 2002 66 The development of rural pension schemes since 1992 67 The replacement rates of old age pensions in different regions (2003) 73 Caring and help received by poor families 77 Migrants with temporary residence permits in urban areas 79 Multidimensional indicators of hardship 80 The monthly rate of the MSLS in 36 cities of China (May 2005) 81 Registered urban unemployment in China (1987-2005) 98 Number of laid-off workers (1993-2002) 100 Composition of hospital incomes in China (1980-2000) (%) 120 Medical insurance subsidies to different target groups in Jilin’s 125 pilot scheme The qualifications and medical institutions of doctors (2002) 129 National health expenditure by resources in China (1980-2001) 132 Types of health insurance schemes and coverage in China (2003) (%) 133 Discounted items for poor patients in nine hospitals 134 Enrolment rate of school-age children in primary schools (1965-2004) 151 Regular higher education institutions and enrolled students (1990-2005) 153 Affiliation of regular higher education institutions (HEIs) (1997-2004) 154 Main types of private education provision in China (2005) 155 Gender inequality in Chinese education (2004) 161 Growth of extra-budgetary funds (1952-91) 175 Rural house building (1978-89) 179 The housing conditions of rural households (1990-2004) 181 Housing choices of temporary and permanent migrants and local 184 residents (%) Differences in housing conditions between temporary migrants and 184 local residents in Shanghai and Beijing The extent to which physical needs are met by state welfare 197 The extent of the achievement of equal value for China’s citizens 200 The extent to which welfare policies meet psychological needs 205 The extent to which the welfare system achieves social integration 206

vii

Social policy in China 10.5 10.6 10.7 10.8

Fulfilling caring duties for children The extent of achieving learning and development The extent to which the welfare system enables self-determination Evidence on the degree of a just polity

208 209 211 213

Figures 1.1 4.1 4.2 7.1

viii

Governmental administrative structure of China The CCP’s central organisation Organisation of the State Council Main structure of the urban health sector in China (2003)

8 46 49 118

Preface

List of abbreviations ACFTU All-China Federation of Trade Unions ACWF All-China Women’s Federation BURMI Basic Urban Resident Medical Insurance Scheme CCP Chinese Communist Party CCPCC Chinese Communist Party Central Committee CMS Cooperative Medical Scheme CRS Contract Responsibility System ECH Economic and comfortable housing GDP Gross domestic product GNH Gross National Happiness GPI Genuine Progress Indicator HDI Human Development Index HEI Higher Education Institution HPF Housing Provident Fund HRS Household Registration System LRH Low Rental Housing Scheme MC Ministry of Construction MCA Ministry of Civil Affairs ME Ministry of Education MF Ministry of Finance MH Ministry of Health MLR Ministry of Land and Resources MLSS Ministry of Labour and Social Security MSLS Minimum Standard of Living Scheme NBSC National Bureau of Statistics of China NGO Non-governmental organisation NPC National People’s Congress NRCMS New Rural Cooperative Medical Scheme PHP Peasant Housing Project PRC The People’s Republic of China PTDRC Project Team of the Development Research Centre of State Council RA Resident Association ROC Republic of China (Taiwan) RSC Re-employment Service Centre SAR Special administrative region SC State Council SO Street Office SOE State-owned enterprise UN United Nations UNDP United Nations Development Programme VTE Village and township enterprise ix

Preface

Currency equivalents (The average exchange rates between 14 May 2007 and 8 November 2007)

Currency unit 1.00 ¥ = 1 GBP =

China Yuan Renminbi (CNY) 0.066 GBP 15.150 ¥

xi

Preface

Preface Chinese people should be proud of China’s economic achievements. In particular, China’s modernisation project emerged from social, economic and political turmoil following the 10-year Cultural Revolution during which millions of Chinese people were physically and psychologically tortured or even killed. China’s economic reforms were also initiated in a hard reality: a backward and poor China that had to feed a quarter of the world’s population. Given these circumstances, China’s economic success is a miracle in modern history. Chinese leaders should, however, be ashamed of a high degree of capitalist exploitation and class suppression in the process of economic modernisation. Over the past three decades, China’s economic growth has been achieved at the expense of the well-being of hundreds of thousands of members of deprived groups: poor rural residents are always worried about medical care and retirement; urban migrant workers have been excluded from accessing urban public services; many factory workers are working long hours in extremely hazardous work environments; farmers whose land was expropriated have not received proper compensation; and thousands of poor patients are unable to afford treatment. The commonly perceived ‘gradual economic reforms’ have actually brought about tremendous changes in welfare provisions and have rapidly destroyed China’s socialist welfare system, leaving millions of poor people unprotected. There is obviously a gap between China’s economic development and its social development. This book is primarily concerned with the well-being of Chinese people. In the words of Chen Guojie (source: Rethinking resettlement, 20 September 2006, Toronto: Probe International, http://www.probeinternational.org/catalog/ content_fullstory.php?contentId=2902), Senior Researcher at the Chengdu Institute of Mountain Hazards and Environment: ‘I was an ordinary researcher who had simply said what I knew to be true, based on science’. Thus, we aim at systematically examining the well-being of Chinese people in the midst of China’s economic reforms. It is hoped that our findings can contribute to the formulation of balanced, just and human-oriented social and economic policies in the future. We are grateful to the Policy Oriented Social Sciences Research Group (POSS) of Nottingham Trent University for providing financial assistance for Dr Chan to gather key literature and conduct interviews in China. In particular, we express our gratitude to Professor Zheng, Mr Peng, Dr Han, Mr Sun, Miss Xie, Dr Gong, Miss Li and Dr Xiong for their hospitality and academic support for Dr Chan in Beijing. Our thanks also go to Emily Watt, Laura Greaves, Jo Morton, Philip de Bary, Jacqueline Lawless, Jessica Hughes and Leila Ebrahimi at The Policy Press. Because of their patience and effective work, this project can now be successfully published.

xiii

Part 1 Background and framework

China’s social policy: background and issues

one

China’s social policy: background and issues Key issues China has experienced rapid economic and social changes over the past three decades. It is now no longer a traditional socialist country but a mixed economy under the rule of an authoritarian government. This introductory chapter examines: • the background and key ideologies of China’s economic reforms; • some of China’s basic features such as its geographical location, the composition of its population, and the relationship between central and local governments; and • special social policy issues in the Chinese context.

Introduction: the emergence of a new era China is currently experiencing the most stable and prosperous period in its modern history. Before the economic reform of 1978, Chinese people had experienced considerable and prolonged periods of suffering. For many years, Chinese people were ‘subjected to aggression and humiliation’ (Deng, 1984), devastated by civil wars and uprooted by class struggles. In particular, the Cultural Revolution (1966-76) launched by Chairman Mao Zedong, assisted by Lin Biao and the Gang of Four (Jiang Qing, Zhang Chunqiao, Yao Wenyuan and Wang Hongwen), led to millions of Chinese people being either physically and psychologically tortured or killed because the basic rights of Chinese citizens were completely suppressed. China was left in social and political chaos following the end of the Cultural Revolution, with many Chinese people struggling to eke out a bare subsistence lifestyle. According to Deng Xiaoping (1987), ‘during the 20 years from 1958 through 1978, China was hesitating, virtually at a standstill’. It is a fact that the Chinese government started its modernisation project under severe constraints, namely, multiple incidents of social and political turmoil; being a poor country having to feed a quarter of the world’s population; lacking modern economic management; and suffering a long period of authoritarian rule and from more than three decades of international isolation. Against China’s backwardness and poverty, Chinese leaders had a strong desire to transform it into a prosperous country, shifting the focus of the Chinese 

Social policy in China

Communist Party (CCP) from previous non-stop political campaigns (and class struggles) to economic activities. As Deng (1978) reminded his colleagues, the CCP should avoid the rigid ideological disputes that had dominated the past and put practical efficacy as ‘the sole criterion for testing truth’. In order to increase economic efficiency, Deng (1978) stressed that ‘we must learn to manage the economy by economic means’; this meant that Chinese people were encouraged to enrich their knowledge of ‘methods of management, structure of management and economic policy’. In Wong’s (1998, p 7) words, China’s modernisation was ‘a political decision’, which attempted to ‘replenish the legitimacy of the regime after the debacle of the Cultural Revolution and to address popular frustration with the shortages and low standards of living under a command economy’.This programme resulted in a radical new economic strategy of introducing the market into socialism, which is Deng’s major ideological contribution to the contents of Chinese socialism. As Deng (1979) pointed out: It is wrong to maintain that a market economy exists only in capitalist society and that there is only ‘capitalist’ market economy. Why can’t we develop a market economy under socialism? Developing a market economy does not mean practising capitalism. While maintaining a planned economy as the mainstay of our economic system, we are also introducing a market economy. But it is a socialist market economy. Although a socialist market economy is similar to a capitalist one in method, there are also differences between them. The socialist market economy mainly regulates interrelations between state-owned enterprises, between collectively owned enterprises and even between foreign capitalist enterprises. But in the final analysis, this is all done under socialism in a socialist society. In Deng’s view, socialism does not necessarily imply a society where all ownership is public; it can involve the coexistence of private and public enterprises. He considered socialism as comprising a dominant public sector together with a regulated private sector so that common prosperity could be achieved through state interventions. He further emphasised that socialism ‘cannot produce an exploited class’ (1979).Thus, it is reasonable to conclude that in this period Chinese leaders only expected a small and restricted market to exist, regulated by strict state rules so that exploitation could be prevented.This is the original version of a ‘socialist market economy’ in the early reform years. Later, Chinese leaders tried to close political debates on the ‘Cultural Revolution’ in order to divert the public’s attention to building a better economy. In 1981, members of the Sixth Plenary of the Eleventh Central Committee Meeting passed a resolution on several historical questions since the establishment of the Chinese Communist Party. As the resolution declared, ‘class struggle is no longer the contradictory issue in China’ and the CCP ‘should not insist on continuing revolutionary struggles’ (CCPCC, 1981). On the other hand, it argued that ‘the 

China’s social policy: background and issues

focus of the Chinese Communist Party and the country should be shifted to build an economic orientated modernisation project by developing productivity so that the public’s material life can be improved’ (CCPCC, 1981).To achieve these objectives, Chinese leaders believed it was necessary to adopt an open door policy through which Chinese people could learn advanced sciences and technologies from western countries. To summarise, Chinese leaders politically shifted the public’s focus from class struggle to economic construction. They fundamentally changed the economic base of China’s socialism by introducing private economic activities as an essential supplement to the state-owned economy. Thus, the contribution of the private sector to the whole economy was recognised and its activities were legitimated. In this way, private property and market forces were initiated, being expected to create more employment and business opportunities for Chinese people. In short, Chinese leaders secured a stable political environment and also provided a solid ideological foundation for China’s economic development.

Chinese economic achievements and well-being China’s economic achievements since 1978 have been remarkable. Its Gross Domestic Product (GDP) rapidly increased from ¥362.4 billion in 1978 to ¥13.7 trillion in 2004, with an annual growth rate of 9.6%. During this period, GDP per capita also jumped from ¥379 to ¥10,502 (from £25 to £690 at a conversion rate of £1 = ¥15) (Chinability.com, 2006). China has become the world’s fourth largest economy after the US, Japan and Germany. In terms of the volume of foreign trade, it was ranked second in 2005, attracting more than US$60 billion (Zhang, 2006). In 2005, China’s import and export volume exceeded US$1.4 trillion, which was 68 times higher than in 1978 (Xinhua News Agency, 2005). As much as 70% of China’s GDP in 2005 came from the private sector, and Chinese leaders have successfully accelerated its productivity, fundamentally transforming China from a communist to a mixed economy. The Economist (2004) points out, ‘China’s leaders still call themselves communists, but they have become capitalists in practice’. Unfortunately, China’s economic successes have also generated inequalities and social exclusion. The economic benefits have not been equally shared by all citizens, and inequalities have widened between social classes, between rich and poor provinces and between urban and rural areas. Economic reform has fundamentally changed the base of China’s socialist system from state-owned enterprises (SOEs) and communes to modern business corporations and familybased farming systems (see Chapters Three and Five for details). More than 27.8 million workers from SOEs were laid off between 1999 and 2004 (China Daily Online, 2004). Also, due to inadequate job opportunities, urbanisation and illegal land acquisitions, many peasants lost their land and were forced to seek employment in cities. From 1993 to 2003, the size of this floating population increased from 70 million to 140 million (Chinanews.com, 2005), and about 17% 

Social policy in China

of the urban population are migrant workers. Regrettably, however, migrant workers and the rural population are unable to access the good quality public services enjoyed by their urban counterparts. Economic reform has also widened the gap between the rich and the poor. By the middle of the first decade of the 21st century, China has surpassed Zimbabwe as the nation with the most polarised distribution of wealth. Recent data reported by the National Bureau of Statistics of China (NBSC) show that China’s Gini coefficient was 0.465 in 2005, which is higher than the internationally accepted warning level of 0.4 (Wang, 2005). Against this background, this book attempts to examine the extent of Chinese people’s well-being, based on the development of five key policy areas: social security, labour, health, education and housing.

Understanding China and its policy issues Situated in the eastern part of the Asian Continent, China is the world’s third largest country with a land mass of 9,600,000 km2, and it has the world’s biggest population, 1.31 billion. The Han are the major ethnic group, accounting for 91.6% of the total population; the remainder comprises 55 minority ethnic groups including Zhuang, Manchu, Hui, Miao Uygur,Yi, Tujia, Mongolian and Tibetan.The Chinese government has made Putonghua (Mandarin) the medium of instruction in all Chinese schools but a wide range of dialects is spoken even among Han Chinese people, including Cantonese, Shanghainese, Fuzhou, Hokkien, Xiang, Gan, Hakka, and so on. China’s regional governance comprises 23 provinces, 5 autonomous regions, 4 centrally administerd municipalities and 2 special administrative regions (see Table 1.1).The populations of some provinces are similar to, or greater than, some big countries: there are 85 million people in Henan Province in contrast to 81 million in Germany. The population in Sichuan Province (107 million) is nearly twice that of the UK (60 million). Traditionally, China was mainly a farming country, but as a result of urbanisation and industrialisation following economic reform, more Chinese people have moved to live in cities.The proportion of the population living in urban areas rose dramatically from 26.41% to 43.9% from 1990 to 2006 (Ming Pao, 2007). The present Chinese government, the People’s Republic of China (PRC), was established by the CCP on 1 October 1949 following the retreat of the Kuomintang (or the Nationalist Party) to Taiwan. Politically, the CCP is the paramount source of power and its members hold almost all of the top government, police and military positions. The ultimate authority of the CCP rests with members of the Politburo under the leadership of the President of China. The State Council (SC), headed by the Premier, is China’s highest state administrative organ, which can adopt necessary administrative measures and regulations as well as issuing orders (see Chapter Four). As for local government, there are three or four levels of administration (see Figure 1.1). County and township/town governments are the lowest levels 

China’s social policy: background and issues Table 1.1: China’s composition Provinces

Anhui | Fujian | Gansu | Guangdong | Guizhou | Hainan | Hebei | Heilongjiang | Henan | Hubei | Hunan | Jiangsu | Jiangxi | Jilin | Liaoning | Qinghai | Shaanxi | Shandong | Shanxi | Sichuan | Yunnan | Zhejiang | (Taiwan)a

Autonomous regions

Guangxi | Inner Mongolia | Ningxia | Tibet (Xizang) | Xinjiang

Municipalities

Beijing (Peking) | Chongqing | Shanghai | Tianjin

Special administrative regions Hong Kong | Macao Notes Autonomous regions: in China, ‘regional autonomy is practised in areas where people of ethnic minorities live in compact communities’ (China Daily Online, 2005). Compared with provinces, autonomous regions have been granted rights in several areas. The 1984 Law on Regional National Autonomy of the People’s Republic of China states that governments in national autonomous areas ‘shall inherit and carry forward the fine traditions of national cultures’, ‘shall guarantee the freedom of the nationalities in these areas to use and develop their own spoken and written languages and their freedom to preserve or reform their own folkways and customs’ and ‘shall guarantee the freedom of religious belief to citizens of the various nationalities’ (House of Commons, 2000). The practice of these rights, however, is ‘tightly circumscribed by other requirements of the state enshrined in law’ (House of Commons, 2000). Municipalities are directly under the administration of central government. A municipality has the same political, economic and jurisdictional rights as a province. Special administrative regions (SARs) were established to solve the Hong Kong and Macao issues and were based on the concept of ‘one country, two systems’. The SAR is in a pattern within which two completely different social systems (the socialist system and the capitalist system) and ideologies can coexist, and the SAR has autonomous power regulated clearly by laws, including executive, legislative and independent judicial power. Note: a The Taiwan Issue: in the earlier years of separation of mainland China and Taiwan, both China (also called the People’s Republic of China [PRC] or ‘communist China’, ‘red China’, ‘mainland China’) and Taiwan (also called the Republic of China [ROC]) claimed the legal sovereignty over Taiwan. Mainland China continues to claim Taiwan as one of its provinces while Taiwan regards itself as an independent country. Sources: China Daily Online (2005); House of Commons (2000); Chinatoday.com (2007)

of government. There are 2,100 counties and 400 county-status cities as well as 25,600 townships and 19,200 towns. Townships are larger territories and have larger rural populations than towns (Zhong, 2003). Under the township/ town government, there are villagers’ committees that are informal and quasigovernmental administrations. Officials at the level of village administration are not formally employed by the government and are ‘treated and perceived as foot soldiers of the Chinese central and local governments in actually implementing policies’ (Zhong, 2003, p 159).



Social policy in China

Figure 1.1: Governmental administrative structure of China Central government

Autonomous region government

Provincial government

Prefecture administrative office

Autonomous prefecture government

Municipal government of large cities with districts

Autonomous County City District county government government government

Township/town government

Nationality (minority) township/town government

Municipal government of centrally administered cities

SARs (Hong Kong/Macau)

District government

County government

Township/town government

Source: Zhong (2003, p 48)

Issues specific to China The following issues are central to a better understanding of Chinese social policy. The Household Registration System (also known as the Hukou System) In China, a person’s life chances in terms of job opportunities and public service entitlements are determined by the Household Registration System (HRS). The National People’s Congress (NPC) passed Regulations for Household Registration in 1958, giving the government power over people’s geographical mobility. Accordingly, each person is required to register their regular residence, either urban or rural. Prior to the economic reform, the HRS became a welfare entitlement that defined the distribution of most daily necessities such as staple foods, as well as the arrangement of jobs. People were required to apply to the authority when changing their residence.Thus, the HRS ‘functioned as a de facto internal passport mechanism’ (Chan et al, 1999, p 427). However, the economic reform brought about tremendous pressures on the HRS. People living in rural areas are attracted to urban areas because of limited job opportunities in the agricultural sector as well as a better income in industrial areas. Also, economically developed regions need more labour to promote economic development. Against these push and pull factors, the central government has allowed certain relaxations of the HRS – some rural residents are now able to take 

China’s social policy: background and issues

up jobs in urban areas. In particular, local governments have been granted powers to set up criteria for recruiting rural workers to meet local economic needs. Under the HRS, migrants are classified into two types: those who have local resident rights (Hukou migration) and those who are without residency rights (non-Hukou migration) (Chan, 2003, p 112). The latter are treated as a ‘floating population’ or ‘temporary migrants’. In 1988, the size of this floating population reached 70 million (Chan, 2003). Most migrant workers are working in low-paid, ‘dirty’ and dangerous jobs and are excluded from accessing basic public services. Thus, the HRS ‘remains an important watershed in the social economic contours of the migrants’ (Chan et al, 1999, p 428). In today’s China, the division of residency contributes to the division of welfare provision among Chinese citizens, as can be seen in Chapters Five to Nine. Laid-off workers (also known as Xiagang) Since the early 1980s, China’s urban welfare policies changed as a result of the reconstruction of SOEs. It should be stressed that ‘laid-off ’ workers in China are different from ‘unemployed’ workers in western societies. The Chinese term is ‘left-post workers’, which means that workers have left their posts but are waiting for job arrangements, that is, they are not working in the main production lines but are receiving training, engaging in sideline production or taking extended unpaid leave (Gang et al, 1998). A research team from the United Nations Development Programme (UNDP) noted that laid-off workers are ‘technically connected to their enterprises’ so that ‘they were not registered or counted as unemployed’ (Zhiyuan et al, 2000, p 58). Laid-off workers can stay at Reemployment Service Centres (RSCs) set up by their SOEs for up to three years. After that, their employment relationship with their employers will be formally terminated.They are then eligible to apply for unemployment benefits or public assistance. Thus, an RSC is a transitional shelter for workers before they move into the open job market. Administrative decisions and multi-departmental measures Unlike western countries, many social policies in China are not regulated by welfare laws but by directives, decisions, circulars and proposals issued by the SC and its ministries.There is no legal framework clearly defining the welfare duties of local government and the welfare rights of citizens (ILO, 2006, p 38). The World Bank points out that ‘China has not yet enacted a national social security law’ (White, 2006). On the other hand, central government departments can issue circulars with similar power as law. In this way, new social policies are not required to be discussed and approved by the NPC, and the CCP and ministries can easily propose new measures for addressing welfare problems. Because of this practice, local officials may find it difficult to understand and implement new policies at



Social policy in China

short notice, especially as some policies require extra resources.This is one of the causes creating a gap between policy goals and policy implementation. One problem of the Chinese welfare system is that no single department is responsible for a welfare policy. It is not uncommon to see part of a welfare policy being managed by two, three, or even more ministries because of a lack of clear division of labour, as well as the existence of different welfare systems for urban and rural areas. For example, in terms of medical care, the Ministry of Health (MH) provides annual grants for government health institutions and facilities, paying medical insurance for government employees. The Ministry of Labour and Social Security (MLSS) manages the urban health insurance scheme. The provision of medical assistance, however, has been run by the Ministry of Civil Affairs (MCA). At present, ‘no single institution has overall responsibility for coordinating health-related activities. This has made it difficult to formulate coherent development strategies’ (Bloom and Tang, 2004, p 15). Similarly, the management and operation of the National Social Security Fund is jointly formulated by the Ministry of Finance (MF) and the MLSS (National Council for Social Security Fund, 2007). Very often, it is only through joint actions from many departments that a policy can be effectively implemented. For example, the policy on the provision of housing assistance for poor urban households was worked out only through joint action from five government departments: the Ministry of Construction (MC), the MF, the MCA, the Ministry of Land and Resources (MLR) and State Bureau of Taxation (MC et al, 2003). As many welfare issues are related to various government ministries, this existing welfare administration might be unable to effectively address the needs of the poor, who also have to go through complicated bureaucratic processes in trying to sort out their welfare problems. In China, policy variations between local authorities even within the same province are common.There are also obvious divisions of welfare between urban and rural areas.While policy principles are proclaimed by the central government, the implementation of the policy is mainly shaped by local financial conditions as well as the motivation of senior civil servants. Because many welfare measures are not specific and do not have enforceable regulations, some local authorities may ‘ignore a policy or implement it unenthusiastically’ (Bloom and Tang, 2004, p 5). Special welfare terms The meanings of some Chinese welfare terms are different from those of western countries, a common problem in comparative studies.The ‘socialisation of social welfare’ is a common term in many Chinese government policy documents, and it mainly concerns the limited financial power of the state and its need to ask for welfare contributions from multiple sources. The Chinese government refrains from using the word ‘privatisation’ in its policy papers because the term ‘arouses much discomfort’ among leaders and academics (Wong, 1998, p 72). Instead, 10

China’s social policy: background and issues

the ‘socialisation of welfare’ becomes a slogan to mobilise a wide range of social institutions to make contributions to the improvement of public services: ‘all strata of society – local communities, mass organisations, work-units, families and individuals – must be actively involved’ (Wong, 1998, p 71). Also, social security in China is not limited to financial assistance but includes social insurance, social welfare, the special care and placement system, social relief and housing services (Information Office of the State Council, 2004). It is ‘an inclusive concept to cover all types of social arrangements for social care and support’ (Wong, 1998, p 9).

The structure of the book This book is organised into three parts. Part 1 (Chapters One to Four) provides a broad overview. The first section of Chapter Two critically examines current approaches to assessing human well-being.Then, a modified model, based on Chan and Bowpitt’s (2005) work, for assessing the extent of Chinese people’s well-being is presented. Chapter Three gives an account of China’s welfare changes over three decades in the context of economic reforms. Chapter Four describes China’s social policy-making process so that readers can identify key power players and understand the constraints on welfare reforms under the Chinese polity. Part 2 consists of five chapters that explore the development of social security, labour, health, education and housing since the economic reforms of 1978. In particular, key policy documents are presented so that readers can understand policy development in a rapidly changing socioeconomic environment. Also, the modified well-being model discussed in Chapter Two is used to assess the quality of life of welfare recipients in each policy area. The final part of the book, Chapter Ten, provides an overall assessment of the well-being of Chinese welfare recipients, and summarises the achievements and weaknesses in each policy area in relation to human well-being. References Bloom, G. and Tang, S. (2004) Health care transition in urban China, Aldershot: Ashgate. CCPCC (Chinese Communist Party Central Committee) (1981) Resolution on several historical questions since the establishment of the Chinese Communist Party, passed by the Sixth Plenary of the Eleventh Central Committee Meeting, Beijing: CCPCC. Chan, C.K. and Bowpitt, G. (2005) Human dignity and welfare systems, Bristol:The Policy Press. Chan, K.W. (2003) ‘Migration in China in the reform era: characteristics, consequences, and implications’, in A.Y. So (ed) China’s development miracle: Origins, transformations, and challenges, New York, NY: M.E. Sharpe, Inc, pp 11135. 11

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Chan, K.W., Liu, T. and Yang, Y. (1999) ‘Hukou and non-Hukou migrations in China: comparisons and contrasts’, International Journal of Population Geography, vol 5, pp 425-48. China Daily Online (2004) ‘Millions to be laid-off as SOEs streamline’, 8 January (www.chinadaily.com.cn/en/doc/2004-01/08/content_296959.htm). China Daily Online (2005) ‘Ethnicity prized and prospering preface’, 1 March (www.chinadaily.com.cn/english/doc/2005-03/01/content_420608.htm). Chinability.com (2006) ‘GDP growth 1952-2006’ (www.chinability.com/GDP. htm). Chinanews.com (2005) ‘China’s floating population exceeded 10% of total’, 6 January (www.chinanews.cn/news/2004/2005-01-06/772.shtml). Chinatoday.com (2007) ‘Chinese cities and province’ (www.chinatoday.com/city/ a.htm). Deng, X.P. (1978) ‘Emancipate the mind, seek truth from facts and unite as one in looking to the future’, Selected works of Deng Xiaoping, Beijing: People’s Daily Online, 13 December (http://english.peopledaily.com.cn/dengxp/vol2/text/ b1260.html). Deng, X.P. (1979) ‘We can develop a market economy under socialism’, Selected works of Deng Xiaoping, Beijing: People’s Daily Online, 26 November (http:// english.peopledaily.com.cn/dengxp/vol2/text/b1370.html). Deng, X.P. (1984) ‘Building a socialism with a specifically Chinese character’, Selected works of Deng Xiaoping, Beijing: People’s Daily Online, 30 June (http:// english.people.com.cn/dengxp/vol3/text/c1220.html). Deng, X.P. (1987) ‘We shall speed up reform’, Selected works of Deng Xiaoping, Beijing: People’s Daily Online, 12 June (http://english.peopledaily.com.cn/ dengxp/vol3/text/c1760.html). Economist, The (2004) ‘Behind the mask’, 18 March (www.economist.com/ displaystory.cfm?story_id=2495113). Gang, F., Lunati, M.R. and O’Connor, D. (1998) Labour market aspects of state enterprise reform in China, Paris: OECD Development Centre. House of Commons (2000) ‘Note on the legal and constitutional status of minorities/minority areas in the PRC’, Select Committee on Foreign Affairs, House of Commons (www.publications.parliament.uk/pa/cm199900/cmselect/ cmfaff/574/574ap31.htm). Information Office of the State Council (2004) China’s social security and its policy, Beijing: Information Office of the State Council (www.china.org.cn/ e-white/20040907/index.htm). ILO (International Labour Office) (2006) Extending old-age insurance coverage in the People’s Republic of China, Bangkok: Sub-regional Office for East Office, ILO. MC (Ministry of Construction), MF (Ministry of Finance), MCA (Ministry of Civil Affairs), MLR (Ministry of Land and Resources) and State Bureau of Taxation (2003) Administrative measures on low rental housing for the minimum income of urban residents, Document no 120, 31 December, Beijing: MC, MF, MCA, MLR and State Bureau of Taxation. 12

China’s social policy: background and issues

Ming Pao (2007) ‘China urbanisation reaches 43.9%’, 1 March (www.mpinews. com/htm/INews/20070301/ca40735w.htm). National Council for Social Security Fund (2007) Interim measures on the administration of the investment of National Social Security Fund, Beijing: NCSSF (http://www.ssf.gov.cn/enweb/NewsInfo.asp?NewsId=537). Wang, X. (2005) ‘China’s wealth inequality coefficient surpasses international warning level’, The Epoch Times, 20 July (www.theepochtimes.com/news/ 5-7-20/30448.html). White, Y. (2006) The promise of a better tomorrow: China’s pension system, Hong Kong: China Law and Practice (www.chinalawandpractice.com/default. asp?page=18). Wong, L. (1998) Marginalization and social welfare in China, London: Routledge. Xinhua News Agency (2005) ‘China makes remarkable achievement in foreign trade this year: minister’, 23 December (http://news.xinhuanet.com/ english/2005-12/23/content_3962147.htm). Zhang, H. (2006) ‘Pat on the back: an analysis of the WTO’s first trade policy review of China’, Beijing Review. Zhiyuan, C.,Yuanzhu, D., Zengke, H., Angang, H., Shi, L., Naughton, B., Riskin, C. and Shaoguang,W. (2000) China human development report 1999:Transition and the state, New York, NY: Oxford University Press. Zhong,Y. (2003) Local government and politics in china: Challenges from below, New York, NY: M.E. Sharpe.

13

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two

Social policy and well-being Key issues Social policy directly affects the status, resources and life chances of welfare recipients.An effectiveness assessment framework is essential to an accurate and comprehensive evaluation of the impact of social policies on citizens’ well-being. However, there is no consensus on the concept of well-being or its measurement. Thus, this chapter examines: • contemporary approaches to assessing ‘well-being’, including Gross Domestic Product, Human Development Index, subjective well-being, social quality and Phillips’ quality of life approach; • human nature and its relationship to Chan and Bowpitt’s human dignity framework; and • the use of a modified version of Chan and Bowpitt’s human dignity framework for assessing the impact of China’s welfare reforms on the well-being of Chinese people.

Introduction Human well-being has always been a concern of academics, politicians, social activists and the general public.The material on well-being is massive and diverse, and the term ‘well-being’ has ‘many usages, meanings and conceptions’ (Gasper, 2004, p 2). Because conceptualising and measuring quality of life outcomes are still controversial (Bowling, 2005), there is still no single generally accepted method for measuring quality of life (Kind, 1990). This lack of a consensus on human well-being might provide opportunities for unscrupulous politicians selectively to adopt a measure of well-being at the expense of disadvantaged groups. More importantly, people’s quality of life will suffer if dominant approaches cannot adequately address the physical, social, economic and political needs of human beings.Therefore, this chapter firstly reviews some key approaches to human wellbeing and then proposes an alternative framework for assessing quality of life.

Constraints of GDP and alternative measurements Economics is a key part of modern life and national development has always been linked with the level of national income or GDP. In China, as with nearly every other industrialised country, the GDP growth rate has been a dominant criterion 15

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and, recently, the ‘blind pursuit of major GDP indicators’ has been criticised for creating negative effects on society (China Internet Information Centre, 2006). Cobb et al (1995, p 6) remind us of several weaknesses of GDP for measuring human well-being: firstly, GDP does not take into account valuable human activities such as unpaid work in households and voluntary work in the community; secondly, it includes expenditure that diminishes as well as expands welfare; and, thirdly, it takes no account of the depletion or degradation of natural resources.Thus GDP identifies well-being with a narrow set of economic indicators rather than with a broader conception of quality of life (Romanow, 2005, p 5). Because of the constraints of using GDP as a measure, some governments and international organisations have created new tools for measuring well-being. For example, the Bhutanese government attracted a lot of attention for its concept of Gross National Happiness (GNH), whereby the ultimate objective is to promote the well-being of its citizens. The four pillars of GNH are: the promotion of equitable and sustainable socioeconomic development; preservation and promotion of cultural values; conservation of the natural environment; and establishment of good governance (Kavanagh, 2004). Another attempt to address the weaknesses of GDP in assessing human wellbeing is the creation of the Genuine Progress Indicator (GPI), which aims to measure true progress of human society by giving a ‘statement of net benefit’ that includes the values of both market and non-market activities, taking the depletion of natural and social capital into account (Cobb et al, 1995, p 8). In short, GPI takes ‘a holistic, integrated and living-capital-systems approach’ by examining life in social, political, economic and environmental aspects (Anielski, 2001, p 1). Both of these constructs are in their early stages of development. The most well-established and widely used alternative, however, is the Human Development Index (HDI), developed by the UNDP as ‘a powerful alternative to income as a summary measure of human well-being’ (UNDP, 2005, p 214).

Human Development Index and its limitations The HDI is a summary measure of human development that attempts to quantify a country’s progress on three aspects: … a long and healthy life, as measured by life expectancy at birth; knowledge, as measured by the adult literacy rate and the combined gross enrolment rate for primary, secondary and tertiary schools; and a decent standard of living, as measured by GDP per capita in purchasing power parity (PPP) US dollars. (UNDP, 2005, p 214) As a composite index, the HDI provides a simple and clear picture of the quality of life in a wide range of countries. However, it has been subjected to many criticisms because of: the limited range of its indices (Veenhoven, 2002); the apparently arbitrary weighting of its three components (Noll, 2002); its lack of a 16

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theoretical framework (Cobb, 2000); its insensitivity to developed industrialised nations (England, 1998); its heavy reliance on education and health at the expense of other well-being attributes (Fukuda-Parr, 2001); and its over-reliance on the discredited GDP measure and lack of sensitivity to inequality within countries (Phillips, 2006). Therefore, the HDI can only partly and inadequately reveal a country’s living conditions. The UNDP is also aware of the weaknesses of the HDI and reminds us that ‘it is important to remember that the concept of human development is much broader and more complex than any summary measure can capture’ (UNDP, 2004, p 142). The constraints of composite indices suggest that alternative measurements need to be developed in order to provide an accurate account of human development in the real world.A major challenge lies in formulating a framework for including all aspects of well-being and to develop meaningful indicators. One central aspect of well-being that has not yet been explored relates to our own subjective judgements about the quality of our lives.

Role of subjective well-being This type of judgement about our subjective well-being concerns ‘people’s evaluations of their lives – evaluations that are both affective and cognitive’ (Diener, 2000, p 34). Obviously any holistic indicator of a person’s quality of life or well-being needs to take account of their own appraisal of how good their life is, but subjective well-being has been subjected to several weighty criticisms.The most fundamental one is ‘false consciousness’ in which the real needs of citizens have been suppressed by the hegemony of dominant groups. Classic examples are the ‘happy poor’, ‘happy slave’ and the ‘happy oppressed woman’ (Phillips, 2006, p 35). Also,Veenhoven (2002, p 36) points out that subjective appraisals have been considered to be ‘unstable, incomparable and unintelligible’. Despite these drawbacks, subjective well-being can still play a significant role in assessing quality of life. Firstly, the creation of ‘false consciousness’ depends on the extent of political control by a dominant group.Taking China as an example, one may argue that the public’s perceptions of politics during the time of the Cultural Revolution were predominantly shaped by the central government under the strong leadership of Chairman Mao and his followers. However, this type of political control has been greatly reduced in recent years because of the central government’s changing ideologies, the new balance of power among new leaders and the increasing influence of local authorities. Academics and journalists are now able to openly criticise the privatisation of public services and the problem of inequalities. Mass media such as newspapers and television documentary programmes have also attacked the inefficiency and corruption of government officials. In addition, the present government has been more critical of its own policies by publishing more even-handed reports on the negative and positive outcomes of public policies. All these changes were inconceivable at the 17

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time of the Cultural Revolution. Therefore, the public’s interpretation of their well-being will be problematic only in a society where freedom of expression has been brutally suppressed and all means of communication are controlled by a government. Unless there is solid evidence to prove the existence of this type of government, the public’s judgements on their quality of life should be seriously studied. The study of subjective well-being is important because the public are the primary target of social services as well as the most reliable source for policy evaluation. For example, a welfare officer with professional qualifications cannot guarantee the provision of good services. Instead, the experiences of welfare recipients can evaluate the professional skills and work commitments of welfare bureaucrats, identifying the barriers that have prevented them from accessing social welfare.Thus, the study of subjective well-being can, to some extent, reveal the inadequacy of public policies for achieving social inclusion. Therefore, in examining well-being we have to take both subjective evaluations and objective conditions into account. In this way, a clearer picture of people’s experiences and a society’s economic conditions can be obtained. After analysing the functions of subjective indicators,Veenhoven (2002, p 42) concludes that researchers need to use both objective and subjective indicators because ‘in the policy mix there is always a combination of material and mental matters’ and objective indicators only ‘tell you half the story’. Nevertheless, subjective well-being is limited by the level of expectations that people are socialised into and therefore is at best unidimensional.

Social quality and Phillips’ quality of life approach Social quality is an attempt to bring together subjective and objective indicators within an overarching framework. It is defined as: ‘the extent to which citizens are able to participate in the social and economic life of their communities under conditions which enhance their well-being and individual potential’ (Beck et al, 1997, p 3). The social quality of a collectivity is not just the accumulation of the life quality of each of its individual members: it incorporates collective as well as individual attributes and is holistic in its orientation. A society with high social quality is envisaged by its promulgators as one where: ‘citizens must have access to an acceptable level of economic security and of social inclusion, live in cohesive communities, and be empowered to develop their full potential’ (Walker, 1998, p 109). Social quality has four elements: • Socioeconomic security is the extent to which people have sufficient resources over time and has two aspects: (i) welfare provisions that guarantee primary existential security, basic security of daily life and internal freedom, security and justice; and (ii) enhancing people’s life chances.

18

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• Social inclusion is the extent to which people have access to institutions and social relations and is connected with the principles of equality and equity and their structural causes. • Social cohesion is the nature of social relations based on shared identities, values and norms, including trust, reciprocity and altruism. • Social empowerment is the extent to which the personal capabilities of individual people and their ability to act are enhanced by social relations and has three dimensions: (i) personal – leading to self-respect and self-development; (ii) social relationships; and (iii) political. In principle social quality is a theoretically robust and holistic approach to wellbeing but its empirical and practical operationalisation is not yet developed (Noll, 2002; Huxley and Thornycroft, 2003). An alternative, more loosely theoretically articulated approach that is easier to operationalise has been taken by Phillips (2006). Phillips’ approach to quality of life encompasses both individual and collective attributes, but he takes a wider perspective than the social quality proponents, drawing on all the major quality of life traditions. At the individual level he starts with the universally agreed goal of avoiding pain and harm. Once these essential needs are met, Phillips incorporates Sen’s capabilities approach and introduces a second core attribute related to autonomy of agency. His next three core attributes are: subjective well-being; flourishing in the Aristotelian ‘eudaimonic’ sense of leading a good life guided by the tenets of reason; and, finally, social inclusion, based on consensual criteria for meeting social needs and on social citizenship. Here citizenship provides a bridge to five collective core attributes of quality of life. The first relates to the integrity of the core institutional order of society, that is, ‘civic responsibility, cultural norms and social rules’ (World Bank, 1998, p i). The second comprises high levels and a wide-ranging distribution of what can be called ‘non-ideological’ integrative norms and values, including trust, reciprocity and other-regarding behaviour. The third is a wide range, high level and high density of network links and bridging ties throughout society. Taken together these indicate both a high degree of social integration and of tolerance and respect for difference. The fourth collective core attribute is sustainability that introduces a global focus and requires the transmission of well-being from one generation to another. The final collective core attribute returns to integrative norms and values, but in this case specifically ideological ones, ranging from fairness, equity and equality of opportunity, through to more full-blooded conceptualisations of equality of outcome. At their most modest level, ideological norms associated with fairness, such as the golden rule of treating others as you would expect them to treat you, will gain virtually universal acceptance. Also most people would probably countenance the meeting of the most basic of needs of fellow citizens but not necessarily meeting them as a social right.

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These individual and collective attributes come together in the following definition: Quality of life requires that people’s basic and social needs are met and that they have the autonomy to choose to enjoy life, to flourish and to participate as citizens in a society with high levels of civic integration, social connectivity, trust and other integrative norms including at least fairness and equity, all within a physically and socially sustainable global environment. (Phillips, 2006, p 242)

Human nature and well-being All of the above characterisations of well-being have at least implicit assumptions about human nature, with the emphasis being materialist in GDP, existentialist in the HDI, and hedonistic in subjective well-being. Social quality is more explicit, emphasising individual self-realisation through the formation of collective identities (Beck et al, 1997), and Phillips’ quality of life perspective is embedded in Aristotelian notions of rationality and fruitfulness at an individual level, as well as relating to collective needs and social norms (Phillips, 2006). Nevertheless it is at least arguable that all of these perspectives start off from an assumption about what constitutes well-being. The theoretical perspective taken in this book, however, starts from the other end: from an account of human nature, taking account of both rationality and sociability, and then proceeds to notions of well-being by identifying human needs. By studying human needs, Doyal and Gough (1991) conclude that the universal goal of humans is the avoidance of pain.They propose that ‘autonomy and health’ are two primary human needs that should be met through 10 intermediate needs, including: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Nutritional food and clean water Protective housing A non-hazardous physical environment Safe birth control and childbearing Appropriate healthcare A secure childhood Significant primary relationships Physical security Economic security Appropriate education

According to Phillips (2006, p 90), their theory is ‘the most important and powerful of the needs-based quality of life constructs. It is robust, clear, forceful and elegant in its formulation’. It seems that Doyal and Gough’s perception of human needs follows European philosophical tradition by treating human beings’ 20

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actions as being based on ‘a rational principle’ (Aristotle, 2007d, p 6). According to Megone (1990), for Aristotle ‘the capacity to reason is important to the quality of life’ (p 38) and ‘the good life for man will be a fully rational active life’ (p 37). Human autonomy, as one of the primary human needs in Doyal and Gough’s theory, reflects this European intellectual tradition. On the other hand, Chinese philosophical tradition based on Confucianism puts much emphasis on the social nature of humans and their duties to each other. As Confucius (2004, p 4) stresses, ‘A young man should serve his parents at home and be respectful to elders outside his house. He should be earnest and truthful, loving all, but become intimate with humaneness’. This is because the Confucian school sees human beings as living in interlocking social networks in which every one is expected to fulfil their responsibilities. Bringing these two philosophical strands together, Chan and Bowpitt (2005) argue that rationality and sociability are fundamental to human development. Rationality concerns people’s decision making and their choices in pursuing personal and social objectives, while sociability is about interdependent social networks and supportive social relationships through which humans satisfy physical and psychological needs as well as developing rational capacities.Therefore,‘to be human is to utilise innate human capacities for achieving autonomy and mutuality’ (Chan and Bowpitt, 2005, p 22). In short, Chan and Bowpitt see human dignity as human development, that is, the fulfilment of all citizens’ rationality and sociability, and they propose a framework for assessing the dignity of unemployed people in China, the UK, Sweden and Hong Kong (see Table 2.1). Chan and Bowpitt’s framework reveals the limitations of economic criteria in assessing human dignity, giving ‘a thorough, detailed analysis of welfare systems from an original perspective’ (Hall, 2006, p 1064). Their work provides ‘a brave starting point, and a clear impetus’ for exploring the concept of human dignity (Bennett, 2007, p 91). The use of human dignity to evaluate the performance of a welfare state is ‘highly relevant and certainly worth following’ (van Berkel, 2007, p 346). However, there are several areas that need to be addressed so that the framework can be more appropriate for examining the well-being of human beings. The first issue is whether Chan and Bowpitt’s framework can be applied to a wide range of services with different types of welfare recipients. The framework was originally developed for unemployed social security recipients and it ‘tells us little about the experiences of a young person with a profound learning disability or an older person with dementia, or, indeed, how governments should promote their human dignity’ (Hall, 2006, p 1063). Similarly, Bennett (2007, p 91) criticises Chan and Bowpitt’s human dignity model as being ‘inevitably limited largely to the treatment of unemployed people in benefits and employment services’.Thus, the validity of the framework for assessing the extent of the well-being of welfare recipients in a society needs to be tested in different types of welfare provisions, not only services for unemployed workers.

21

Social policy in China Table 2.1: Key areas for achieving autonomy and mutuality Achieving Policy objectives

Areas of comparison

Autonomy

Mutuality

Financial assistance for buying daily Physical and psychological well- necessities for maintaining physical being health

3

3

Healthcare for physical functioning

3

3

Psychological support for mental health

3

3

Training of welfare workers and the administration of a welfare system that deals with the psychological needs of recipients

3

3

Fulfilling caring duties

Support for parents to fulfil duties of care in health, education and social activities

3

Social integration

Support for recipients to participate in social and cultural life

3

Welfare images of recipients presented by the state

3

Learning

Equal value

Selfdetermination

Government’s ideas about human learning

3

Support and opportunities for recipients’ learning and developing their skills

3

Government attitudes towards the value of different social groups

3

3

Special programmes for meeting special needs of disadvantaged groups

3

3

Equal treatment in terms of age, gender, ‘race’ or class

3

3

Opportunities and extent to which recipients are able to participate in policy making

3

The extent to which receiving benefits promotes selfdetermination

3

Source: Chan and Bowpitt (2005, p 29)

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The second issue is related to the first point and is the criteria used for comparisons. This is because one criterion will be more sensitive than another criterion on assessing the effectiveness of a policy on meeting human needs.Also, some criteria used by Chan and Bowpitt for studying unemployed recipients might not have sufficient data for assessing other social services. For example, data about the psychological conditions of public housing recipients is hard to obtain because of a lack of literature. Also, the provision of housing has a limited impact on recipients’ learning. Nevertheless, by applying the framework to other policy areas, the effectiveness of a criterion for assessing a welfare policy can be clearly understood. More importantly, Chan and Bowpitt’s (2005) model does not address the relationship between political institutions and the well-being of citizens. By treating human beings as social beings and as ‘a collective group’, we might find that human organisations, especially types of governance, directly affect the wellbeing of all individuals. In Aristotle’s words, ‘the state is a creation of nature, and that man is by nature a political animal’ (Aristotle, 2007a, p 2). Both Confucius and Aristotle argued strongly that a just human institution was crucial to quality of life. According to Confucius, a just polity has several features. Firstly, it is the duty of a government to provide basic necessities and protection for citizens. Also, rulers should be trusted by the public (Confucius, 2004). Secondly, a just government should be governed by virtuous rulers (Confucius, 2004). Confucius stresses:‘If you put the honest in positions of power and discard the dishonest, you will force the dishonest to become honest’ (Confucius, 2004, pp 45-6). In addition, rulers and ministers should respect their own roles, fulfilling their own duties. Thus, public servants are expected to be honest people who respect their assigned duties. Thirdly, a just polity should provide education for the public. According to Confucius (2004, p 44), ‘“to govern” means to rectify. If you were to lead the people with correctness, who would not be rectified?’. As he emphasised: a ruler should ‘enrich’ and ‘educate’ his fellow citizens (2004, p 48). This implies that a state needs to cultivate positive moral values and also create a good culture that helps citizens to lead a fulfilling life. Fourthly, a just polity should allow the public to express their views. Confucius pointed out: ‘When the government is just, you may speak boldly and act boldly; when you have an unjust government, you may act boldly, but be careful what you say’ (Confucius, 2004, p 51).Thus, citizens are able to voice their concerns openly in a just society. Similarly, Aristotle believed that in a good society ‘every man, whoever he is, can act best and live happily’ (Aristotle, 2007b, p 2).The state also has to ‘preserve harmony and good order’ (Aristotle, 2007c, p 5). Fundamentally, according to Aristotle, a state should pursue virtue because this is the ‘best life for individuals and states’ (Aristotle, 2007b, p 2). In particular, justice is the greatest of virtues and acts like cement that brings people together (Aristotle, 2007a, p 3). Thus, both Confucius and Aristotle believed the state was fundamental to human well-being. They argued that rulers should pursue virtue and justice as 23

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well as provide daily necessities for people. In order to achieve these objectives, state administrators and civil servants should love virtue and be capable of fulfilling their duties. All of these are basic requirements of a just polity, which can be used for assessing the well-being of welfare recipients. Thus, in using Chan and Bowpitt’s (2005) framework for assessing human wellbeing, we need to include more policy areas, address the limitations of criteria for evaluating a welfare policy and emphasise the role of a just polity. In the light of these issues, this book examines the extent of human well-being based on social security, labour policy, health, education and housing.Also, a modified framework as a tool of evaluation will include the following criteria: 1. 2. 3. 4. 5. 6. 7.

Physical and psychological well-being Social integration Fulfilment of caring duties Human learning and development Equal value Self-determination Just polity

The final area, of a just polity, is additional to Chan and Bowpitt’s criteria. In short, this more comprehensive view on quality of life addresses the life experiences of different types of welfare recipients as well as the relationships between citizens and their political governance.

Conclusion The quality of life of citizens has been assessed by different approaches with different conclusions in this chapter. Thus, an assessment tool should be based on our understanding of human beings so that our needs can be effectively evaluated. In this regard, we have modified Chan and Bowpitt’s (2005) framework by including ‘just polity’ as an evaluating criterion. In this way, the relationship between citizens and their political institutions can be better understood. Also, a fair and objective assessment should include the life conditions of different types of welfare recipients. By addressing this issue, our study examines quality of life in five welfare areas: social security, labour policy, health, education and housing. In short, it is only through a framework oriented to both human nature and human needs and the inclusion of various types of welfare experiences that the quality of life of citizens can be effectively appraised. References Anielski, M. (2001) ‘Making money or growing poorer? Measuring the genuine health of nations’, The Shift, vol 4, no 1, pp 1-3.

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Aristotle (2007a) Politics: Book one, translated by B. Jowett, Web Atomics, Massachusetts Institute of Technology (http://classics.mit.edu/Aristotle/ politics.1.one.html). Aristotle (2007b) Politics: Book seven, translated by B. Jowett, Web Atomics, Massachusetts Institute of Technology (http://classics.mit.edu/Aristotle/ politics.7.seven.html). Aristotle (2007c) Politics: Book six, translated by B. Jowett, Web Atomics, Massachusetts Institute of Technology (http://classics.mit.edu/Aristotle/ politics.6.six.html). Aristotle (2007d) Nicomachean ethics, translated by W.D. Ross, Web Atomics, Massachusetts Institute of Technology (http://classics.mit.edu/Aristotle/ nicomachaen.mb.txt). Beck,W., van der Maesen, L. and Walker,A. (eds) (1997) The social quality of Europe, The Hague: Kluwer Law International. Bennett, F. (2007) ‘Book review: human dignity and welfare systems’, Journal of European Social Policy, vol 17, no 1, p 91. Bowling, A. (2005) Measuring health: A review of quality of life measurement scales, Maidenhead: Open University Press. Chan, C.K. and Bowpitt, G. (2005) Human dignity and welfare systems, Bristol:The Policy Press. China Internet Information Centre (2006) ‘New criteria for officials’, 17 May (www. china.org.cn/english/GS-e/168608.htm). Cobb, C. (2000) Measurement tools and the quality of life, San Francisco, CA: Redefining Progress. Cobb, C., Halstead, T. and Rowe, J. (1995) The genuine progress indicator: Summary of data and methodology, Oakland, CA: Redefining Progress. Confucius (2004) The analects of Confucius, translated by C. Muller, Tokyo: Toyo Gakuen University (www.hm.tyg.jp/~acmuller/contao/analects.html). Diener, E. (2000) ‘Subjective well-being: the science of happiness and a proposal for a national index’, American Psychologist, vol 55, no 1, pp 34-43. Doyal, L. and Gough, I. (1991) A theory of human need, London: Macmillan. England, R.W. (1998) ‘Measurement of social well-being: alternatives to gross domestic product’, Ecological Economics, vol 25, pp 89-103. Fukuda-Parr, S. (2001) Rescuing the human development concept from the HDI: Reflections on a new agenda, NewYork, NY: United Nations Human Development Programme (http://hdr.undp.org/docs/training/oxford/readings/fukudaparr_Rescuing.pdf). Gasper, D. (2004) Human well-being: Concepts and conceptualisations, Helsinki: United Nations University (www.wider.unu.edu/publications/dps/dps2004/dp2004006.pdf). Hall, C. (2006) ‘Book review: human dignity and welfare systems’, British Journal of Social Work, vol 36, no 6, pp 1063-4. Huxley, P. and Thornycroft, G. (2003) ‘Social inclusion, social quality and mental illness’, British Journal of Psychiatry, vol 182, pp 289-90. 25

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Kavanagh, P. (2004) ‘Happiness and progress: measuring human well-being in Bhutan and Canada’, Reports, 17 June (www.idrc.ca/en/ev-61364-201-1DO_TOPIC.html). Kind, P. (1990) ‘Issues in the design and construction of a quality of life measure’, in S. Baldwin, C. Godfrey and C. Propper (eds) Quality of life: Perspectives and policies, London: Routledge, pp 63-71. Megone, C. (1990) ‘The quality of life: starting from Aristotle’, in S. Baldwin, C. Godfrey and C. Propper (eds) Quality of life: Perspectives and policies, London: Routledge, pp 28-41. Noll, H.H. (2002) Social indicators and quality of life research: Background, achievements and current trends, Koln: German Social Science Infrastructure Services (www. social-science-gesis.de/en/social_monitoring/social_indicators/Publications/ pdf-files/isscnoll.pdf). Phillips, D. (2006) Quality of life: Concept, policy and practice, London: Routledge. Romanow, R.J. (2005) ‘The Canadian Index of Well-being: taking measure of the things that count’, National Conference on Mission in Movement, 6 May, Toronto. UNDP (United Nations Development Programme) (2004) Human development report 2004: Cultural liberty in today’s diverse world, New York, NY: UNDP. UNDP (2005) Human development report 2005, New York, NY: UNDP. van Berkel, R. (2007) ‘Book review: human dignity and welfare systems’, Journal of Social Policy, vol 36, pp 343-4. Veenhoven, R. (2002) ‘Why social policy needs subjective indicators’, Social Indicators Research, vol 58, pp 33-45. Walker, A. (1998) ‘The Amsterdam declaration on the social quality of Europe’, European Journal of Social Work, vol 1, pp 109-11. World Bank (1998) The initiative on defining, monitoring and measuring social capital: Overview and program description, New York, NY: World Bank.

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Social policy in the context of economic reforms

three

Social policy in the context of economic reforms Key issues The development of China’s social policy is a response to its post-1978 economic reforms. Economic reforms have destroyed the traditional Chinese socialist welfare model based on communes and work units. As a consequence, the Chinese government has had to establish a welfare system which is compatible with the operation of its mixed economy. Thus, this chapter studies: • the welfare functions of communes and work units before China’s economic reforms; • new economic ideologies and practices during the first stage of reforms: 1978-92; • key economic ideologies and measures in the second reform stage after 1993 and their impact on the employment and benefits of workers; and • the main welfare initiatives adopted by the Chinese government during the two stages of economic reforms.

Introduction China’s economic reforms were driven by the desire of Chinese leaders to tackle poor public living conditions and to enhance the political legitimacy of the CCP. Although Chinese leaders reintroduced the market to China’s socialist system, they lacked a blueprint to change its inefficient Soviet-style socialist economic system (Chow, 1999). As a result, China’s economic reforms have been a process of gradual development rather than big changes. The Chinese government’s approach, according to Deng Xiaoping, is ‘crossing the river by groping for stones’ (quoted in Qian and Wu, 2000, p 1). However, the impact of the slow economic reforms have almost completely destroyed China’s socialist welfare system centred on the welfare activities of communes and state-owned enterprises. In order to compensate for this and to address unmet social needs, the Chinese government has attempted to construct a new welfare system that is compatible with its socialist market economy. Against this background, this chapter aims to present a wider picture of the development of China’s social policy in the context of economic reforms.

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The pre-reform economic system Before the economic reforms, China practised communism, adopting a closed door policy. One of the most dramatic changes following the establishment of the PRC was the implementation of land reform in the early 1950s through which 117 million acres of arable land were redistributed to 300 million farmers. Large businesses were also nationalised (Zhiyuan et al, 2000). Thus, in the early years of the PRC, central government tried to build a more equal society through the nationalisation of private property. Politically, all power was in the hands of the CCP, which formed a highly centralised decision-making structure (Zhiyuan et al, 2000, p 20). By implementing socialism, the Chinese government set up a central planning economic system based on the model of the Soviet Union. Under the leadership of Mao Zedong, the state was hostile to the market and to capitalists, using every means at its disposal to get rid of them. Consequently, all private enterprises and most free market activity were eliminated (Zhiyuan et al, 2000, p 20). In relation to rural areas, the central government passed the Resolution on the Establishment of the People’s Communes in Rural Areas in 1958, which stated that: The people’s communes are to be established in which farming, forestry, animal husbandry, sideline production, and fisheries will be developed in an all-round way; and in which the workers, peasants, soldiers, students, and businessmen will help each other and work together. (quoted in Qi, 2000, p 15) A commune was ‘a highly centralised unified management and egalitarian distribution system, which distributed daily necessities to its members’ (Qi, 2000, p 15). It provided jobs for all, with earned income based on a work points system (Gang et al, 1998). As a result of Mao Zedong’s political mobilisation, a total of 26,000 communes were formed by the end of 1958.The central government also promoted the development of township and village enterprises, pushing them to focus their production on five small industries: cement, chemical fertilisers, machinery, power, and iron and steel. Economic activities in urban areas took place around SOEs. Under a command economy, the State Planning Commission was responsible for financial and project planning. Using the concept of ‘social ration’, the state acted as a manager, allocating resources among sectors and enterprises (Zhiyuan et al, 2000, p 20). Being directly supervised by one or more government departments at national and local levels, the main duty of an SOE was to implement central economic plans. All prices were fixed by the government, which was also responsible for the profits and losses of SOEs. A socialist-oriented welfare system was based on these economic relations, and people were guaranteed a lifetime of employment because work units were not allowed to go bankrupt (Gang et al, 1998).To urban workers, work units were similar to a small society incorporating a mini-welfare 28

Social policy in the context of economic reforms

state (Leung and Nann, 1995, p 57) by providing everything from basic wages to housing, pensions and childcare (Gang et al, 1998, p 31). In short, welfare needs were met by communes in rural areas and by work units in cities. Social welfare provisions were based on the socialist ideology of collectivism and equality. However, this kind of welfare system ‘subjected the worker to the control of the state authority’ (Leung and Nann, 1995, p 57). Unfortunately, the collective welfare system suffered low productivity and only provided a low public standard of living. Mao’s regime had left the nation backward and impoverished (Wong, 1998, p 63). For example, the annual per capita income in 1977 was only ¥260 for urban workers and ¥114 for rural peasants (Chow, 1987).Thus, for nearly three decades of communist rule China remained a poor country with its economic development seriously unbalanced – between major economic sectors, between production relations and productive forces, and between consumption and accumulation (Nolan and Ash, 1995, pp 983-4). In the light of public frustrations and shame about the CCP’s economic record, Chinese leaders were eager to try alternative means to increase economic productivity. In particular, following the painful experience of the Cultural Revolution, prosperity could enhance the political legitimacy of the CCP.

Welfare changes and economic reforms China’s economic reforms started in the countryside through the introduction of the Household Responsibility System. Originally, the Household Responsibility System was initiated not by government officials but by farmers in Anhui Province who had experienced economic hardship under the commune system. They secretly allocated collective farmland to individual families who were responsible for cultivating their own land. Leading farmers who violated the practice of communes had prepared themselves for punishment by the government. However, the leader of Anhui Province decided to permit this practice in 1978 after seeing its benefits. As a result of this new arrangement, wheat production in the province tripled, reaching 20.1 million jin (1 jin = 500 grams) (Liu, 1992). This system was later adopted by central government as a rural economic strategy. Accordingly, farmers were allocated individual plots. After fulfilling the government’s predetermined quota, they could then sell their surpluses in the open market. In 1983, the Household Responsibility System was practised by 98% of production brigades, which had been collective production organisations under the commune system, and agricultural production subsequently had an annual growth rate of 7.9% between 1979 and 1984 (Wang, 1994).The success in agriculture reform boosted the confidence of CCP leaders about China’s future economic changes. Economic reforms in other industries, however, were far more complicated than in the agricultural sector. Since the 1980s the Chinese government tried different approaches, gradually building up today’s modern economic system. In the earlier stage of reform, from 1978 to 1992, the focus of China’s urban economic policy 29

Social policy in China

was to enhance the productivity of SOEs by giving more autonomy to SOE managers and enhancing work motivation. After 1993 its policy was to transform SOEs into modern business enterprises.

Economic reforms, 1978-92 The Chinese government regards Deng Xiaoping as the chief architect for building a ‘socialist society with Chinese characteristics’ (CCPCC, 1984). In 1984, the Chinese Communist Party Central Committee (CCPCC) published a document, the Decisions on the reform of the economic system, which changed some basic elements of China’s socialist economy. Firstly, it pointed out that a commodity-based economy could operate under socialism.This meant that the Chinese government could develop a planned commodity economy in accordance with its economic strategies, and that the ownership of economic organisations would still mostly be in the hands of the state. However, central government recognised that certain economic activities, especially some agricultural products, daily necessities and personal services, could be provided by individuals and families, who could play a supplementary role in a socialist system. Secondly, the document suggested that SOEs under ‘socialism with Chinese characteristics’ should be efficient and energetic. It argued that the ownership and management of SOEs could be separated. Accordingly, an SOE would be granted considerable decision-making power, becoming relatively autonomous although remaining an agent of central government. Under new arrangements, an SOE would be expected to pay taxes, recruit and reward staff according to their performance, retain surpluses and be responsible for losses. In response to these changes, local and central governments needed to change their previous directive role to that of guidance. This meant that the state would stress macro-economic regulation by formulating overall social and economic development directions and strategies, promoting technical and skills development, and coordinating the economic activities of different regions, departments and enterprises. Under the new economic order, the CCP leaders accepted the necessity of competition and unequal rewards because these activities could stimulate the motivation of enterprises and individuals to improve products and achieve success.The document stressed,‘the policy of encouraging some sections of people to get rich first is the necessary road of bringing the whole society to prosperity, which is compatible with the logic of the development of a socialist society’ (CCPCC, 1984). In this period, Chinese leaders focused on changing management and enhancing productivity and firmly upheld the baseline of economic reforms – the retention of state ownership and the dominance of state enterprises. Several initiatives were launched within this favourable political environment, such as the profit retention plan and the contract scheme (Dodds, 1996). According to the profit retention plan, an SOE did not need to pass on all its profits to the government but could keep some. Also, an SOE was allowed to use its retained

30

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earnings to issue bonuses and benefits to staff.The objective of these rewards was to enhance the work motivation and productivity of managers and workers. Seeing the positive consequences of the Household Responsibility System for the rural economy, the central government applied the Contract Responsibility System (CRS) to industry. In 1988, the SC issued an Ordinance on the contracted management of state-owned enterprises (tentative) that stated the rights and duties of both government and the contracted party. The main objectives of the CRS were to promote the autonomy of managers, ‘enhance the energy of SOEs and promote their economic efficiency’ (SC, 1988a). Later, a ‘tax-for-profit’ system was launched, replacing the negotiated profit remission between enterprises and their supervisory units. In this way, central government could obtain stable revenue while the rights of an SOE to dispose of its profits were strengthened. In short, in the first stage of economic reforms, the Chinese government attempted not to change the ownership of SOEs but to tackle the problems of management and work motivation.The state was still the sole owner of enterprises, being responsible for their losses. Unfortunately, only tackling management issues could not solve the low productivity of SOEs: about 10-15% of contracted enterprises still incurred losses (Liu, 1992).This meant that the government could not pass business risks on to SOEs; their autonomy was still limited because of having to rely on government departments for investments, loans and materials. Liu (1992, p 83) concluded: ‘There is still a long way to go before enterprises can become truly independent business entities that are responsible for their profits and losses and are capable of self-development and improvement’. The first stage of reform shows that more structural changes were required in order to reduce the financial responsibility of the government and to enhance the autonomy of enterprises. In the late 1980s, Chinese leaders realised the importance of a bigger private sector to China’s modernisation. The SC published a Temporary ordinance on China’s private enterprises by defining the rights and duties of private companies (SC, 1988b). According to the ordinance, a ‘private enterprise’ meant a profitmaking organisation with more than eight employees, with its assets belonging to individuals. This ordinance was a major ideological breakthrough because it legalised the status of the private sector, providing legal protection for private property (SC, 1988b). After this relaxation of private ownership, between 1989 and 1999 non-government enterprises grew rapidly from 90,581 to 1,508,857 (Kanamori and Zhao, 2004). From 1988 to 1997, the share of the gross output value of industry for non-public-owned enterprises increased from 7% to 33%, while the share of state-owned enterprises dropped from 57% to 27% (Li, 2000). However, new employment problems emerged as a result of the introduction of the private sector and changes to the operation of SOEs. In 1980, the government encouraged self-employment and job seeking in the labour market. This meant that ‘the government would no longer take full responsibility for providing a job for everyone and the job market was to be developed’ (Gang et al, 1998, p 31). In 1986, the SC issued a directive granting power to SOEs to use workers in the form of an ‘employment contract’.This measure put an end to the notion of 31

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the worker’s lifelong employment under socialism. Accordingly, the employment relationship between SOEs and newly recruited employees became time-limited. Older workers’ dependency on SOEs for jobs and welfare formally ended after the passing of the Law of the People’s Republic of China on Enterprise Bankruptcy by the Standing Committee of the NPC in December 1986 (Li, 2001). In addition, the Chinese government opened a new chapter for market-oriented labour relations for all types of enterprises following the amendment in 1991 of the Code of Civil Procedure on the bankruptcies of non-state-owned enterprises. This legislation ‘promoted the market competition mechanism of survival of the fittest’ (Li, 2001).Thus, the CCP broke its previous promise on full employment in a socialist society. In the new economic regime, workers had to face uncertainties, testing their luck in an open competitive labour market.

Social policy responses to economic reforms, 1978-92 As a result of new employment policies, Chinese workers have to cope with unemployment again after three decades of job security in a communist economy. The bankruptcy law was invoked to close more than 16,000 enterprises between 1988 and 1997 (Li, 2001). The proportion of SOE workers employed on shortterm contracts increased from 7% to 51.6% between 1986 and 1997 (Bloom et al, 2002). As pointed out by the Chinese Academy of Social Sciences, ‘the elimination of workplace security in cities means the elimination of employees’ rights and benefits’ (quoted in Bloom et al, 2002, p 7). Thus, unemployment became a new threat to social stability as a result of: discontinuing permanent job arrangements; the emergence of the private sector; labour surpluses in rural areas; and bankruptcies in state enterprises. In the early 1990s there were as many as 200 million surplus workers in rural areas (Nielsen et al, 2005). The official unemployment rate in 1990 was 2.5%, with more than 3.8 million workers seeking jobs (Gang et al, 1998). Unemployment left many families too poor to meet even basic necessities. Further, the disbanding of communes and bankruptcies of SOEs meant that disadvantaged groups in rural and urban areas were deprived of financial, medical, education and housing protection. Thus, welfare reforms in China mainly resulted from its new economic policies. Also, tackling the welfare needs of SOE workers became a prime concern of the central government. In 1986, the SC issued a directive, Measures on insurance of SOE workers waiting for jobs (tentative), for constructing an unemployment insurance scheme (SC, 1986). Chinese leaders used the term ‘waiting for a job’ instead of ‘unemployment’ in official documents in order to reduce resistance from traditional socialist supporters to the reforms. Also, the government published the Decision on old age pension insurance scheme for enterprise workers (SC, 1991) in order to try to address the deterioration of old age protection resulting from bankruptcies and financial difficulties in many SOEs, which provided pensions to their workers in the pre-reform era. The document introduced an old age insurance scheme for urban SOE workers. 32

Social policy in the context of economic reforms

Regarding medical care, many people were unable to access basic treatment as a result of the decline of rural cooperative medical schemes and the financial difficulties of SOEs. Most rural clinics became private practices (PTDRC, 2006) and urban hospitals compensated central government’s reduced subsidies by introducing charges and fees for services (Dong, 2001). Because of the lack of a nationwide health strategy, local governments formulated their own policies for meeting the medical needs of their regions. The Chinese government considered education as a key to economic success. In 1986, the NPC passed the Compulsory Education Law of the People’s Republic of China to provide nine-year compulsory education for children. Local authorities were granted more power to use multiple sources to provide elementary education (CCPCC, 1985). The principle of marketisation was also introduced to housing provision in order to reduce the welfare burden of SOEs and local governments. Key elements of the reforms between 1979 and 1988 included the sale of new houses at cost price, subsidised sale to SOE and local government sitting tenants, and rent increases to promote the privatisation of public housing (Wang and Murie, 1999). Economic reforms in China between 1978 and 1993 were incremental and, according to Qian and Wu (2000, p 4), the result was ‘a remarkable success’. However, from a social welfare perspective, changes were rapid and onerous, and the basic needs of poor people were inadequately addressed (see Chapters Five to Nine for details). During this period, the central government’s key concerns were to reduce welfare expenses, minimise the welfare commitments of SOEs and privatise public services. Unfortunately, there was no well-organised and comprehensive plan for tackling negative social consequences brought about by the government’s new economic initiatives. By asking local government, SOEs and hospitals to utilise multiple channels in order to finance public services, central government had underestimated the resulting financial difficulties accruing to families and individuals. Furthermore, it did not provide clear guidelines and impose necessary restrictions on the fee-charging measures of public services providers.As a result, the localisation and privatisation of social services exacerbated regional disparities, excluding many poor people from accessing housing, education and medical needs. As an official research team of the CCP pointed out, the guiding ideologies after 1984 put too much emphasis on economic expansion, neglecting the building of an effective governance environment (The Third Research Team of the Historical Research Unit of the CCP, 1998). In short, key features of China’s welfare system in the first stage of economic reforms were fragmentation without a blueprint for the overall national welfare provision, localisation based on the initiatives of local officials, privatisation leading to increased service fees and rescinding the welfare duties of SOEs.

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Economic reforms after 1993 During the second stage of reform, the Chinese government’s main objective was to transform SOEs into modern business enterprises. As illustrated above, the first stage of SOE reform had achieved limited success. SOE productivity did not dramatically increase, and the activities of managers were still subject to interference by government officials. Therefore, an alternative approach was required to reduce the government’s financial burden and to enhance the independence of state enterprises. In 1992, Deng Xiaoping made an ideological breakthrough by announcing the establishment of a ‘socialist market economy’ (Dodds, 1996). In November 1993, the Third Plenum of the Fourteenth Party Congress adopted a Decision on issues concerning the establishment of a socialist market economic structure (CCPCC, 1993). The document could be seen as a major step forward in economic reforms because the Chinese government decided to greatly expand market forces and to transform SOEs to be autonomous competitors in an open economy. Firstly, central government redefined the nature of SOEs so that they were expected to act according to the demands of the market economy, and the government gave a commitment that it would not directly intervene in their production and management activities (CCPCC, 1993). SOEs could be transformed into various financial bases and managed as either shareholding enterprises or contracted companies. Also, a company law was passed in 1994 that provided a legal base for the enterprise reform. As Wedeman (2004, p 79) comments, SOE reform in China ‘boils down to a process of “corporatisation” in which the state has sought to transform SOEs from administrative agencies into business enterprises’. Supporters of this approach argue that it is only in this way that SOEs were able to have genuine autonomy because of the separation of enterprise management and ownership (Dodds, 1996). Through the ‘100-Firm Corporation Experiment’, the Chinese government started to change the governance of pilot firms in 1995. The project attempted to transform them into limited shareholding corporations (Zhiyuan et al, 2000). Central government defended its position that this was not privatisation because public ownership was still ‘a principal component’ of China’s economy and other forms of ownership were just supplementary economic forces (CCPCC, 1993). According to Zhiyuan et al (2000, p 6), by the mid-1990s there was a consensus that ‘the state should be a passive shareholder, ie, a beneficial “residual claimant” without the power to control the corporation’s day to day operations’. While the private sector was recognised as an element within China’s socialist economy, SOEs have been expected to operate in a more competitive business environment by mainly following market principles. In the light of these changes, central government redefined its function mainly to ‘macro-economic regulation’. As the CCPCC (1993) clearly stated: ‘The main duties of the government are to formulate and implement macro economic policies, establish basic facilities and create a favourable economic environment’. The document further stressed: 34

Social policy in the context of economic reforms

‘The government will use economic, legal and administrative measures to manage the economy; it will not directly intervene in the production and management activities of enterprises’ (CCPCC, 1993). Obviously, Chinese leaders believed that China’s socialism could still be preserved through the domination of SOEs in the market as well as via the state’s regulatory power. At the same time, they became more confident in the greater ability of an open and competitive market than a planned economy to enhance work incentives and create wealth.Thus, the CCP at this stage openly adopted a market-centred approach to its economy under the banner of a ‘socialist market economy’. After redefining the nature of SOEs as independent economic entities, the Chinese leadership attempted to turn SOEs into corporations with clear definition of property rights and transferable ownership (Gang et al, 1998, p 18).This strategy not only reduced the Chinese government’s financial burden but also enhanced the management autonomy of SOE managers. Seeing that over 65% of national output was produced by profit-seeking economic units and that private enterprises were flourishing, Chow (1994, p 36) even argues that ‘China had already become essentially a market economy’ in the early 1990s. Apart from some key SOEs that continued to be directly supervised by government officials (because of strategic considerations in terms of national security, monopoly over natural resources, basic public goods and services and advanced technologies) the Chinese government allowed many small and medium-sized SOEs, especially those in deficit, to be sold or declared bankrupt. The remaining SOEs were changed to different types of business enterprises. Some remained fully controlled by local governments; some became shared or listed companies with the government as the biggest shareholder; some were contracted out; and some were sold to workers. The objective of transforming SOEs into modern corporations became clearer after the publication of the Decisions on the reform and development of SOEs (CCPCC, 1999). The basic principles of this document were similar to those of the 1993 document.The objective was to accelerate the pace of enterprise reform. Accordingly, it aimed at building a ‘modern enterprise system’ for SOEs in three years. It was argued that the establishment of a modern business enterprise system was both a necessary step for developing a market economy and an effective path for joining state ownership with the market economy (CCPCC, 1999). More importantly, the then Chinese President Zemin Jiang even proclaimed ‘a socialist state does not need to have the state sector as the predominant actor in the economy to maintain its socialist nature’ (Gang et al, 1998, p 18). This is an obvious departure from the old concept of China’s socialist market economy, which emphasised a bigger share of state enterprises in the economy. By adopting this new economic approach, however, Chinese leaders put more stress on macro-economic measures to regulate the market. Interestingly, the Chinese government’s economic ideology after two decades of reform sounds like the positive non-intervention philosophy adopted by the Hong Kong government, the freest economy of the world (Chan, 1996; Chan and Bowpitt, 2005). 35

Social policy in China Table 3.1: A selection of company forms in China Firm type

Firm characteristics

SOEs

Un-restructured state firms in which all the capital comes from the government. In many cases, the budgets of these firms are still completely indistinct from the public budget

Shareholding enterprises

A corporate form introduced in 1994 for large firms. Several thousand SOEs have been converted into shareholding enterprises, and have kept state entities as their owners. Some privately owned companies have also taken this form

Listed companies

A public listing requires a firm to take a shareholding structure. In addition, a listing brings the firm under an extensive set of rules regarding accounts, disclosures and corporate governance norms issued by the China Securities Regulatory Commission and other agencies

Enterprise groups

Large firms with extensive subsidiaries. Groups can take a number of forms – SOE or even privately owned – but most are publicly owned

Limited liability firms

A corporate form established in 1994 for businesses with less than ¥50 million in registered capital and between 2 and 49 shareholders wishing to take limited liability status. Owners are issued with ownership certificates (rather than shares) that cannot be openly traded

Collectives

Concentrated in rural areas, a collective is a firm with assets owned collectively by workers and other economic entities, often including private investors and local government

Private firms

Private firms can be registered in two ways, depending on the number of staff. A firm with more than eight staff can be registered as a private limited liability firm

Foreign-invested enterprises

Joint ventures, cooperative, sole-invested enterprises and limited liability firms with some foreign capital

Note: Some of these classes of firm are not mutually exclusive. An enterprise group can be an SOE or a shareholding firm, while a limited liability firm can be state-controlled or private. Source: Green (2004, p 19)

As a result of enterprise reform, various types of companies can be found in today’s China, ranging from completely state-controlled to completely privaterun enterprises (see Table 3.1). In short, enterprise reform has separated the management duties of SOEs from the state’s ownership, and managers are expected to run businesses according to market principles. It should be stressed that unlike the selling off of state enterprises by Russian and other Eastern European countries during the early stage of economic reforms, the Chinese government transferred its power of management but still maintains its ownership over many SOEs. In short, Chinese leaders are willing to ‘set a foot down in capitalism’ but still ‘keep the other foot firmly rooted in socialism’ (Wedeman, 2004, p 72). By transforming an SOE from performing a combination 36

Social policy in the context of economic reforms Table 3.2:The historical development of China’s economic reforms since 1978   1. 1978-82: Observation period, no economic or political guarantees   2. 1982: Constitutional amendment, ‘Supplement to the socialist state-owned economy’   3. 1987 and 1988: ‘Provisional regulation of rural and urban business people registration and management’. Private enterprises appear in official documents for the first time. The Provisional Act of Private Enterprise of the PRC is also enacted   4. 1992: Party Congress adopts resolution to set up the ‘Socialist market economic system’   5. 1997: Party Congress changes position of private enterprises from their previous role as ‘supplement’ to ‘important component’   6. 1999: Constitutional amendment guarantees legal rights and interests of the private sector, with the exception of property rights   7. ‘Three Representatives’: advanced culture, productivity and interests of the greatest number of peoplea   8. 2002: Party Congress grants party membership rights to entrepreneurs   9. NPC (2004): Constitutional amendment guarantees property rights 10. The Property Law of the PRC was passed on 16 March 2007b Notes: a The ‘Three Representatives’ was proposed by former Chinese Chairman Jiang Zemin in 2000 for addressing the role of the CCP in China’s new socialist economy. According to Jiang, the CCP ‘must always represent the development trend of China’s advanced productive forces, the orientation of China’s advanced culture and the fundamental interests of the overwhelming majority of the Chinese people’ (China Internet Information Centre, 2002a). b The

Property Law stated that ‘the property of the state, the collective, the individual and other obligees is protected by law, and no units or individuals may infringe upon it’ (People’s Daily Online, 2007). Sources: China Internet Information Center (2002a); Kanamori and Zhao (2004, p 12); People’s Daily Online (2007)

of social, political and economic functions into a purely economic entity, central government has completed the task of transferring welfare duties away from work units (see Chapters Five to Nine for details). As the CCPCC (1999) declared, the ‘business and social welfare functions of SOEs need to be separated in order to reduce their social burden’; in short, modern enterprise reform has ended the traditional welfare burden of SOEs so that alternative welfare providers need to be established to shoulder this burden.

Social policy responses to economic reforms after 1993 Deepening economic reforms further shook China’s already weak welfare foundation.As a result of the reconstruction of SOEs, some workers were laid off, some had their wages reduced by as much as 50%, and some no longer regularly received salaries. From 1995 to 2002, the number of SOE workers dropped dramatically from 112.6 million to 71.6 million following the selling of SOEs and bankruptcies. Based on the international unemployment definition, research 37

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studies suggest that the urban unemployment rate rose rapidly from 7.6% to 12.7% between 1995 and 2001 (OECD, 2005) (see Chapter Six for details). The rapid expansion of the private sector also brought about new risks for Chinese workers such as hazardous working conditions, long working hours, low wages and the lack of retirement protection. Between 1998 and 2003, the private sector’s share of GDP increased from 50% to 59%. There were as many as 3 million domestic private enterprises and 24 million sole proprietorships in China in 2003 (OECD, 2005). As the traditional Chinese socialist labour legislation was unable to provide adequate protection for workers, central government had to formulate new welfare measures in order to ‘maintain social stability and smoothly build a socialist economic system’ (CCPCC, 1993). In response to the new employment relations, central government passed the Labour Law on 5 July 1994 in order to ‘protect the legitimate rights and interests of labourers’ in a socialist market economy (NPC, 1994). In addition, to try to ensure the smooth reconstruction of SOEs, the Chinese government set up RSCs for laid-off workers, who could receive training and financial aid for a maximum of three years before the formal termination of their employment relationship with SOEs. In this period, job creation was seen by the Chinese government as its ‘major strategic task in economic and social development’ (Information Office of the State Council, 2002, p 2).Thus, a retraining programme called ‘Ten Million in Three Years’ was launched in 1998. By addressing the deterioration of its traditional welfare system, central government established a ‘social security system with Chinese characteristics’ based on ‘Three Security Lines’ (China Internet Information Centre, 2002b, p 69): The first security line is the basic living guarantee system for those laid off from the SOEs, which aims to guarantee basic living standards, pay social insurance contribution and promote re-employment. The second security line refers to the unemployment insurance system, which provides unemployment benefit and actively promotes reemployment…. The third security line refers to the minimum living standard guarantee system of urban residents covering all urban residents whose family income per capita is lower than the prescribed level…. The “Three Security Lines” are well integrated and have effectively guaranteed the basic living standards of the laid off workers, the unemployed and the low-income residents, serving as an effective social safety net. The first security line, the basic living guarantee system, targets workers laid off by SOEs.The other two security lines, unemployment insurance and the Minimum Standard of Living Scheme (MSLS), take a broader perspective by addressing poverty in a market economy. In 1999, the Regulation on Unemployment Scheme extended the unemployment coverage from SOEs to all types of companies.

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The focus in this period regarding medical care was to form a more comprehensive medical insurance scheme and to re-establish a cooperative medical scheme in rural areas. From 1994 to 1998, the government published several policy papers for improving the contents of medical insurance schemes in urban areas. The Views on reforms of the medical care system for enterprise workers issued in 1994 proposed a healthcare insurance scheme that included a social pooling fund and a personal account for workers of SOEs (State Development and Reform Commission et al, 1994). In 1998, the Decision on establishing the basic medical insurance scheme system for urban employees published by the SC (Information Office of the SC, 2002) extended medical insurance protection to workers from all types of enterprises.Although medical insurance became compulsory for urban employees, the medical scheme for rural residents is still voluntary with a low coverage. Central government published the Decision on further strengthening health services in rural areas in 2002 (CCPCC and SC, 2002) for building a New Rural Cooperative Medical Scheme (NRCMS).To encourage more people to join the scheme, a participant only had to pay an annual fee of ¥10 to a medical fund, and the central and local government each contributed ¥10. Central government uses other initiatives to enhance the medical capacity in the countryside, including building rural infrastructure, increasing subsidies for grain production, exemption from tuition fees in less developed western regions and the extension of MSLS to rural residents (People’s Daily Online, 2006). Concerning education, the Chinese government expanded higher education to add capacity to its industrial and commercial activities. From 1995 to 2005, the number of higher education institutions increased from 1,054 to 1,792. The total number of students enrolled rose rapidly from 2.9 million to 15.6 million in this period. As well as the expansion in state education, private education rapidly developed since China’s economic reforms began. By 2005, there were 1,624 private higher education institutions serving more then 3.2 million students (ME, 2006; see Chapter Eight for more details on the development of state and private education). Regarding housing policies, SOEs and local government stopped allocating accommodation to workers. Instead, the Decision on deepening the urban housing reform (SC, 1994) introduced a Housing Provident Fund (HPF), which required the contributions of both employers and employees to tackle housing needs.The policy paper also proposed the building of economic and comfortable housing (ECH) for lower-middle-class families. As for the housing needs of poor people, five ministries published the Administrative measures on low rental housing for the minimum income of urban residents in 2003 introducing the Low Rental Housing (LRH) Scheme (MC et al, 2003). Since the mid-1990s, central government has used various ‘macro-economic’ strategies to regulate housing prices such as increasing penalties on property developers for delaying construction projects, imposing taxation on buyers for selling their properties less than two years after purchase, limiting the building of luxurious and large-sized housing and increasing the supply of ECH and LRH. 39

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To summarise, the Chinese government has had to tackle tremendous unemployment and welfare pressures caused by the complete withdrawal of SOEs from welfare provision and their transformation into autonomous modern economic enterprises.While SOEs are no longer considered to be a ‘pillar’ of the economic system, the private sector has been accepted as one of the key elements of China’s socialist market economy. Because the Chinese government has fundamentally changed its economic strategies from using the dominant position of state enterprises to adopting macro-economic interventions, together with its heavy reliance on market forces for pursuing economic growth, it seems that socialism has been pronounced dead in China in the second stage of economic reforms. Thus, the Chinese government had to establish a new welfare system compatible with the operation of a market economy. As a result, market-oriented welfare measures were introduced, as can be seen from the contributions of both employers and employees to unemployment, medical, old age and housing protection schemes. In other words, those making contributions to economic production are rewarded and those who are non-participants are excluded from having a decent standard of living. It should be stressed that some welfare improvements have been made, including the extension of various types of insurance schemes from SOE workers to those working in other types of enterprises, and the extension of public assistance from cities to the countryside.To some extent, these actions are related to the necessity to maintain a stable society. As a Chinese government’s welfare White Paper pointed out, social security is ‘an important guarantee for the social stability and the longterm political stability of a country’ (Information Office of the SC, 2004). Judged from this perspective, the modern Chinese government is similar to that of capitalist welfare states in Europe and North America that attempt to use social welfare to achieve ‘legitimation’ and ‘accumulation’ (O’Connor, 1973). This means that a capitalist state will provide public services for economic development and, at the same time, give a minimal amount of assistance for poor people in order to maintain political stability. These limited welfare objectives partly explain the existing low levels of public assistance and the relatively poor social services in rural areas. The SC also admits that China still has a long way to go to develop its social security provision to an acceptable level, particularly in rural areas (Information Office of the SC, 2004).Thus, labour market-oriented welfare protection and the exclusion of deprived groups from accessing equal welfare are central features of China’s welfare system in this stage of its economic development. However, it should be stressed that in recent years the Chinese government has promoted the concept of scientific development and the building of a harmonious society (China Daily Online, 2007). Accordingly, Chinese leaders aim to tackle social inequalities by providing more assistance for migrant workers and building a new socialist countryside. The ultimate objective is to achieve a well-off society. As Chinese society has experienced rapid changes and its welfare system is developing, a future systematic evaluation can prove whether Chinese leaders’ declared objectives could be achieved. 40

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Conclusion This chapter has illustrated how China’s economic reforms triggered its welfare reform. As a result of the introduction of a Household Responsibility System and the reconstruction of SOEs, China’s socialist basis of welfare in rural and urban areas has to a large extent melted down. The scrapping of communes means that rural residents have lost healthcare and social assistance protection. The passing of the Bankruptcy Law, the introduction of employment contracts and the transformation of SOEs into autonomous economic entities implies that workers’ lifelong employment under socialism has ended, along with their work unit-centred welfare protection. Unfortunately, poor farmers and migrant workers find it difficult to afford basic welfare services as a result of unemployment, low income and the political exclusion of migrant workers from accessing urban welfare.There is obviously a discontinuity between the building of a new welfare system and the diminishing effect of the traditional one over the past three decades of China’s economic reforms. It has been stressed that economic reforms in China have been ‘experimental and gradual’ (Chow, 1999; see also Wang, 1994; Gang et al, 1998), with a goal of achieving economic efficiency and growth (Dodds, 1996). However, even though reform in the economic field was gradual and incremental it swiftly led to the destruction of old welfare institutions, and their replacement by new ones has been too slow to be effective. In short, the Chinese government has failed to respond in time to the welfare needs of the public. Obviously, there is a gap between economic development and social development; economic growth has been pursued at the expense of the well-being of deprived groups. Like many free market societies, China’s experience reveals that not everyone can share the benefits of a growing economy. The path of welfare reform is still a long one for the Chinese government in its attempts to build a more equal and just welfare system compatible with the basic values of the CCP. References Bloom, G., Lu,Y. and Chen, J. (2002) Financial health care in China’s cities: Balancing needs and entitlements during rapid change, IDS Working Paper 176, Brighton: Institute of Development Studies, University of Sussex. CCPCC (Chinese Communist Party Central Committee) (1984) Decisions on the reform of the economic system, Passed by the Third Plenary of the Twelfth Central Committee’s Meeting on 20 October, Beijing: CCPCC. CCPCC (1985) Decision of the Central Committee of the Communist Party of China on the reform of educational structure, Beijing: People’s Press. CCPCC (1993) Decision on issues concerning the establishment of a socialist market economic structure, Passed by the Third Plenary of the Fourteenth Central Committee’s Meeting on 14 November, Beijing: CCPCC.

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CCPCC (1999) Decisions on the reform and development of SOEs, Passed by the Fourth Plenary of the Fifteenth Central Committee’s Meeting on 22 September, Beijing: CCPCC. CCPCC and SC (State Council) (2002) Decision on further strengthening health services in rural areas, Document no CCPCC(2002)13, Beijing: CCPCC and SC. Chan, C.K. (1996) ‘Colonial rule, Chinese welfare ideologies and reproduction of social policy – the case of Hong Kong social security’, PhD thesis, Department of Sociological Studies, University of Sheffield. Chan, C.K. and Bowpitt, G. (2005) Human dignity and welfare systems, Bristol:The Policy Press. China Daily Online (2007) ‘President Hu speaks on national development’, 25 June (www.chinadaily.com.cn/china/2007-06/25/content_5424879.htm). China Internet Information Centre (2002a) ‘Three Representatives to become Party’s mission statement’, 13 November (www.china.org.cn/english/features/48642. htm). China Internet Information Centre (2002b) ‘Labour and social security profile’, 12 November. Chow, G.C. (1987) The Chinese economy, Hackensack, NJ: World Scientific. Chow, G.C. (1994) Understanding China’s economy, Singapore: World Scientific. Chow, G.C. (1999) China’s economy, reform and perspectives (http://www.princeton. edu/~gchow/China.html). Dodds, R.F. Jr (1996) ‘State enterprise reform in China: managing the transition to a market economy’, Law and Policy in International Business, vol 27 (www. questia.com/PM.qst?a=o&se=gglsc&d=5000408676). Dong, W. (2001) Health care reform in urban China, Toronto: Munk Centre for International Studies, University of Toronto. Gang, F., Lunati, M.R. and O’Connor, D. (1998) Labour market aspects of state enterprise reform in China, Paris: OECD Development Centre. Green, S. (2004) Enterprise reform and stock market development in mainland China, Frankfurt: Deutsche Bank Research. Information Office of the SC (State Council) (2002) Labour and social security in China, Beijing: Information Office of the State Council (www.china.org. cn/english/2002/Apr/31774.htm). Information Office of the SC (State Council) (2004) China’s social security and its policy, Beijing: Information Office of the State Council (www.china.org.cn/ewhite/20040907/index.htm). Kanamori, T. and Zhao, Z. (2004) Private sector development in the People’s Republic of China, Tokyo: Asian Development Bank Institute. Leung, J. and Nann R. (1995) Authority and benevolence, Hong Kong:The Chinese University Press and St Marin’s Press. Li, S. (2001) ‘Bankruptcy law in China: lessons of the past twelve years’, Harvard Asia Quarterly, vol 5, no 1 (www.asiaquarterly.com/content/view/95/40/).

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Liu, J. (1992) ‘The reform of state-owned enterprises’, in T. King and J. Zhang (eds) Case studies of Chinese economic reform,Washington, DC:World Bank, pp 80109. MC (Ministry of Construction), MF (Ministry of Finance), MCA (Ministry of Civil Affairs), MLR (Ministry of Land and Resources) and State Bureau of Taxation (2003) Administrative measures on low rental housing for the minimum income of urban residents, Document no 120, 31 December, Beijing: MC, MF, MCA, MLR and State Bureau of Taxation. ME (Ministry of Education) (2006) National education development statistical bulletin 2005 (www.moe.gov.cn/edoas/website18/info20464.htm). Nielsen, I., Smyth, R. and Zhang, M. (2005) Unemployment within China’s floating population: Empirical evidence from Jiangsu survey data, ABERU Discussion Paper 6, Monash, Australia: Monash University. Nolan, P. and Ash, R. (1995) ‘China’s economy on the eve of reform’, The China Quarterly, vol 144, pp 981-98. NPC (National People’s Congress) (1994) The Labour Law of the People’s Republic of China, Adopted at the Eighth Meeting of the Standing Committee of the Eighth National Peoples Congress on 5 July. O’Connor, J. (1973) The fiscal crisis of the state, New York, NY: St Martin’s Press. OECD (Organisation for Economic Co-operation and Development) (2005) OECD economic surveys: China, Paris: OECD. People’s Daily Online (2006) ‘Document shows determination to build a new countryside’, 24 February (http://english.peopledaily.com.cn/200602/23/ eng20060223_245370.html). People’s Daily Online (2007) ‘China’s top legislature adopts landmark property law’, 16 March (http://english.people.com.cn/200703/16/eng20070316_358242. html). PTDRC (Project Team of the Development Research Centre) (2006) An evaluation of and recommendations on the reforms of the health system in China, Beijing: PTDRC. Qi, H. (2000) ‘The evolution of Chinese township and village enterprises’, in F. Richter (ed) The dragon millennium: Chinese business in the coming world economy, Westport, CT: Quorum Books, pp 13-34. Qian,Y. and Wu, J. (2000) ‘China’s transition to a market economy: how far across the river?’, Conference on Policy Reform in China at the Centre for Research on Economic Development and Policy Reform, 18-20 November, Stanford University, California. SC (State Council) (1986) Measures on insurance of SOE workers waiting for jobs (tentative), Document no 1986/77, 12 July, Beijing: SC. SC (1988a) Ordinance on the contracted management of state-owned enterprises (tentative), 27 February, document no 1988/13, Beijing: SC. SC (1988b) Temporary ordinance on China’s private enterprises, 25 June, document no 4, Beijing: State Council.

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SC (1991) Decision on old age insurance scheme for enterprise workers, Document no 33, Beijing: SC. SC (1994) Decision on deepening the urban housing reform, Document no 1994/43, Beijing: SC. State Development and Reform Commission, MF (Ministry of Finance), Ministry of Labour and MH (Ministry of Health) (1994) Views on reforms of the medical care system for enterprise workers, 14 April, document no 1994/51, Beijing: State Development and Reform Commission, MF, ML and MH. The Third Research Team of the Historical Research Unit of the CCP (1998) China’s reform and open door policy over the past 20 years, Liaoning: Liaoning People’s Press. Wang, H. (1994) The gradual revolution: China’s economic reform movement, New Brunswick, NJ: Transaction Publishers. Wang,Y.P. and Murie, A. (1999) Housing policy and practice in China, Basingstoke: Macmillan Press Ltd. Wedeman, A. (2004) ‘Corporate capitalism and socialist China’, in E.T. Gomez and H.H. Hsiao (eds) Chinese enterprise, transnationalism, and identity, London: Routledge Curzon, pp 72-108. Wong, L. (1998) Marginalization and social welfare in China, London: Routledge. Zhiyuan, C.,Yuanzhu, D., Zengke, H., Angang, H., Shi, L., Naughton, B., Riskin, C. and Shaoguang,W. (2000) China human development report 1999:Transition and the state, New York, NY: Oxford University Press.

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four

The making of social policy in China Key issues China is a one-party polity in which social policies are mainly decided by government officials. However, to enhance the legitimacy of the Chinese Communist Party, a restricted and regulated participation was established in the form of the National People’s Congress. In the light of this political structure, this chapter explores: • the nature and organisational structure of the Chinese Communist Party; • key policy players in China’s politics, including the Politburo Standing Committee, the National People’s Congress and the State Council; • the process of policy making; and • key government departments responsible for making Chinese social policy such as the Ministry of Labour and Social Security, the Ministry of Civil Affairs, the Ministry of Health, the Ministry of Education and the Ministry of Construction.

Introduction Although China has been undergoing large-scale socioeconomic transformation since the late 1970s, its authoritarian state remains largely intact. The party–state polity comprises a dual bureaucracy, with the party apparatus dominant over the government bureaucracy. Being the sole ruling party, the CCP is the real policy maker in China. Under the absolute leadership of the CCP, social policy-making power at the national level is shared by the legislature, the NPC and its Standing Committee, and the SC (China’s cabinet) and its ministries and commissions. According to China’s Constitution, the NPC and its Standing Committee has the power to enact laws and to make major decisions. The SC and its ministries have the authority to make policies and enact administrative rules and regulations in relevant policy areas.As China has its unique polity, this chapter identifies key policy players, examining how they operate and interact with each other in the process of making China’s social policy.

China’s real policy maker: the Chinese Communist Party Understanding the CCP’s organisation and operation is essential to understand China’s social policy-making process. Founded in 1921, the CCP is the largest 45

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political party in the world with more than 70 million members. After it came to power in 1949, the CCP established a one-party state form of government in China. Based on the Leninist principle of democratic centralism, the CCP has established a hierarchical pattern of organisation in the shape of a pyramid (Saich, 2001). As the CCP plays an all-powerful role in China’s polity (CCP, 2002), it overshadows the Chinese state. Since the economic reforms in the late 1970s, the relationship between the party and the state has been adjusted due to the development of a market economy. According to the current Constitution of the PRC, the CCP should be subject to the authority of the state and act within the framework of the Constitution (PRC, 2003). Nevertheless, the CCP monopolises the key state positions and makes crucial decisions on who occupies what position (Burns, 1987, 1994). Whether the CCP or the state is the dominant authority in China is still an issue to be resolved by Chinese politics students. While the CCP undoubtedly has a paramount role in Chinese public policy making, not much published information on the CCP central leadership over policy making is available (Wu, 1995). Organisation of the CCP Just like the governing hierarchical structure in China, the CCP has its own nationwide organisational structure from grassroots organisations to central apparatuses. At the national level, the CCP has its central organisations; at the grassroots, the CCP has a huge, comprehensive network of party cell organisations. In between are CCP organisations at provincial and county levels. As all key national policies are made by central government, this chapter focuses on discussing the CCP’s central organisations. According to the Constitution of the CCP, the party’s highest body is its National Congress. Meeting at least once every five years, the National Congress appoints the CCP Central Committee (usually with more than 150 members), Central Figure 4.1:The ccp’s central organisation General Secretary Standing Committee of the Politburo

Central Secretariat

Politburo Central Committee

Central Commission for Discipline Inspection

National Congress

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Military Committee and its Central Commission for Discipline Inspection.Then the Central Committee sets up its apparatus, which includes appointing the Politburo (usually with about 20 members), the Politburo Standing Committee (usually with 7-9 members), the General Secretary, the Central Secretariat and other functional departments.The Central Secretariat is an organisation that runs the day-to-day work of the Political Bureau of the Central Committee and its Standing Committee. The CCP and policy making The CCP is the source of all political power in China, which has the exclusive right to legitimise and control all the political organisations, and to determine the social, economic and political goals for society. Generally speaking, the CCP has an authoritative and unchallengeable role in areas of political, ideological and organisational leadership. It seeks not only to control the legislature and executive but also to dictate the nation’s moral and ethical values (Saich, 2001). Every five years, the CCP holds its National Congress, which formally serves two functions: to decide major policy directions and to elect the party’s central leadership. About six months after the CCP National Congress meets, China’s legislature (the NPC) holds its plenary session to pass legislation on the policy directions set by the CCP. Then, the SC specifies the policy directions and implements the laws enacted by the NPC. The CCP’s central locus of policy-making power is the Politburo Standing Committee. It is also the highest policy-making body in China that makes major national policies.The members of the Politburo Standing Committee concurrently hold the key positions of the state, for instance, president, premier and chairperson of the NPC. Such an interlocking situation reflects the fusion of the party and the state in China (Lieberthal, 1995). On top of making concrete policies and deciding the major direction of national policy, the CCP also exercises leadership over law making that is constitutionally vested in China’s legislature, the NPC.The party central leadership takes a variety of means to control the law-making process, for example, organisational control over key appointments, institutional control over the meeting agendas, pre-approval of draft laws and setting the general tone of legislative debate. In fact, party organisations penetrate every aspect of the policy-making system.

The National People’s Congress and its Standing Committee: the highest state organ of policy making Being the highest organ of state power in the PRC, the NPC is composed of around 3,000 deputies elected from the provinces, autonomous regions and municipalities, and of deputies elected from the armed forces.The NPC is elected for a term of five years. It meets in session once a year, that is, the plenary session of the NPC.When the NPC is not in session, its power is exerted by its permanent body, the Standing 47

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Committee of the NPC. Both the NPC and its Standing Committee exercise the legislative power of the PRC. As the permanent body of the NPC, the Standing Committee has the power to enact laws except for basic laws. Theoretically, the NPC and its Standing Committee possess the dominant policy-making powers in China. However, compared with the CCP and the SC, the NPC has a limited role in policy making. Major decisions and appointments are made by the CCP and passed on to the NPC for its ‘consideration’ (Saich, 2001, p 114). For a long time, the role of the NPC in policy making was regarded as symbolic. Thus, the NPC has been nicknamed the ‘rubber stamp’ (O’Brien, 1990; Tanner, 1999). As a rule, only where a policy takes the form of law are the NPC and its Standing Committee involved. With the increasing role of law in China since the early 1990s, the role of the NPC in policy making has been enhanced (Tanner, 1999; Ngok, 2002). Nowadays, the NPC has become an important forum for mediating policy differences between different parts of the party and the government. However, the NPC still rarely defeats proposals put before them by the CCP or the SC.

The State Council: China’s principal policy maker The SC, namely the Central People’s Government, is the highest executive organ of state power, as well as the highest organ of state administration. Composed of a premier, vice-premiers, state councillors, ministers in charge of ministries and commissions, the auditor-general and the secretary-general, the SC is responsible for carrying out the principles and policies of the CCP as well as the laws adopted by the NPC, and dealing with affairs and policies such as internal politics, diplomacy, national defence, finance, economy, culture and education. Being the central government of a unitary country, the SC directly oversees the various subordinate governments in the provinces. Organisation of the State Council As the highest executive body of the country, the SC includes the premier, the SC Standing Meeting, the various commissions, ministries, bureaux and think-tanks subordinate to it.The premier is the head of the SC, who is nominated, appointed and removed by the president of the PRC, and whose nomination is reviewed by the NPC. The premier and his/her cabinet have a five-year single term of office, and incumbents cannot be reappointed after two successive terms. The main organisation of the SC is its Standing Committee, which meets twice a week (see Figure 4.2). The SC is composed of a wide range of departments and agencies. These organisations can be divided into four groups: (i) ministries and commissions; (ii) bureaux directly under its authority; (iii) executive offices; and (iv) institutions directly under its authority. They can be further classified into four categories as follows (Luo, 1998, pp 8-17): (i) ‘macroeconomic control departments’, which 48

The making of social policy in China Figure 4.2: organisation of the State council NPC

SC

Ministries and commissions

Bureaux

Executive offices

are responsible for the management of national economy, for example, the MF and the State Economic and Trade Commission; (ii) ‘specialised economic management departments’, which are those ministries responsible for managing the specialised economic and industrial sectors; (iii) departments administering education, social security and resources management, for example, the Ministries of Personnel, Labour and Social Security, and Education; and (iv) state organs that administer state and political affairs, for example, ministries in charge of law and order, public security and state security; and ministries of family planning, radio, film and television management, and culture. The State Council and policy making As the chief administrative organ of government, the SC exercises a wide range of powers over policy making. Its main functions are to formulate administrative regulations and measures; to issue policies and orders, and monitor their implementation; to draft legislative bills for submission to the NPC or its Standing Committee; and to prepare the economic plan and the state budget for deliberation and approval by the NPC. In many cases, the SC and the CCP central leadership jointly issue public policies. For instance, in the 1990s, many important policies relating to the re-employment of redundant workers in SOEs were promulgated by both the SC and the CCP. In the field of social policy, policy making is dominated by the SC. Since the 1980s, social policies have been regulated by rules, directives, decisions, circulars and proposals issued by the SC or its agencies, rather than laws enacted by the NPC or its Standing Committee. For instance, the reforms introduced in the fields of pensions, healthcare, employment and housing have been guided by the administrative regulations and rules made by the SC or the related ministries. There are no laws promulgated by the NPC dealing with the old age insurance system, social insurance and public relief. There are several reasons for the prevalence of administrative regulations over law in the field of social policy. First, China’s social welfare system has undergone 49

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continuous transformation during the reform era, and such an ever-changing situation is not suitable for law making. Second, there is no clear-cut ideology of social policy in the Chinese reforms; therefore, consensus building is difficult among stakeholders in the social policy sectors.Third, administrative regulations are more flexible than laws, which leave much room for local government and other policy clients, especially enterprises, to manoeuvre. Fourth, such policy practice is also good for central government itself, as it can readjust policies to respond freely to changing situations. However, due to the weak legal effectiveness of the administrative regulations, many welfare policies have not been implemented successfully (see Chapter Ten), especially in the labour policy sector. Many enterprises are reluctant to abide by administrative regulations concerning labour protection.

Key government departments and social policy making Under the SC, there are ministries that deal with a wide range of political, social and economic affairs. The following sections introduce five ministries whose concerns are related to the five policy areas of this book: social security, labour, health, education and housing. Ministry of Labour and Social Security The MLSS is in charge of China’s labour policies and employment-related social insurance policies. It was established in 1998, based on the former Ministry of Labour, with a view to unifying the administrative structure of the provision of social security programmes in the country. Since then, the main policy function of the MLSS has been to build a sound employment-based social insurance system in China (Ngok and Zhu, 2003). As the main policy maker of labour and employment policies, the MLSS is active in making labour policies and laws. Since the mid-1990s, the MLSS has been a key player in formulating policies and programmes to create re-employment opportunities, and in delivering benefits and services for laid-off workers of SOEs. It is also the main patron of labour legislation. Ministry of Civil Affairs The MCA is responsible for a wide range of issues, ranging from funeral services to marriage registration, from non-governmental organisation (NGO) registration to community development, and from management of old age homes to poverty reduction. While the MLSS is responsible for the social insurance programmes and welfare packages for workers, the MCA is in charge of welfare programmes for marginal groups, including people who are unable to work, individuals who have no family support, poor households, people who need help to overcome temporary hardships, people with mental ill health and physical disabilities, and all those who are unable to look after themselves (Wong, 1998).The MCA is China’s 50

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key department for dealing with social security issues such as social assistance programmes for the poor and those suffering from physical illness, social welfare services for older people, orphans and disabled people, and special treatment for demobilised soldiers and their families. Before the economic reforms, MCA service clients were mainly disadvantaged people in cities. Since the 1980s, the MCA has paid much more attention to poverty reduction in rural areas. It even piloted a social pension insurance scheme for peasants in the late 1980s. Until 1998, the MCA was the central department in charge of rural old age pension insurance. However, this function was transferred to the MLSS in 1998 (see Chapter Five). In order to cope with social problems resulting from the erosion of work unit (danwei) welfare since the late 1980s (see Chapter Six), the MCA focused on developing community services. Nowadays, community services and community building are major elements of China’s social welfare agenda. From the mid1990s, the MCA has been a key player in tackling urban poverty. Based on the experience of Shanghai, which was the first city to set up an MSLS for tackling poverty in 1993, the MCA introduced this scheme to the whole of China in 1997 (see Chapter Five). As a central department in charge of a wide range of social policy issues, the MCA also plays an active overarching role in dealing with poverty reduction and the protection of underprivileged groups such as older people, people with disabilities and orphans. Ministry of Health The MH undertakes the roles of providing health information, improving health awareness and education, ensuring the accessibility of health services and monitoring the quality of health services provided to citizens and visitors in China. It is also involved in the control of illness and disease, coordinating the utilisation of resources and expertise where necessary. As a main actor in healthcare policy, the MH has the power to draft health policies, to allocate health resources, to develop health programmes and to implement health policy. During the reform era, the key policy challenge facing the MH was the reform of the old public-funded healthcare system that existed in cities. Under the old health policy regime, people working in the public sector were entitled to free medical care. Since the reform of healthcare policy, patients have to pay for healthcare services. Meanwhile, market principles have been widely introduced in the delivery of healthcare services, and public hospitals have been transformed into profit-making institutions. As a result, the price of healthcare services is soaring, and more and more patients are unable to afford them (see Chapter Seven). In recent years, the public has strongly criticised the MH for its marketoriented health policy and its failure to provide adequate and affordable services for ordinary people.

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Ministry of Education The ME is in charge of the promotion and implementation of school education at all levels, higher education, adult education, physical education and other educational affairs. Since the mid-1980s, the ME has been active in initiating and implementing educational reforms. However, as China’s education has become more and more market-oriented in the reform era, and educational inequality has grown, the ME has been criticised for advocating the marketisation of education and urged to play an active role in reducing educational inequality and providing fair, high-quality education for all. Ministry of Construction The MC was established in 1988 and is responsible for policy matters on urban and rural planning, standards of construction and buildings, public works, real estate market and housing reform. It is more oriented to economics (property market) and technology (construction and buildings) than to social policy. Although housing reform is dominated by the SC, the MC is an important policy actor in formulating housing reform measures and policies. It is responsible for guiding the work on house building and housing system reform, management of housing and real estate industries and regulating the property market. Under the guidance of the MC, the real estate industry has contributed greatly to China’s rapid economic growth since the early 1990s as it has become an important point of growth in China’s economy. However, the booming real estate industry and the soaring price of residential housing in China have exerted great pressure on the MC as more and more ordinary people are unable to pay for accommodation. The MC has been criticised for forming an interest alliance with property developers and pushing up property prices. Moreover, the MC has not paid much attention to building affordable housing and public rental housing for the low-income classes. As social protection for migrant workers has been given a high priority since 2002, the MC also has a role to play in protecting their rights and interests, as many migrant workers are working in construction enterprises under the jurisdiction of the MC. Since 2003, the MC, together with the MLSS, has issued administrative decrees to require construction enterprises to pay wages on time and in full to migrant construction workers, and to provide them with job training.

Other actors involved in social policy Besides the above-mentioned state social policy actors, there are some special actors that are involved in social policy making in China, for instance, the All-China Federation of Trade Unions (ACFTU) and the All-China Women’s Federation (ACWF). These organisations are not state organs with the constitutional power of policy making, but they play some important roles in the policy-making process. Generally speaking, their policy-making functions come from their 52

The making of social policy in China

close relationship with the CCP. With the development of its market economy, Chinese civil society is also burgeoning. More and more interests have begun to be organised, as shown by the increasing number of NGOs in China.The wide use of the internet and the diversification of the traditional mass media have largely facilitated their expressions of interest and participation in the policy process. In addition, the role of intellectuals (from both inside and outside the establishment) in the social policy-making process has been enhanced. The roles of these two non-state organs in the policy process are now examined in more detail. All-China Federation of Trade Unions The ACFTU is the highest organisation of Chinese trade unions. Since China is constitutionally a state run by the working class and the ruling Communist Party is the vanguard of the working class, a special relationship naturally exists between unions and the government and between unions and the CCP.Although a union is officially defined as a mass organisation of the working class based on the voluntary association of employees, the ACFTU is far more than an ordinary mass organisation in China. It is not an exaggeration to say that the ACFTU functions as a state bureaucracy. The leaders of ACFTU are usually officials qualified to serve at high levels of central government. The top leader of ACFTU is usually a member of the CCP Central Politburo. As the representative of the official labour movement, the ACFTU has the moral responsibility to protect workers’ interests and rights. The ACFTU therefore has great influence in workers’ affairs. The ACFTU not only has a say on matters relating to workers’ interests, but also participates in the drafting work of labour policy and legislation. The ACFTU enjoys a degree of quasi-law-making power. All-China Women’s Federation The ACWF is one of a few so-called mass organisations sanctioned officially by the CCP to mobilise Chinese women’s support for CCP policy. Like the ACFTU, the ACWF has also established a hierarchical pyramid of organisation parallel with the government structure.According to its constitution, the ACWF’s mission is to represent and safeguard women’s rights and interests and to promote equality between women and men. Its main task is to unite and mobilise Chinese women to make more of a contribution to China’s modernisation and economic development and social well-being. The ACWF and its nationwide branches have become important providers of social services for women during the economic reform era. They provide education services, offer a wide range of training programmes, especially for unemployed female workers to improve their technical and professional skills, and they render services to women and children. For example, the ACFW launched the ‘Spring Bud’ programme in 1993 to enable poor girls who dropped out of 53

Social policy in China

school in the economically underdeveloped regions to return to school, and it set up ‘Hope Schools’ for those who dropped out. The ACFW has also played an active role in fighting poverty. To finance the services provided, the women’s federations at all levels have run their own economic entities and engaged in business activities.

China’s policy-making process: the case of the Labour Contract Law The formulation of the Labour Contract Law started in 2004 amid huge complaints about mistreatment of workers by employers, such as pay arrears, unpaid overtime, refusal to provide written contracts and trapping workers in short-term labour contracts. The MLSS and the ACFTU were the main promoters of the drafting work. In February 2005, the Labour Contract Law was included in the annual legislative plan of the NPC’s Standing Committee. In October 2005, the draft Labour Contract Law was approved by the SC in principle and submitted to the Standing Committee for deliberation. In December, the Standing Committee finished the first round of deliberation. During the formulation of the Labour Contract Law, the most controversial issue was the guiding principle of the Law.There were two competing groups on this issue. One group argued that the Law should give top priority to the legal protection of labour and the other fought for equal treatment for both employers and employees in the spirit of contract. Meanwhile, business communities lobbied very actively as they were worried that stricter contract requirements could raise costs and give them less flexibility to hire and fire employees. Some foreign business associations warned that strict regulations could force foreign companies to reconsider new investments or even the continuation of their activities in China because of possible cost increases. As the drafting of the Labour Contract Law attracted wide attention from the public, and aroused competing opinions from the business community and pro-labour communities, on 20 March 2006, the Standing Committee decided to make the draft Labour Contract Law public and hold open consultation. By 20 April, when the one-month period of public consultation came to an end, a total of 191,849 suggestions were raised by the public (Xinhua News Agency, 2006). It is the first draft law in China’s legislative history that attracted such a wide range of concern and attention from the public. Another new draft, taking account of the consultation, was deliberated by the NPC’s Standing Committee in December 2006 and the third round of deliberation was conducted in April 2007. Finally, the Labour Contract Law passed the fourth round of deliberation by the Standing Committee and was enacted on 29 June 2007. The final version of the Law is a compromise between the interests of the employees and the employers. In order to pacify the foreign investors, the final version of the Law modified some controversial provisions in the draft laws. After the exposure of forced labour in brick kilns in Shanxi Province, Central and North 54

The making of social policy in China

China on the eve of passage of the Law, the Law stipulates that government officials guilty of abuse of office and dereliction of duty will face administrative penalties or criminal prosecution. There was a high level of coverage of the consultation processes in the Chinese media.

Social policy implementation: the politics of central–local relations Politically speaking, China is a unitary polity where the power to make political decisions rests with central government. However, in regard to its social policy regime, China is a pluralist country because social welfare arrangements vary from locality to locality. Such a welfare regime is described as ‘one country, multiple systems’ (Wong, 1998). One key reason for this diversified welfare regime is that the Chinese state has never had the resources needed to develop a unified national welfare system.As a result, central government has delegated more and more of its welfare functions to local government authorities, especially at the county level. With the intensifying of marketisation and decentralisation during the reform era, the Chinese welfare system has become more diversified and localised. The imbalance between local government authorities’ responsibilities and their limited financial resources further constrains their capacity to deliver social services. In the early years of the reform era central government was in an increasingly disadvantageous position as the central share of budgetary revenue continuously decreased (Chung, 1995). In order to reassert central fiscal control over the localities and to secure enough revenue for central government, a new tax-sharing system was introduced in 1994.This eroded the financial capacity of local governments even though they were the main providers of social welfare in China. Under the new system, a number of important changes were introduced. Firstly, taxes were regrouped into three categories: central, local and shared tax. Secondly, the Central Tax Bureau was set up to collect tax revenue for central government. Thirdly, central government took away local autonomy for granting preferential rates for certain key taxes to attract private and foreign investment. Finally, the new system explicitly emphasised improving the central government’s overall macro-economic control (Loo and Chow, 2006). In short, the tax-sharing reform stabilised and raised the income of central government and strengthened its ability to regulate and control national finances. However, the reform only defined the relationship between central and provincial-level finances and did not deal with the lower levels.This has resulted in high-level government having relatively stable sources of taxes and the interests of local government being seriously compromised (see also Chapter Ten). The lower the level of government, the more difficult their financial situations have become. For example, 50-60% of county governments and 75% of township governments have problems with paying salaries, and a substantial number of them are heavily in debt (Ding, 2004).The poor financial situation of local governments 55

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has seriously affected their capacity to implement social policies formulated by the central government (Leung, 2005).

Conclusion China’s policy process is characterised by the separation of policy making from budget making (Ma and Hou, 2005). That is to say, no financial resources are guaranteed for policy implementation. In most cases of social policy development, while central government is responsible for policy formulation (thereby centralising financial resources), local government, which suffers from budget deficits, is responsible for policy implementation without direct money transfer from central government.The divide between centralised governmental revenue and decentralised and localised service provision further weakens the implementing of social policies. As a result, the fact that there is a disjunction between policy making and policy implementation has become a defining character of China’s social policy process. Therefore, many social policies cannot achieve their policy goals as originally proclaimed. Focusing on the social policy-making process at the national level, this chapter has identified the key national policy-making institutions, namely the CCP, the NPC and the SC. Special governmental departments in charge of social policy, such as the MLSS, the MCA, the ME, the MH and the MC, and other main social policy actors, such as the ACFTU and the ACFW, have also been examined. As the pace of marketisation and decentralisation intensifies, Chinese civil society is also developing. This means that more actors will become involved in China’s social policy making and the balance of power among them will directly affect the wellbeing of different social classes. References Burns, J. (1987) ‘China’s Nomenklatura system’, Problems of Communism, no 36, September-October, pp 36-51. Burns, J. (1994) ‘Strengthening central CCP control of leadership selection: the 1990 Nomenklatura’, China Quarterly, no 138, pp 458-91. CCP (Chinese Communist Party) (2002) The constitution of the Chinese Communist Party, Beijing: People’s Press. Chung, J.H. (1995) ‘Beijing confronting the provinces: the 1994 tax-sharing system and its implications for central-local relations in China’, China Information, vol 9, no 2-3, pp 1-23. Ding, X.H. (2004) ‘The challenges faced by Chinese higher education as it expands in scale’, Chinese Education and Society, vol 37, no 1, pp 36-53. Leung, J. (2005) ‘Social welfare in China’, in A. Walker and C. Wong (eds) East Asian welfare regimes in transition: From Confucianism to globalism, Bristol:The Policy Press.

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Lieberthal, K. (1995) Governing China: From revolution through reform, New York, NY and London:WW Norton & Company, Inc. Loo, B.P.Y. and Chow, S.Y. (2006) ‘China’s 1994 tax-sharing reforms: one system, differential impact’, Asian Survey, vol XLVI, no 2, pp 215-37. Luo, G. (1998) ‘Explanatory note of the program for restructuring the State Council’, Report delivered at the First Session of the Ninth National People’s Congress on 6 March, in the Bureau of Secretariat of General Office of the SC (State Council) and the Comprehensive Bureau of the General Office of the Central Organs Establishment Commission (eds) The central government organs 1998, Beijing: Reform Press. Ma, J. and Hou, Y.L. (2005) ‘The policy process and budgeting process at the provincial level financial system in China’, Comparative Economic and Social System, no 5, pp 34-9. Ngok, K.L. (2002) ‘Law making and market transition: legislative activism of the eighth NPC’, Problems of Post-Communism, vol 49, no 2, pp 23-32. Ngok, K.L. and Zhu, G.B. (2003) ‘Reinventing the communist government in a transitional economy – a review of China’s 1998 central government restructuring’, Asian Profile, February, pp 1-14. O’Brien, K.J. (1990) Reform without liberalization: China’s National People’s Congress and the politics of institutional change, New York, NY: Cambridge University Press. PRC (People’s Republic of China) (2003) The constitution of the People’s Republic of China, Beijing: People’s Press. Saich,T. (2001) Governance and politics of China, New York, NY: Palgrave. Tanner, M.S. (1999) The politics of lawmaking in post-Mao China: Institutions, processes, and democratic prospects, New York, NY: Oxford University Press. Wong, L. (1998) Marginalization and social welfare in China, London and New York, NY: Routledge. Wu, G.G. (1995) ‘Documentary politics: hypotheses, process, and cases studies’, in C.L. Harmin and S.S. Zhao (eds) Decision-making in Deng’s China: Perspectives from insiders, Armonk, NY: M.E. Sharpe, pp 24-38. Xinhua News Agency (2006) ‘191,849 pieces of opinions were solicited on the draft Labor Contract Law’, 21 April (http://news.xinhuanet.com/legal/200604/21/content_4457789.htm).

57

Part 2 Key policy areas and well‑being

Social security policy

five

Social security policy Key issues The Chinese government’s abolition of communes and the changing nature of work units from multiple caring institutions to pure economic units led to increasing numbers of unsupported older people, and unemployed workers suffering from poverty. Over the past three decades, the Chinese government has attempted to build a new social security system to secure social stability and promote economic development. This chapter discusses: • the welfare functions of communes and work units before China’s economic reforms; • the new social security measures after 1978 such as old age pensions in cities and the countryside, the Minimum Standard of Living Scheme, and the Five Guarantees; and • the impact of China’s social security reforms on the well-being of welfare recipients in the context of the modified human dignity framework introduced in Chapter Two.

Introduction A major purpose of the development of social security in China since the 1980s has been to address the unmet societal needs caused by the disbanding of the communes and the reconstruction of SOEs. As pointed out by the SC, ‘with the progress of history, the old labour and social security system had become inadaptable to the requirements of economic and social development’ (Information Office of the SC, 2002).Thus, alternative social security arrangements needed to be established for addressing welfare problems in a mixed economy. In China, social security is a broad concept that incorporates a wide range of social services including: insurance for old age, unemployment, ill health, workrelated injuries and maternity, social welfare services, social relief, housing security and rural social security (Information Office of the SC, 2004; see also Zheng, 2002). Some services included in the list are studied in other chapters of this book. This chapter focuses on old age pensions, the Five Guarantees, the MSLS and other support managed by the MCA for poor people including medical, education and housing assistance.

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Social security before the economic reforms As illustrated in Chapter Three, social welfare provision before the economic reforms was centred on communes and SOEs. In rural areas, social assistance was mainly provided by the collective efforts of communes and family members. In 1956, central government published a directive entitled Guidelines for advanced agricultural communes, according to which communes were required to provide Five Guarantees for older people, widows, orphans and disabled people by giving them food, clothes, shelter, medical care, education and funeral services.Thus, the Five Guarantees are a safety net for rural poor people. Those who receive this type of benefit are called ‘Five Guarantees households’ (Yang, 2006). Chapter Three illustrated the importance of work units for welfare provisions. During the time of state socialism, lifetime employment was a norm for Chinese workers whose work units provided them and their family members with a comprehensive social protection package. After retirement, workers’ relationships with their work units did not end. Instead, they left their posts but still received various types of benefits such as medical care, housing and pensions. This type of welfare arrangement had three features. Firstly, it was enterprise-based – an individual enterprise provided retirement benefits for its workers without directly redistributing welfare resources among enterprises.Thus, the amount and quality of welfare would vary from enterprise to enterprise. Secondly, the state was expected to provide any protection that an individual enterprise failed to meet. Thirdly, workers did not need to pay insurance premiums (Zheng, 2002).As a result, work units acted like a mini-welfare state by taking care of workers from the ‘cradle to the grave’, forming a work unit-based, rather than state-based, welfare system.

Social security after the economic reforms The welfare functions of China’s two pillars of social security, communes and work units, declined following the introduction of the Household Responsibility System and reform of SOEs. The Chinese government introduced a series of social security reforms in order to deal with the increasing financial needs of older people and poor families. The following sections examine social security changes in this time of economic transition. Development of old age pensions in urban areas In China, the provision of old age protection was driven by economic and political considerations.A policy paper entitled Decision on old age insurance scheme for workers of enterprises pointed out that the ‘SOE pension scheme is an important measure to protect retired workers and maintain social stability. It reduces the burden upon the state and enterprises, promoting economic structural reform’ (SC, 1991). As the proposed scheme only aimed at tackling welfare problems associated with China’s enterprise reform, its scope of protection was relatively limited. This 62

Social security policy

new scheme was compulsory for SOEs; while collective-owned enterprises, most of which were managed by local governments, were only encouraged to implement it.Also, for private sector and joint venture companies it was voluntary to establish such a scheme. In particular, central government emphasised the use of multiple channels to meet the needs of older people.Thus, old age protection was expected to be supported by three elements, including (a) basic old age insurance, (b) supplementary insurance from enterprises and (c) personal savings. Local authorities could decide the level of contribution from enterprises, while the rate of workers’ contributions was limited to no more than 3% of their annual salaries (SC, 1991). The government also urged the level of social pooling to be transferred from township level to the provincial level. It seems that the 1991 pension scheme was a quick and pragmatic policy response to the pressing problem of old age retirement. Firstly, the variations of employers’ contributions reveal that the scheme did not seriously consider the adequacy of retirement protection overall. Secondly, the exclusion of other types of enterprises suggests that policy makers failed to address the needs of old age protection from a broad perspective. Thus, it is fair to say that old age protection in China was originally developed mainly for securing social stability by providing some benefits for members of the traditional privileged urban SOE workforce. A more comprehensive scheme was published in 1995, entitled a Notification on deepening reform of the old age pension insurance system (SC, 1995). The ultimate objective of the government here was to establish a unified system under the same management, using the same financial pool for all types of enterprises and workers. Surprisingly, the document had offered two old age pension schemes from which local governments could choose, which caused further ‘fragmentation of the old age pension system’ (Leisering et al, 2002, p 21). While granting considerable freedom to local authorities to set the levels of premiums and the amount of pensions according to local circumstances, central government actually failed to address the fundamental problems of inequality and the unbalanced welfare burden between SOEs in different regions. In 1997, the SC issued a circular entitled the Decision on establishing a uniform basic old age insurance system for enterprise employees (SC, 1997a). The document addressed three crucial issues. Firstly, it adopted a ‘social-pool-plus-individualaccounts scheme’. Secondly, it set a unified contribution rate for both employers and employees. Thirdly, it extended old age protection to all types of enterprises and self-employment. In short, the Chinese government attempted to address the financial difficulties of urban older people from different economic sectors only after nearly two decades of economic reforms. Another circular, entitled Issues about the social pooling of the basic old age pension insurance at provincial level and the transfer of occupational pooling to local administration, was published in 1998 (SC, 1998). It proposed a time frame for achieving social pooling at the provincial level by the end of 1998. Moreover, it urged local authorities to set the same contribution rate for employers in the same province. More improvements were made after 2000. In 2002, urban workers with flexible 63

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working patterns could also join the old age pension scheme. These workers were required to pay an insurance premium of about 18% of the average wage in their regions. In 2003, a total of 155.06 million urban workers participated in this scheme. In 2005, the SC issued a directive called the Decision on improving enterprise workers’ basic old age insurance scheme (SC, 2005).The key principle of this document mainly followed that of the 1997 circular by setting standard contribution rates for both employees and employers. However, it clearly specified the contribution rates for self-employed people and flexible employees. The modern Chinese pension scheme for urban workers was established after the publication of the aforementioned policy documents and the implementation of local experiments since the economic reforms. Key elements of China’s pension scheme for urban workers are shown in Table 5.1. Thus, it was not until 2005 that a clear, standardised, comprehensive and concrete old age insurance scheme for urban workers began to emerge since the passing of the 1986 Bankruptcy Law and came to fruition after the beginning of the new millennium. In the last 20 years of the 20th century, many old people encountered tremendous income uncertainties and economic hardships caused by redundancies, the failure of their SOEs to pay retirement benefits and little retirement protection from private enterprises. There was obviously a welfare gap between the decline of welfare functions of SOEs and the emergence of an appropriate old age protection scheme. Also, the income security of older people was still hampered by regional variations over replacement rates as well as the exclusion of migrant workers from the old age pension scheme in many regions. The development of old age pensions in rural areas Traditional collective welfare in rural areas was severely weakened by the disappearance of communes, but, since the 1970s, some local governments took initiatives to establish old age pension schemes, mainly in the form of individual accounts covering rural residents aged 20-59. Apart from personal contributions, employers and local communities were encouraged to subsidise the scheme.The rate of contribution was decided by individual participants, based on their abilities and expectations. Individuals could receive annuities at the age of 60 from their accumulated accounts (Wong, 1998). From 1991 to 1997, there were several changes in the content of the scheme, including the reduction of the pensionable age from 60 to 50 and the permitting of prepayment and retro-payment (see Table 5.2). Unfortunately, the expansion of rural pension schemes was restricted by several factors including ‘competition’ or ‘disturbance’ from commercial insurance companies; negative views from some government ministries that accused the scheme of becoming a burden to farmers; the unwillingness of some local governments to afford the starting costs; and a low rate of return for the schemes (Leisering et al, 2002, p 19). Also, the scheme did not appeal to farmers because 64

Social security policy Table 5.1:The design of the pension scheme for employees of urban enterprises (2006) Financial systems

A combination of pay-as-you-go, advance funding and government subsidies The pension scheme consists of two elements: the base amount and an individual account The base amount is financed on a contributory pay-as-you-go basis from the pooling fund as well as through subsidies from central and provincial governments The individual account aspect of a pension is financed from the accumulated contributions, plus investment earnings, in a worker’s individual retirement account

Contribution rates

The contribution rate of an enterprise should not exceed 20% of an enterprise’s total wage bill The contribution rate applicable to enterprises in any given province is determined by the provincial authorities. It can vary within a province from one county/city to another Enterprise employees usually contribute at a rate of 8% Employees of small establishments, flexible employees and the selfemployed contribute at a rate of 20%

Pension age

Eligibility for an old age pension is conditional on reaching the following ages: a) for male employees: 60 b) for female managers (cadres): 55 c) for other female employees: 50 d) people who have worked in forms of employment that are especially hazardous or extremely strenuous (for example, coal miners, those working in high altitudes or at extreme temperatures) can qualify for an early old age pension five years before the ages cited above

Contribution A worker must have paid his/her share of contributions or been credited requirements with contributions for at least 15 years A worker who has contributed for less than 15 years and who has reached retirement age is entitled to receive the balance in his/her individual account in a lump sum Benefits

The base amount (also referred to as the ‘pooling pension’) has been 20% of a calculation base equal to the average monthly urban wage in the area in which the contributor resides. Under the December 2005 Decision of the SC, the initial base amount of a worker’s pension will, in future, be determined by three factors: a) the average local wage in the year prior to retirement b) the employee’s average indexed personal monthly contributory wages over his/her career and c) the length of the employee’s period of contributions The individual account amount has been 1/120th of the funds (contributions and investment earnings) accumulated in a contributor’s individual account

Source: Based on information from ILO Study Team (2006, pp 43-52)

65

Social policy in China Table 5.2:The original design of rural pensions (1991) and later changes up to 2002 The 1991 original design

Later changes

Coverage

All rural citizens with agricultural hukou (households) between 20 and 59 years

Babies could be included in coverage Special groups could be admitted before universal coverage

Funding

By individual participants, plus, possibly, subsidies from employers or local communities; tax exemption for contributions Choice of contribution rates depending on individual capacities and desires

Prepayment and backpayment of contributions allowed

Fund investment

Bank deposits and special government bonds Local interests should also be served Expected return rate was fixed at 8.8% per year

Support local economic development only Return rates set by MCA annually, slightly above the interest rate of bank deposits

Pensionable ages

60 years (preferential)

Could be reduced to 55 or even 50 years

Benefits

Annuities depending on accumulated funds in individual accounts Minimum 10 years of payment Return rate of investments assumed 8.8% per year over the annuisation period

Increased by 10% in 1994

Administrative organisations

MCA Pensions Department: general guidance and supervision Provincial or city/county social insurance agencies: administration of funds and individual accounts Administrative costs up to 3% of current contributions

At the beginning of a pension scheme in a county, an extra 3% allowed for administrative costs

Source: Leisering et al (2002, p 19)

there were neither efficient financial products, nor any preferential saving interest rates and special treasury bonds to maintain and increase the value of old age insurance funds (People’s Daily Online, 2006b). Against these unfavourable factors, the total number of old age insurance participants dropped from 82.8 million to 53.8 million from 1997 to 2004 (Table 5.3).The World Bank concluded that ‘the scheme was unsuccessful and the coverage was small’ (White, 2006). Although old age pension reform in rural areas had started earlier than that in the cities, there was little progress after several years of attempting to introduce new policies. 66

Social security policy Table 5.3:The development of rural pension schemes since 1992 1992 1995 1996 1997 1998 2000 2001 2002 2003 2004 Number of insurants (million)

26.0

51.4

65.9

82.8

80.3

61.7

60.0

54.6

54.3

53.8

Number of pensioners (million)

–

0.3

0.3

0.6

–

1.0

1.1

1.2

2.0

2.1

Contribution collection (billion Yuan)

–

3.7

4.4

4.2

3.1

1.4

1.7

2.5

3.6

–

Pension expenditure (billion Yuan)

–

0.1

0.2

0.3

0.5

0.4

0.5

0.5

1.5

–

Accumulated funds (billion Yuan)

0.8

6.0

10.0

14.0

16.6

19.6

21.6

23.3

25.9

28.5

Source: Shi (2006, p 801)

Since the economic reforms the frontier of protection for older people in China retreated from communes to the family. Minimum Standard of Living Scheme Many Chinese people encountered financial difficulties because of unemployment, inadequate retirement benefits and redundancies caused by the reconstruction of SOEs. A study conduced by ACFTU showed that 10 million workers did not receive wages on time and 1,510,000 retirees had their pension reduced or even stopped (Wong, 1998). Therefore, the Chinese government urgently needed to set up an effective mechanism to tackle poverty in its new mixed economy (Ngan et al, 2004). Without a nationwide strategy for tackling poverty, central government urged local authorities to use multiple sources and to develop their own initiatives to meet their residents’ needs. In particular, after the 1994 tax reforms, local authorities were expected to bear the financial burden of welfare provision (see Chapters Four and Ten for details).Thus, local solutions in response to local problems were a common practice in the early stages of China’s economic reforms, as exemplified by the development of the MSLS. Shanghai was the first local authority to introduce the MSLS in 1993 in order to ‘provide a basic living for individuals or families to overcome their difficulties, maintaining social stability and promoting social development’ (Shanghai MCA, 1996). Later, a similar type of scheme was launched in regions such as Qingdao, Fuzhou, Dalian and Guangzhou.According 67

Social policy in China

to Mo et al (2005), the development of the MSLS revealed that some local authorities were creative and willing to take initiatives to meet social needs. In 1997, the SC introduced the MSLS to the whole country to provide protection for ‘city dwellers with non-agricultural households and where the average income of family members is below the level of the minimum living standard of a region’ (SC, 1997b). The MSLS mainly targeted three groups: the traditional ‘three-no’s’ (households without dependants, without any sources of income and without working ability); unemployed workers; and low-income households. Local authorities were expected to bear all expenditure of the MSLS. But in 1999 central government resumed its role as the last resort.The SC (1999) summarised the contents and implementation of MSLS: a) Level of assistance: the basic necessities of recipients are clothing, food and housing. Also, by setting the amount of assistance, local authorities are urged to take expenses such as water, electricity, gas and the education of children and young people into account. b) Application procedure: applicants are required to submit application forms together with supporting evidence to Street Offices (SOs) or Resident Associations (RAs). c) Monitoring mechanism: officers from RAs check applications by interviewing applicants and their neighbours.The names of successful applicants are posted on public notice boards. Neighbours are encouraged to tell government officials about any welfare fraud. In addition, applicants can be asked to undertake community service. Because of the Chinese government’s extra efforts, 669 cities and 1,639 counties established the MSLS in 1999. Between 1999 and 2004, the central government’s financial expenditure on the MSLS increased dramatically from ¥4 million to ¥105 million, which represented 60.7% of the total expenditure on the MSLS in 2004. As a consequence, the number of MSLS recipients jumped by nearly 800 per cent, from 2.81 million to 22.01 million (Mo et al, 2005). Supplementary assistance for poor people Educational assistance for poor families: in 2004 the government set up several objectives to be fulfilled by 2007, targeting poor children and young people in both urban and rural areas. Firstly, it aimed to provide free primary and secondary education for holders of the certificate of Five Guarantees in rural areas and the ‘three-no’s’ in urban areas. Secondly, exemption from textbook purchases and special charges were granted to poor pupils receiving compulsory education. Thirdly, subsidies were provided for students at upper secondary schools. In a similar vein to other welfare programmes, central government promoted the use of multiple resources, and local authorities were urged to encourage community donations to this programme. To address the financial difficulties of 68

Social security policy

higher education graduates, the MCA in 2004 required local civil affairs offices to provide temporary aid or a minimal standard of living allowance for needy graduates (MCA, 2004a). Medical assistance: although many poor families are unable to pay for medical care as a result of the marketisation of health services and the breakdown of traditional cooperative medical schemes in rural areas (see Chapter Seven for details), little attention was paid to the setting up of formal and centralised medical assistance. Liu andYi (2004) summarised the impact of increasing medical costs, with medical expenses accounting for 22.6% of the disposable income of poor families in Shanghai, pushing more families under the poverty line.An official national health survey, conducted by the MH, found that 34% of urban residents and 47% of rural residents stopped hospital treatment mainly because of financial difficulties. Also, 22% of low-income groups did not consult doctors when they were sick (China Development Research Foundation, 2005, p 60). In response, various types of medical assistance measures were implemented in different localities, including discounted charges, temporary assistance, specific medical grants, medical assistance foundations, medical mutual help schemes and charitable aid (Shi, 2002). However, according to Liu and Yi (2004, p 87), there is still no national model on how to implement National Medical Assistance. Meng (2006, p 53) argues that the reason why public hospitals did not provide adequate exemptions for poor patients was the ‘absence of government-specific budgets and well-designed regulations for hospital exemption programmes’. In 2004 the government announced a fund to provide financial support for poor families, financed by subsidies from local governments, lottery funds and public donations (MF and MCA, 2004). Central government also provided financial support for poor local authorities in central and western parts of China, where those with no income or who were too poor to pay for expenses associated with life-threatening diseases could apply for medical aid. The amount of assistance, however, was based on the financial circumstances of local governments. The government initiated a plan in 2005 to implement pilot medical assistance schemes in selected counties for two years (MCA et al, 2005). The scheme was financed by multiple sources: those who have not joined any medical insurance schemes or those who are unable to cope with medical costs as a result of catastrophic illnesses are eligible to apply. Low Rental Housing for poor households: in 2003 the government provided financial assistance with rent for poor urban households occupying below 60% of the average per capita living space in their region (MC et al, 2003). In a similar vein to the medical assistance scheme, this housing scheme was expected to be financed by multiple sources such as subsidies from local governments, part of the income from the HPF (see Chapter Nine for details) and private donations. The names of successful applicants were posted on public notice boards. Additionally the policy included the provision of LRH and rent reductions. 69

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In 2005 the government gave a detailed account of the criteria for applications for LRH. Firstly, applicants did not necessarily need to be recipients of the MSLS, as required in the past. Secondly, local government could now set the criteria for an applicant’s living space restriction. Thirdly, applicants needed to submit written applications to the SO or township government together with evidence of income. Finally, again the names of successful applicants are posted on public notice boards.Thus, applicants need to pass several barriers, checked by volunteers and civil servants, rather than by welfare professionals, and ‘public notification’ has been seen as a necessary and effective means of preventing welfare fraud (MC and MCA, 2005). Additionally, in 2006 local governments were required to allocate 5% of their land revenue for building LRH (China Real Estate Business, 2006). The effectiveness of this measure, however, depends on the willingness of local authorities and the effectiveness of central government’s monitoring mechanism. Minimum Standard of Living Scheme in rural areas The development of the MSLS in rural areas has been relatively slow. It was not until 2006 that central government announced its intention to implement it throughout the whole country. In 2003, 2,037 counties of 15 provinces had set up the MSLS to provide financial support for 4 million recipients. However, this only accounted for 0.4% of the rural population. For many years, the central government only encouraged areas with adequate capacity to establish the scheme (Information Office of the SC, 2004). Due to the lack of a common policy on public assistance, local authorities developed their own schemes. According to Tang (2005), there are two types of social assistance. One group of provinces already extended the practice of the urban MSLS to the countryside. Here, 4.4 million eligible rural residents were issued with MSLS certificates.Another group of provinces focuses on assisting ‘households with special difficulties’, and there are 8 million rural residents protected by this scheme. In early 2007, there were 15 million rural residents living on the MSLS with a total expenditure of ¥4.16 billion. As the welfare functions of local authorities, especially their lower-level administration units, was always limited by financial difficulties (see Chapters Four and Ten for details), the extension of the MSLS from cities to the countryside would be beyond their capacity. Unless there was an injection of more resources from central government as well as the strengthening of the existing monitoring mechanism over local officials’ behaviour, the full coverage of the rural population would take a relatively long time to achieve. Five Guarantees in rural areas In 1978, ‘households with Five Guarantees’ were defined as older people, people with disabilities, young children without guardians and those who are without working ability and income. The commonly used term today is ‘three no’s’. 70

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However, the funding base of ‘three no’s’ was under threat following the collapse of communes after the implementation of the Household Responsibility System. This was because welfare grants from communes disappeared. To address this urgent welfare need, the SC (1994) published the Regulations concerning the work of implementing Five Guarantees in rural areas. Accordingly, eligible people would be issued a ‘certificate of Five Guarantees’ after having been approved by village committees or township governments.The government expected that recipients would be provided with food, clothing, housing, medical care and burial expenses (the so-called five areas of guarantee) in order to provide them with ‘a normal living standard’. Compulsory education would also be provided for children and young people.Again, the localisation of welfare was adopted: villages and township governments were responsible for implementing the Five Guarantees, supervised by the county government.Village committees and township governments needed to collect resources for financing the Five Guarantees (Wong, 1998). There are two types of assistance for ‘households with Five Guarantees’: concentrated care and dispersed care. Concentrated care means that eligible people, especially older people, would be collectively cared for in one building, such as homes for older people (MCA, 1997). In 2003, 503,000 older people were living in 24,000 old age homes (Hong et al, 2004). By contrast, dispersed care means that eligible people would be cared for by people who signed a ‘Five Guarantees Caring Agreement’ with local governments or by village/township governments that organised regular assistance for them. By 2006, 3.2 million villagers were living on the Five Guarantees (China Daily Online, 2006). In the same year, central government issued an Ordinance on the implementation of Five Guarantees in rural areas, which set up a more systematic application procedure, culminating in the names of applicants being posted in public (SC, 2006). It also established a stable financial base where all local governments had to work out the Five Guarantees expenses in their budgets and collective village enterprises were required to help finance the Five Guarantees. More importantly, central government promised to provide poor regions with financial support to launch the Five Guarantees. Compared with the 1994 circular, this policy document provided a more stable financial base for Five Guarantees, although it created a more complicated and bureaucratic application procedure.

Social security and well-being Using a modified human dignity framework developed in Chapter Two, the following sections assess the impacts of China’s social security measures on the well-being of welfare recipients.

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Meeting physical well-being Minimum Standard of Living Scheme Only items essential to day-to-day living have their costs met by the MSLS, and no national formula has been developed for calculating the amount of social assistance necessary to meet these costs. The MSLS has also been positioned as ‘the lowest level of financial support in the social security system’ (People’s Daily, 2002a). Furthermore, local government have been advised by central government to ‘keep a distance’ between the levels of the MSLS and those of the national minimum wage and unemployment benefits (MF et al, 2006). Obviously, work motivation (rather than meeting the needs of human beings) is the main concern of officials when considering the level of the MSLS. Without an objective and national formula, local governments have worked out the levels of MSLS on the basis of their own local financial conditions as well as senior officials’ perception of poverty. Several research studies reveal that MSLS levels are too low to make ends meet.A national study with 1,257 respondents reported that the standard monthly MSLS rate in 36 cities was only 22.2% of the per capita monthly income of residents, and in some cases was even as low as 9.2%. This explains why 50.6% of MSLS recipients had to seek supplementary assistance from relatives (Zhang and Tang, 2005).Another study found that the average personal annual benefit of the MSLS (¥1,412.31) was only 16.6% of the average personal annual income in Wu Han City, where as many as 60% of respondents said that the level of assistance was too low to afford daily necessities (Mei and Liu, 2005). Due to financial constraints, most recipients in another study could only buy the cheapest food, regardless of its nutritional value, and over half were unable to eat meat weekly (Tang, 2003). Similar problems were reported in three other cities where unemployed respondents voiced the following concerns (Cook and Jolly, 2000, pp 18-19): No good clothes to wear Family has poor equipment Difficulty getting food and clothes No money to pay heating or rent No ability to pay back loans, do not dare to borrow money Cramped living space. Another weakness of the MSLS was that it was inadequate to support recipients’ healthcare needs. Sun (2005) reported that 20.1% of the 686 MSLS families in 10 cities would delay treatment and only 7.3% would go to hospitals.This is because as many as 89.3% of respondents needed to pay all medical costs out of their own pockets (Sun, 2005). Another study showed that only 3.6% of 387 MSLS respondents in Wu Han City received financial support for medical treatment and many poor people did not have, or had delayed, medical consultations due 72

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to financial difficulties (Mei and Liu, 2005). The above evidence clearly shows that the existing MSLS is failing to meet the healthcare needs of many of China’s poorer people. Urban old age pensions There are variations in the levels of old age pensions among recipients, especially between urban and rural residents, shaped by local financial conditions. Retired older people in cities receive a pension with replacement rates ranging from 40% to nearly 80% (Wang, X., 2005) (see Table 5.4). Table 5.4:The replacement rates of old age pensions in different regions (2003) Average Average annual Region annual salary old age pension Shandong Shanxi Xinjiang Gansu Hebei Henan Qinghai Inner Mongolia Guizhou Jilin Sichuan Yunan Heilongjiang Shaanxi Tibet Hubei Ningxia Anhui Hainan Fujian Hunan Guangxi Jiangxi Jiangsu Liaoning Zhejiang Guangdong Chongqing Tianjin Beijing Shanghai National average

12,567 10,729 13,255 12,307 11,189 10,749 15,356 11,279 11,037 11,081 12,441 12,870 11,038 11,461 26,931 10,692 12,981 10,581 10,397 14,310 12,221 11,953 10,521 15,712 13,008 21,367 19,986 12,425 18,648 25,312 27,304 14,040

9,856 7,951 9,218 8,152 7,299 6,881 9,784 7,042 6,872 6,877 7,657 7,919 6,778 6,985 16,256 6,372 7,729 6,287 6,173 8,222 7,014 6,763 5,653 8,399 6,715 10,146 9,241 5,660 8,316 10,327 11,025 7,907

Replacement rate (%) 78.4 74.1 69.6 66.2 65.2 64.0 63.7 62.4 62.3 62.1 61.6 61.6 61.4 61.0 60.4 59.6 59.5 59.4 59.4 57.5 57.4 56.6 53.7 53.5 51.6 47.5 46.2 45.6 44.6 40.8 40.4 56.3

Source: Wang, X. (2005, pp 129-30)

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A consultant from the World Bank claimed that ‘China’s benefits are too generous’ because the 70% replacement rate of the final year’s wage was higher than that of the US (40%) and many other western countries (50%) (James, 2002, p 15). However, a higher replacement rate is only true in some regions and economic hardship for older people exists in many regions. As revealed in Table 5.4, the average replacement rate of all provinces was only 56.3% in 2003. Also, the replacement rate in Shandong (78.4%) was almost double that in Beijing (40.8%). Thus, regional disparity should not be neglected when assessing the quality of life of China’s older people. In contrast to urban retired workers, older people in rural areas have little financial protection due to the lack of a compulsory retirement scheme. The present old age pension scheme only covers around 15% of Chinese workers (Xiang, 2007). Older people in the countryside are still expected to rely on either income from farmland or support from children. Unfortunately, this traditional mode of old age protection is ‘very hard to maintain’ now (Xiang, 2007). ‘Households with Five Guarantees’ As shown in official documents, the Chinese government has consistently promised to provide households with Five Guarantees with an average living standard. In practice, assistance offered by local governments is inadequate. For example, Hong et al (2004) reported that respondents in some areas of Anhui Province received far less than the ¥1,800 a year stated in the official documents. Also, the average annual assistance in 2000 for those who were in ‘concentrated care’ was ¥1,404 and for those in ‘dispersed care’, ¥833.6, which was much lower than the average annual income (¥1,920) of rural people.They further found that households with Five Guarantees were unable to get adequate support for food, clothes, medical care and housing. Almost all of the respondents could not remember the last time they had eaten meat; many of them could not afford new clothes. Many lived in very poor housing that did not protect them from storms. Health was the most problematic issue as many Five Guarantees respondents were unable to get any medical treatment. The development of LRH has been very slow. In 2007, 149 cities do not have an LRH scheme. Many other cities do not even have information on LRH applications and the approval procedures (see Chapter Nine for details). Thus, apart from urban retired pensioners in rich regions, social assistance recipients received only limited financial support that hardly met their physical and medical needs.The present assistance levels have been politically constructed to promote work ethics without reference to any scientific studies for meeting daily necessities.

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Meeting psychological needs The existing social security system does not adequately address the psychological needs of welfare recipients. Rather than forming a new administrative mechanism for managing social assistance, central government uses traditional communist neighbourhood organisations, SOs and RAs, to handle social security applications. In 2004, there were 80,017 of these organisations with 300,000-500,000 volunteers investigating MSLS applications (Tang, 2005). However, staff from these organisations are not social welfare professionals but volunteers or frontline cadres whose normal duties are dealing with political education, hygiene and community issues. Local authorities can use home visits, interviews with neighbours and official letters to relevant private and public organisations to assess the eligibility of applicants. Members of staff from the SOs or RAs have close contact with applicants due to the neighbourhood nature of these organisations. They not only have a better understanding of the employment and financial situations of poor applicants but can also advise applicants on non-material problems (Tang, 2002). Their weaknesses, however, are ‘the lack of professional quality and service inconsistencies’ (Tang, 2002; Wu and Shi, 2005). Many MSLS frontline workers are housewives, retired workers, laid-off workers and people with disabilities with low qualifications (Qingdao Public Administration Institute Research Team, 2003). Lacking any professional training, workers from the RAs do not have a clear understanding of the concepts and contents of unemployment, social assistance and public housing schemes. For example, some of them do not understand the objectives of the MSLS, treating it as charity. Also, many lower-rank cadres often believe that the MSLS will cultivate welfare dependency and increase the public welfare burden, and some even stereotype recipients as lazy and hopeless (Wu and Shi, 2005). Because of these misconceptions and their limited skills, the service quality of SOs or RAs is inconsistent and the welfare rights of recipients are often not realised. More importantly, the use of public notices as a monitoring procedure has deterred some recipients from seeking public assistance. Wu and Shi (2005) report that some poor parents refused to apply for the MSLS in order to prevent their children from being discriminated against at schools. After knowing that their photographs would be put on public notice boards, many MSLS applicants withdrew their applications (Xinhua News Agency, 2006a). Guiyang City even required applicants to attend public hearings in order to decide the results of their MSLS applications (Xinhua News Agency, 2006b). Obviously local governments have set up harsh application procedures without considering the social and psychological impact on poor people. Better service quality is essential to the psychological needs of many poor people. In particular, many laid-off workers, when asked to express their social and psychological conditions, felt ‘loss of face, nothing to live on, fed up, can’t sleep, hollow, empty, lonely, isolated, no-one to talk to, couldn’t accept it, now 75

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resigned to it, initially optimistic, now discouraged’ (Cook and Jolly, 2000, p 13). It is therefore essential to raise the education level of staff and to enhance their professional skills so that appropriate support could be offered to social security recipients (Tang, 2002). There is also a serious shortage of psychologists in China. For example, with a population of 17 million, Shanghai Municipality only has 100 therapists (China Daily Online, 2004a). Clearly, no specific counselling programmes are available for tackling the mental health issues of poor people, whose problems are currently treated as solely financial issues, dealt by administrative procedures. Social integration The recipients of the MSLS, as illustrated above, do not have sufficient resources to buy nutritious food or to pay for medical fees. Given their very limited resources, it is difficult for them to lead a normal social life.Tang (2003) reported that 39% of poor respondents did not visit friends and relatives for the Chinese New Year and other festivals. In Chinese society, gift exchange and eating out are popular social activities for celebrating festivals. In particular, married adults are expected to give pocket money to children in the Chinese New Year. However, poor unemployed workers had ‘no money to get together with relatives and friends’ and ‘can’t have everyday entertainment (watch ball games, go to concerts)’. They even tried to ‘avoid social interactions’ such as ‘weddings and New Year engagements’ (Cook and Jolly, 2000, pp 18-19, 35). Thus, social security recipients are too poor to fulfil common expectations; they have been excluded from what is considered a normal social life. The use of public notices are seen as a barrier to a normal social life, and have become a necessary hurdle to go through when applying for various types of welfare benefits such as the MSLS, Five Guarantees and LRH. Under the existing social assistance procedures, an applicant’s name, age, number of family members, address and amount of support received are treated as public information – the public are encouraged to give comments on the eligibility of all applicants. Some provinces devise even more stringent application requirements to deter welfare fraud. For example, Sichuan Province requires the details of applicants to be published three times before the approval of welfare entitlements (Shang and Wu, 2004). It is argued that China does not have an effective system to accurately assess the income of recipients, and that the involvement of the public, especially recipients’ neighbours, could be seen as an effective monitoring procedure. On the other hand, the loss of ‘face’ is a serious issue for Chinese people. Some families refused to apply for assistance for fear of their children being discriminated against at school (People’s Daily Online, 2002b). It should be stressed that the central government has attempted to mobilise government departments and the community to support laid-off workers. As the SC (1997b) pointed out:

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We should express our traditional Chinese noble values of respect for older people, caring for children, and mutual help. We should widely mobilise collective resources by organising activities to bring ‘warmth and support’ for the poor. We should stress mutual help in the family. Sun’s (2005) study also reported that respondents were visited by local cadres, especially during traditional Chinese festivals (see Table 5.5). At the national level, government and NGOs reported paying 55.8 million visits to poor families (Information Office of the SC, 2004). Furthermore, a total of ¥18.11 billion was raised from ‘heart-warming activities’ between 1994 and 2004 (Information Office of the SC, 2004).There was a mixture of stigmatisation of and official concern towards social security recipients. However, this type of official support is occasional and selective, which can hardly solve the long-term financial problem of welfare recipients. Table 5.5: Caring and help received by poor families Type of help and caring Caring and help from SO cadres Help from neighbours ‘Caring actions’ during traditional festivals Visited by government cadres Work unit/individual provides assistance for a family Help from volunteers Getting no help

n (718)

%

455 253 224 162 133 104 108

63.4 35.2 31.2 22.6 18.5 14.5 15.0

Source: Sun (2005, p 245)

Fulfilling caring duties The current low levels of assistance fail to meet children’s educational and social needs. Two national studies revealed the education problems of poor families. By studying the life quality of 2,354 poor respondents in Shanghai, Wu Han, Tianjin, Lanzhou and Chongqing, Tang (2003) found that 77.4% of them were unable to pay for school expenses; 18.4% even claimed that they would stop children from attending school because of poverty. Similarly, Sun (2005) reported that among 565 poor families, only 7.6% received education subsidies from the government, and many of them (59.6%) had to use limited family resources to cope with educational expenses. Because of limited public support, one in five families (20.4%) had to borrow money from relatives to cope with children’s educational needs. Complicated application procedures have put off needy families from seeking official help. To apply for tuition fee concessions, parents receiving the MSLS have to apply to schools first. Then, after obtaining approval from the schools, parents have to return the completed forms to the Social Assistance 77

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Management Offices or to RAs (Shanghai MCA, 2001).Thus, poor parents need to go through several barriers in order to receive assistance. Despite having introduced nine-year compulsory education in 1986, the enrolment rate at junior secondary schools in 2004 was 87.3%, whilst the national gross enrolment rate in senior high schools was only 42.8% (ME, 2004). The drop-out rate in rural junior high schools was as high as 40% (China Daily Online, 2007a). It is evident therefore that many poor children have been excluded from receiving a basic education. Furthermore, the medical needs of poor children have suffered as a result of the privatisation of healthcare as well as the low coverage of medical insurance schemes. Because of high medical costs, many parents are forced to delay getting treatment for sick children or even to give up altogether (Shanghai Star, 2004). The existing level of the MSLS is hardly able to meet the basic daily necessities of poor families, let alone the social needs of children. Sun (2005, p 228) reported that 43% of young people from poor families did not participate in social activities because of financial reasons. Also, 22.2% of young people from this group of families even regarded staying at home as their only leisure activity. According to the respondents, social activities required extra resources, used ‘a lot of money’, and their families found them difficult to afford. The existing MSLS does not fully enable parents to fulfil even their most minimal caring duties.The privatisation of social services had excluded 20 million children from schools and also half of the population, including many children, from receiving medical care (Chan, 2003). Equal value Unequal access is the most obvious feature of the present Chinese social security system, with two different welfare systems for China’s citizens: one for cities and one for rural areas (for example, the old age pension scheme is compulsory in urban areas but voluntary in rural areas).According to a senior official of the MLSS, central government ‘had not apportioned a penny’ to the rural pension scheme, while it made ‘an annual contribution of more than 50 billion yuan’ to the urban pension system (People’s Daily Online, 2006b). Only 15% of China’s 1.3 billion people are covered by old age pension schemes (China Internet Information Centre, 2005). A household survey conducted in 2000 further revealed a big pension gap between cities and the countryside: 56.2% of older people living in cities who did not work received old age pensions compared with just 8.2% of their counterparts in rural areas (Wang, D., 2005). Thus, old age security is the privilege of urban workers as well as a small number of rich farmers in rural areas. The link between social security and the HRS puts migrant workers at a disadvantage (Wang and Zhao, 2003). More and more rural workers move to work in urban areas as a result of rapid economic growth in big cities and loss of farmland due to urbanisation and redevelopment (see Chapters Three and Six for details). In 2004 there were 113.9 million migrant workers working in cities, accounting for 78

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23.2% of the total number of rural labourers (Xinhua News Agency, 2004a). In 2000, 17.7% of the urban population were actually ‘temporary migrants’ (see Table 5.6). Some economically developed regions attract a big number of migrant households. For example, there were 23 million migrant workers in Guangdong, 20% more than its registered population. Although the number of participants in old age insurance schemes increased from 112 million to 174 million between 1998 and 2005, only 55% of urban workers were covered by the scheme (China Internet Information Centre, 2006). Migrant workers are characterised by high mobility and low salaries. Unfortunately, under the existing old age pension administration, migrant workers cannot easily transfer their old age pensions from one region to another region because of poor pension services as well as regional differences on pension debts. The existing system also fails to address the financial burden on migrant workers of paying insurance premiums. As urban migrant workers struggle to pay for their families in rural areas, extra expenses in the form of old age insurance are not easy to pay. As Chengping Tian, a minister of the MLSS, admitted:‘China still has a great number of employees and individuals from nonpublic ownership enterprises excluded from the present old-age pension scheme’ (China Internet Information Centre, 2006). Fundamentally, the existing old age pension scheme is centred on work, and those who are out of the labour market get little protection. Many women are unable to join the labour force because of family commitments and will therefore find it difficult to make ends meet in the future. The case of old age insurance shows that the equality of men and women under Chinese socialism has been gradually eroded by a market-oriented welfare system. Saunders and Sun (2006), after using multidimensional indicators for assessing the living conditions of men and women, found that 44.2% of women did not have old age pension protection, in contrast to only 14.2% of men. Also, 77.6% of women compared with 66.5% of men did not have savings for their old age. This explains why more female respondents did not feel economically secure (Table 5.7). Table 5.6: Migrants with temporary residence permits in urban areas All migrants Destination (millions) Urban Proportion of the City Town areas urban population (%) Origin of ‘temporary migrants’ Outside province 23.1 8.4 31.6 Inside province, outside county 23.6 5.6 29.2 Town within same county 7.3 6.8 14.1 City to town in same county 0.0 1.1 1.1 Rural areas within same county 4.2 5.5 9.7 All originsa 58.2 27.6 85.9

6.5 6.0 2.9 0.2 2.0 17.7

Note: a Excluding people who moved within a city. Source: OECD (2005, Table 1.12)

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Table 5.7: Multidimensional indicators of hardship Incidence (%)a Dimension/definition Economic insecurity Does not feel economically secure Is not satisfied that they have enough food and clothing ‘Very worried’ about not having enough resources for basic living

Males

Females

17.0 6.7 21.6

31.1** 3.7** 24.7**

Inadequate housing facilities Is not satisfied with present living conditions Health status Has a chronic illness Assesses health conditions as ‘rather bad’ or ‘fairly bad’ Not covered by a health insurance programme of any kinda ‘Very worried’ about having no money to see doctor when sick

22.9

22.4

64.1 16.7 31.4 28.4

69.8** 25.4** 57.1** 31.4**

Social exclusion Feels lonely ‘often’ Has no one to confide in Has no one to care for them when needed

67.4 24.1 18.6

73.0** 27.3** 20.3*

Relative social status Feels less economically secure than other retired workers Feels they are falling more and more behind the development of society Is unhappy compared with other old people

22.2 67.4 4.1

37.0** 73.0** 6.9**

2.7 8.7

5.7** 8.6

Overall well-being Overall economic condition is ‘very difficult’ Is ‘totally’ or ‘fairly’ unsatisfied with life

Notes: **/* indicates that the mean gender difference is statistically significant (ρ = 0.01/0.05). a Is

not covered by any of the following programmes: public free medical care; commercial health insurance; cooperative health insurance; other forms of medical insurance. Source: Saunders and Sun (2006, p 144)

In short, the gender division of welfare in China has been widened by a marketoriented old age insurance scheme that provides protection just for workers instead of homemakers. Also, the disadvantages of people with rural household residency, unfortunately, do not disappear if they are working in cities. Their rural residency becomes a justification for local authorities to exclude them from social security protection. Although migrant workers are doing ‘jobs that city dwellers find too strenuous, dirty or low paid’ (People’s Daily Online, 2007), and also fulfilling the same taxation obligations as their urban counterparts, local governments treat them as ‘overseas workers’, denying them access to the MSLS, LRH, medical care and old age pension insurance. It is only in recent years that central government has tried to tackle this kind of unfair treatment. For example, in 2003 local authorities were urged to provide public education for migrant children (see Chapter Eight for details). Prior to this policy, nearly half of the 19.8 million migrant workers 80

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under the age of 18 did not go to school (China Daily Online, 2004b). And it was not until June 2007 that the MLSS announced a draft paper for introducing a mandatory old age insurance scheme for 140 million migrant rural workers.The draft proposed that migrant workers contribute 5% of their monthly salaries to an old age pension scheme managed by provincial governments. The present MSLS is mainly an urban-oriented social assistance programme. Although in 2006 central government decided to extend public assistance to rural areas, progress has been slow. The actual implementation of rural MSLS depends on the motivation of local officials as well as their local financial conditions. However, the problem of unemployment has become more serious in rural areas as a result of the deregulation of agricultural prices and production. According to the China Poverty Relief Fund, 30 million rural people lack adequate food and clothing, and another 60 million have an income of less than US$100 a year (Chan, 2004). Unlike households with Five Guarantees, able-bodied adults are not regarded as ‘deserving’ poor, and their needs have not been adequately addressed. Social assistance measures are therefore mainly benefiting the urban poor. Regional variations on welfare benefits are another type of inequality. Local authorities have been granted the power to set the benefit levels of their regions according to their financial conditions. As a result, poor people in economically developed provinces get a higher social assistance benefit than those in less developed provinces. For example, the monthly assistance rates of the MSLS in Guangzhou and Beijing were ¥330 and ¥290 per person respectively, in contrast to only ¥161 in Urumqi and ¥165 in Xining (see Table 5.8). Table 5.8:The monthly rate of the MSLS in 36 cities of China (May 2005) Name of city Guangzhou Shenzhen Dalian Ningbo Hangzhou Beijing Shanghai Xiamen Tianjin Nanjing Jinan Qingdao Hiakou Shenyang Shijiazhuang Wuhan Chengdu Hefei

Monthly MSLS rate per person (¥) Name of city 330 290-344 240-363 300 280-320 290 290 265-315 265 240 230 230 221 220 220 220 210 210

Fuzhou Kunming Nanning Changsha Harbin Lhasa Xian Zhengzhou Chongqing Huhhot Lanzhou Nanchang Taiyuan Yinchuan Guiyang Changchun Xining Urumqi

Monthly MSLS rate per person (¥) 200-220 210 210 200 200 200 200 200 195 190 190 190 183 180 170 169 165 161

Source: Secretary of China Social Security Forum (2006)

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The discussions above suggest that the CCP has nearly completely destroyed its core value of equality. New patterns of inequality have emerged in China caused by the combination of the marketisation of labour relations and the CCP’s preferential treatment of urban residents. Under existing social security arrangements, the extent of protection varies between men and women, between urban permanent residents and migrant workers, rich and poor regions and urban areas and the countryside. As the Chinese government admits, ‘the whole social security system lacks unity and coherence’ and suffers from ‘structural defects’ (China Internet Information Centre, 2002). Self-determination In China, social security recipients can hardly influence welfare decisions. The levels of the MSLS and the Five Guarantees are decided solely by senior officials of the local governments (SC, 1997b). Living on state benefits, welfare recipients are also subjected to some form of control. For example, working age recipients are required to join community services organised by resident associations (SC, 1999). Moreover, the names of MSLS recipients, as illustrated in the previous section, will be released to the public. Thus, tackling welfare fraud has become a legitimate justification for the Chinese government to regulate the behaviour of poor citizens. Some local authorities may seek advice from the public, especially the academic community. For example, officials of the Shanghai Municipal Government asked academics for their views on developing new policies. As the Mayor of the Shanghai Municipal Government Zheng Han emphasised, ‘it is good practice to get comments and opinions from specialists to help the government design policies, and we will hold on to the tradition and improve it’ (Shanghai Municipal Government, 2003). This type of consultation is selective and passive, however, relying heavily on the goodwill of government officials. As local government officials are key decision makers, the influence of academics on the implementation of the MSLS will be relatively limited. The CCP attempted to use administrative arrangements to encourage some degree of public participation. The first strategy was to provide social security information to the public about such things as the levels of benefits, application procedures, feedback channels, and details of the relevant legislation. According to the guidelines of the SC (1997b), ‘by implementing the MSLS, the principles of openness, equality and democracy should be stressed’. Later, the SC (2001) further urged local authorities to adopt more appropriate channels to encourage democratic participation and to provide more information to the public. The MCA (2004b) also asked local governments to provide more opportunities for the public to monitor the MSLS: ‘let the public know the management of the MSLS in order to build an open system based on fairness and justice’. Regarding the Five Guarantees, the SC (2006) stressed that the details of its applications, implementation and finance ‘should be released to the public, subject to their 82

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supervision’. Also, applicants for LRH were encouraged to make complaints to a higher level of administration if they were not satisfied with the decisions of the lower administrative units (MC et al, 2003). In this context, giving feedback on the operation of existing social security programmes is the only realistically available form of public participation. Due to the lack of independent committees for reviewing official decisions, applicants’ welfare rights are actually not institutionally safeguarded. A just polity A just institution, as discussed in Chapter Two, is mainly evident in the form of the quality of personnel and the effectiveness of a polity at safeguarding justice. In China, numerous circulars and directives were issued by central government to urge local officials to take care of those in need. Regarding the implementation of the MSLS, the SC (2001) pointed out that all levels of government should: Put the work of MSLS into the list of important tasks, strengthen leadership, plan systematically and ensure the successful implementation of the MSLS. Every department should earnestly fulfil their tasks, strengthen co-ordination, dealing with problems that might be emerging … should mobilise community resources, tackle poverty, organise caring activities, and build a mutual help culture. Furthermore, concerning the Five Guarantees, the SC emphasised that those who violated the law (for example, through corruption and illegally using welfare resources) would be regarded as criminals and subject to prosecution (SC, 2006). Central government is therefore aiming at building a polity based on justice. But existing political and administrative arrangements are too weak to monitor the malpractices of government officials. Participants paying in to the old age pension scheme always worry about pension fund management.A large proportion of pension funds is collected and managed by local authorities. According to the law, local officials are only permitted to deposit funds to banks or invest them in the form of national bonds or securities, but, unfortunately, the National Audit Office reported in November 2006 that about ¥7.1 billion of pension funds had been misused in overseas investments, construction projects and illegal lending (China Daily Online, 2007).The party chief of Shanghai, Lianyu Chen, was involved in using ¥3.2 billion of a social security fund for providing a loan to a toll road operator. In another case, the Director of the Health Insurance Fund Management Centre in the Ningxia Hui Autonomous Region transferred ¥31.9 million from a medical insurance fund to friends and relatives (People’s Daily Online, 2006a). Although central government ordered local authorities to set up monitoring mechanisms to prevent such abuses, the effectiveness of the new measures is in doubt because of the lack of an independent legal system for punishing the illegal activities of civil servants. 83

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Another problem is the non-compliance by local governments with central government’s welfare measures. For example, the contribution rates of old age pension schemes vary from province to province and can even ‘vary from one county/city to another within a province’ (International Labour Office Study Team, 2006, p 48). Although the employers’ contribution rate should not exceed 20% of their wage bills, the rates of contributions in many provinces were actually over 20%. The International Labour Office further points out (2006, p 11) that: … officials of the central and Fujian governments all suggest that there is considerable non-compliance with contributions. This noncompliance takes the form of enterprises failing to report all the employees for whom contributions should be made and of enterprises under-reporting the wages of their employees in order to reduce the amount of contributions due. Non-compliance is also commonplace where village and township governments deliberately report fewer cases of the Five Guarantees than the real figures. As the lowest administrative unit, village and town authorities are always in financial difficulties. In order to minimise their financial burden, some of them deliberately report lower numbers of households with Five Guarantees in order to reduce their social security expenditure (Yang, 2006). After the scrapping of Agricultural Tax in 2005, village and town governments encountered additional financial pressures. As one example, a respondent to a study in one of the areas of Hubei Province said that the actual number of households eligible to receive the Five Guarantees should be 500 households instead of the reported 215 (Yang, 2006). Similar problems were found in Anhui Province where the number of eligible cases of Five Guarantees in 2002 was 398,369, although only 264,967 cases were reported in 2000. The increase of 133,402 within two years, as explained by the researchers of a study, was as a result of under-reporting by village and town cadres (Hong et al, 2004). According to the MCA, 5.7 million people were eligible to receive the Five Guarantees, but the actual number of people receiving benefits was only 2.97 million (Hong et al, 2004). Due to this under-reporting, the needs of some poor families have been institutionally suppressed and the extent of poverty in some regions has subsequently been underestimated. Another significant problem is that the existing welfare administrators have few professional skills for operating China’s modern social security system. Although the use of RAs for handling social security applications can reduce much administrative cost, staff from these organisations have little understanding of citizens’ welfare rights. As shown above, they often treat social security as some form of charity. Some local officials even use their own value judgements to refuse to award the MSLS money to drug addicts, gamblers and those who have violated family planning policy.To give one example, the regulations of the MSLS in Shandong Province state that those who have recently purchased computers, video cameras, digital cameras, air conditioning units, refrigerators, cars and mobile 84

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phones, as well as households whose telephone bills are higher than 50% of the standard rate of the MSLS, cannot apply for MSLS assistance. Much of China’s social security administration is therefore dominated by amateur administrators and their subjective interpretations of highly bureaucratic guidelines.As for old age pensions, the International Labour Office stresses that the existing administrative capacity needs to be strengthened so that ‘there are a sufficient number of trained staff with the skills and knowledge requirements to implement, administrate and oversee the application of the national law and provincial regulations’ (International Labour Office Study Team, 2006, p 4; see also White, 2006). Fundamentally, there is a lack of comprehensive legislation regulating China’s social security system. At present, social security measures are mainly shaped by administrative and departmental circulars. As Shi (2002) notes, social security legislation at local government level is more detailed, and has come earlier than at the national level. Concerning old age pensions, the International Labour Office Study Team (2006, p 2) pointed out that the present uncertainties were ‘resulting from the absence of a definitive legal framework’ to address issues such as categories of workers and employers who were subject to old age insurance, the retirement age, the contribution rate and the contribution base. The use of directives and circulars was too weak to defend the welfare rights of poor people. It should be stressed that both central government and some local authorities have recognised the poor quality of welfare administration. The MLSS therefore focuses on three directions for future welfare management: institutionalisation, professionalisation and socialisation. One of its objectives is to implement a human-centred service to improve the quality of welfare services (People’s Daily, 2004). Individual local authorities have taken actions to address the problems, and after reviewing the structure and human resources of frontline social security offices, in 2004 the Shanghai Municipal Government tried to raise the quality of employment support workers by requiring new workers to pass an examination and on-the-job training courses and by retraining established staff to enhance their knowledge of employment services (Shanghai Municipal Government, 2004). Shanghai was also the first Chinese province to grant social workers a professional and official status by requiring them to pass a comprehensive examination organised by the Civil Affairs Administration (Xinhua News Agency, 2004b). Some progress has therefore been made to raise the service standard of welfare staff, although there is still a long way to go to reach the standards in developed industrialised countries.

Conclusion Over the past three decades, the Chinese government has developed new social security measures in order to address social problems caused by the deterioration of communes and SOEs: an old age pension scheme composed of a base account and an individual account was established and the MSLS was used as the last

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resort to address poverty, and the function of the traditional Five Guarantees in rural areas has been strengthened. However, the new social security system is biased towards both urban areas and people engaged in the labour market. The old age pension scheme is only compulsory for urban workers, while the existing MSLS has a wider coverage in cities than in the countryside. Social security provision in today’s China has been divided by gender, residency and locality.The welfare disparity between cities and the countryside has created two welfare systems serving two groups of Chinese citizens sharing the same nationality. It should be stressed, however, that China has made remarkable progress in terms of poverty reduction. From 1978 to 2004 the number in poverty reduced from 250 million to 29 million (Xinhua News Agency, 2004a).The amount of investment put into poverty reduction work also increased from ¥9.8 billion in 1994 to ¥30 billion in 2003 (Xinhua News Agency, 2004c). It is therefore fair to say that the Chinese government has done some work to tackle poverty and to address welfare disparities, which is revealed from the extension of the MSLS from cities to the countryside and its intention to provide old age protection for migrant workers. Nevertheless, much more work needs to be done in order to effectively tackle inequality in a Chinese socialist market economy. Central government also understands that ‘China still has a long way to go to develop its social security services to a satisfactory level’ (Information Office of the SC, 2004). References Chan, C.K. and Bowpitt, G. (2005) Human dignity and welfare systems, Bristol:The Policy Press. Chan, J. (2003) ‘Political crackdown in China as leadership prepares mass privatization’, World Socialist website, 26 November (www.wsws.org/ articles/2003/nov2003/chin-n26.shtml). Chan, J. (2004) ‘Chinese regime amends constitution to protect private ownership’, World Socialist website, 2 April (www.wsws.org/articles/2004/apr2004/ npc-a02_prn.shtml). China Daily Online (2004a) ‘China faces shortage of psychologists’, 7 September (www2.chinadaily.com.cn/english/doc/2004-09/07/content_372385.htm). China Daily Online (2004b) ‘New proposal to help migrant kids into school’, 8 November (http://service.china.org.cn/english/2004/Nov/111494.htm). China Daily Online (2006) ‘Central government pledges assistance to needy people’, 26 January (www.chinadily.com.cn/english/doc/2006-01/26/content_515782. htm). China Daily Online (2007a) ‘China experiences rising school dropout rate’, 30 April (www.chinadaily.com.cn/english/doc/2005-03/04/content_421520.htm). China Daily Online (2007b) ‘China to audit social security funds’, 7 June (www. chinadaily.com.cn/china/2006-12/13/content_758099.htm).

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China Development Research Foundation (2005) China development report 2005, Beijing: Development Research Centre of State Council, China Country Office, United Nations Development Programme. China Internet Information Centre (2002) ‘Labour and social security profile’, 12 November (http://service.china.org.cn/english/2002/Nov./48592.htm). China Internet Information Centre (2006) ‘Pension system to cover 220 min people in 2010’, 14 January (www.china.org.cn/english/China/155158.htm). China Internet Information Centre (2005) ‘Pension system covers only 15% of population’, 10 November (www.china.org.cn/english/China/148375.htm). China Real Estate Business (2006) ‘Three ministries explore resources: 5% of land revenue for building Low Rental Housing’, 24 July. Cook, S. and Jolly, S. (2000) Unemployment, poverty and gender in urban China: Perceptions and experiences of laid-off workers in three Chinese cities, Brighton: Institute of Development Studies, University of Sussex. Hong, D.Y., Fang, L.J. and Qiu, X.Q. (2004) ‘Obstacles and solutions: the study of rural Five Guarantees in post collective period’, Journal of the People University of China, vol 1 (www.usc.cuhk.edu.hk/wk_wzdetails.asp?id=4296 32K 20073-30). Information Office of the SC (State Council) (2002) Labour and social security in China, Beijing: Information Office of the SC (www.china.org.cn/english/2002/ Apr/31774.htm). Information Office of the SC (2004) China’s social security and its policy, Beijing: Information Office of the SC (www.china.org.cn/e-white/20040907/index. htm). International Labour Office Study Team (2006) Extending old-age insurance coverage in the People’s Republic of China, Bangkok: Sub-regional Office for East Office, International Labour Office. James, E. (2002) How can China solve its old age security problem? The interaction between pension, SOE and financial market reform, Social Science Research Network Electronic Paper Collection (http://papers.ssrn.com/abstract=287392). Leisering, L., Sen, G. and Hussain, A. (2002) People’s Republic of China – Oldage pensions for the rural areas: from land reform to globalisation, Manila: Asian Development Bank. Liu, X. and Yi, Y. (2004) The health sector in China: Policy and institutional review, Washington, DC: World Bank (http://siteresources.worldbank. org/INTEAPREGTOPHEANUT/Resources/502734-1129734318233/ policyandinstitutionalreview-final.pdf). MC (Ministry of Construction) and MCA (Ministry of Civil Affairs) (2005) The application, supervision, and withdrawal of low rental public housing for the urban minimum income households, Document no MC(2005)122, Beijing: MC and MCA.

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MC, MF (Ministry of Finance), MCA (Ministry of Civil Affairs), MLR (Ministry of Land and Resources) and State Bureau of Taxation (2003) Administrative measures on low rental housing for the minimum income of urban residents, Document no MC, MF, MCA, MLR, and SRT 120, 31 December, Beijing: MC, MF, MCA, MLR and State Bureau of Taxation. MCA (Ministry of Civil Affairs) (1997) Ordinance on the management of rural old aged homes (tentative), Beijing: MCA. MCA (2004a) Notification on assistance for graduates of higher education, Document no 2004/327, Beijing: MCA. MCA (2004b) Ministry of Civil Affairs urges enhancing and developing the Minimum Standard of Living System for urban residents, 7 April. MCA (2007) A meeting concerning the MSLS was held in Fuzhou, rural MSLS entered a new stage, 26 January (www.mca.gov.cn/news/content/recent/200712685327. htm). MCA, MH (Ministry of Health), MLSS (Ministry of Labour and Social Security) and MF (Ministry of Finance) (2005) Views on pilots of establishing an urban medical assistance scheme, Document no State Council 2005/10, Beijing: State Council. ME (Ministry of Education) (2004) Basic education in China (www.moe.edu. cn/baze/zonghe/04/htm). Mei, J.M. and Liu, P.P. (2005) ‘The urban Minimum Standard of Living Scheme and the socio-economic characteristics of its recipients: a study of 387 households in Wu Han city’, Journal of Zhong Nan Economic and Law University, vol 5, pp 1520. [In Chinese] Meng, Q. (2006) Health care pricing and payment reform in China:The implications for health service delivery and cost containment, Stockholm: Karolinska Institutet. MF (Ministry of Finance) and MCA (Ministry of Civil Affairs) (2004) Trail on the management of rural medical assistance fund in rural areas, Document no 2004/1, 5 January, Beijing: MF. MF, MCA and MLSS (Ministry of Labour and Social Security) (2006) Urgent notice on adjusting the benefits of social security recipients (www.a-lan.cn/ssxw/ jjxw/200611/156888.html). [In Chinese] Mo, R., Hua,Y.F., Tang, J., Wang,Y.H. and Li, G.W. (2005) ‘Public policy analysis: social security and social justice’, in China Economic Reform Research Foundation and China Economic System Reform Research Group (eds) Report on China’s reform and development 2005, Shanghai: Shanghai Far East Publisher, pp 183-221. OECD (Organisation for Economic Co-operation and Development) (2005) OECD economic surveys: China, Paris: OECD. Ngan, R.,Yip, N. and Duo,W. (2004) ‘Poverty and social security’, in L.Wong, L. Whyte and G. Shixun, Social policy reform in Hong Kong and Shanghai, New York, NY: Sharpe, pp 159-83. People’s Daily (2002a) ‘Problem solving: the implementation of Minimum Standard Living Scheme in our country’, 26 June.

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People’s Daily (2002b) ‘Urban needy: the new concern of Chinese government’, 3 November. People’s Daily (2004) ‘The Ministry of Work and Social Security asks all local governments to implement “new three directions” on services’, 2 July. People’s Daily Online (2006a) ‘US$900m misused from social security fund’, 24 November (http://english.peopledaily.com.cn/200611/24/print20061124_ 324716.html). People Daily’s Online (2006b) ‘Twelve percent Chinese rural laborers participate in old-age pension’, 27 November (http://english.people.com.cn/200611/27/ eng20061127_325683.html). People’s Daily Online (2007) ‘China’s old-age insurance scheme to cover migrant workers’, 11 June (http://english.peopledaily.com.cn/200706/11/ eng20070611_383047.html). Qingdao Public Administration Institute Research Team (2003) ‘A study of China’s community administration model and its implementation – the case of Qingdao’ (www.mca.gov.cn/mca/news/2003luntan/lunwen14.html). Saunders, P. and Sun, L. (2006) ‘Poverty and hardship among the aged in urban China’, Social Policy and Administration, vol 40, no 2, pp 138-57. SC (State Council) (1991) Decision on old age insurance scheme for workers of enterprises, Document no 33, Beijing: SC. SC (1994) Regulations concerning the work of implementing ‘Five Guarantees’ in rural areas, Document no 141, 23 January, Beijing: SC. SC (1995) Notification on deepening reform of the old age pension insurance system, Document no 6, Beijing: SC. SC (1997a) Decision on establishing a uniform basic old age insurance system for enterprise employees, Beijing: SC. SC (1997b) State Council’s announcement on establishing a national minimum living system for urban residents (www.mca.gov.cn/article/content/WDB_ ZCWJ/2003/22484945.htm). SC (1998) Issues about the social pooling of the basic old age pension insurance at provincial level and the transfer of occupational pooling to local administration, Document no 28, Beijing: SC (www.molss.gov.cn/gb/ywzn/2006-02/16/content_106846. htm). SC (1999) Ordinance on the Minimum Standard Living Scheme for urban residents, Document no 271, Beijing: SC. SC (2001) Enhancing the work of Minimum Standard of Living Scheme, Document no 2001/87, 12 November, Beijing: SC. SC (2005) Decision on improving enterprise workers’ basic old age insurance scheme, 3 December, Document no 2005/38, Beijing: SC (http://trs.molss.gov.cn/ was40/mainframe.htm). SC (2006) Ordinance on the implementation of Five Guarantees in rural areas, 1 March, Beijing: SC.

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Secretary of China Social Security Forum (2006) The standard rate of the Minimum Standard of Living Scheme in 36 cities (www.cnss.cn/zlzx/sjtj/qttj/200609/ t20060914_30898.html). Shang, X. and Wu, X. (2004) ‘Changing approaches of social protection: social assistance reform in urban China’, Social Policy and Society, vol 3, no 3, pp 25971. Shanghai MCA (Ministry of Civil Affairs) (1996) Shanghai social assistance measures (www.shmzj.gov.cn/node2/node8/node30/userobjectlai141.html). Shanghai MCA (2001) Issues about the implementation of education assistance for primary and secondary school children from the MLSG, Shanghai: Shanghai MCA. Shanghai Municipal Government (2003) Office of the Mayor (www.sh.gov.ch). Shanghai Municipal Government (2004) Employment support workers to be more professionals (www.83666.gov.cn). Shanghai Star (2004) ‘Crushing burden of sickness’, 26 September (www.chinadaily. com.cn/english/doc/2004-09/26/content_377827.htm). Shi, S.H. (2006) ‘Left to market and family – again? Ideas and the development of the rural pension policy in China’, Social Policy and Administration, vol 40, no 7, pp 791-806. Shi, Z.X. (2002) China’s medical assistance scheme and its development, Beijing: China’s Medical Economic Research Centre (www.ccper.org/new/list. asp?no=652andsort=医疗体制改革). [In Chinese] Sun,Y. (2005) The heritage and preventability of poverty: Research on children from urban poor families, Beijing: Social Science Academic Press. Tang, J. (2002) Establish a comprehensive minimum living security system, Research Center of Social Policies, Chinese Academy of Social Science (www.cass.net. cn/chinese/s09_shx/zlk/39.htm). Tang, J. (2003) Social exclusion and the living conditions of urban poor people, Research Center of Social Policies, Chinese Academy of Social Science (www.cass.net. cn/chinese/s09_shx/zlk/39.htm). Tang, J. (2005) The Minimum Standard of Living Scheme in cities and countryside: Historical, present and future development, Beijing: Institute of Sociology of the Chinese Academy of Social Sciences (http://203.93.24.66/shxw/shzc/ P020050824304842967803.pdf). Thelle, H. (2004) Better to rely on ourselves: Changing social rights in urban China since 1979, Copenhagen: NIAS. Wang, D. W. (2005) China’s old age security in cities and countryside: Challenges and choices (www.laborecon.org/workingpaper/dw200508_cn.pdf). [In Chinese] Wang, F. and Zhao, Y. (2003) ‘Labour market construction and labour mobility in urban China’, in C. Jones Finer, Social policy reform in China:Views from home and abroad, Aldershot: Ashgate, pp 98-115. Wang, X.J. (2005) ‘An analysis on the region gaps of the basic pension in China’, Social Security Studies, vol 2, pp 124-37.

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White, Y. (2006) The promise of a better tomorrow: China’s pension system, Hong Kong: China Law and Practice (www.chinalawandpractice.com/includes/print. asp?SID=4195). Wong, L. (1998) Marginalisation and social welfare in China, London: Routledge. Wu, L. and Shi, G.Q. (2005) ‘The ethical problems of the Minimum Standard of Living Scheme’, Journal of Nanking Normal University, vol 2 (www.sociology.cass. cn/shxw/shzc/P020060525429192032499.pdf). [In Chinese] Xiang, H. (2007) Challenges confronting National Social Security Fund, Beijing: NCSSF (www.ssf.gov.cn/enweb/Column.asp?Columnld=59). Xinhua News Agency (2004a) ‘To increase farmer’s income, a new challenge for China’s poverty reduction endeavor’, 27 May (www.china.org.cn/english/ features/poverty/96604.htm). Xinhua News Agency (2004b) ‘Shanghai begins certifying community service workers’, 17 May (www.humanrights.cn/news/2004-5-18/Local200451893406. htm). Xinhua News Agency (2004c) ‘China’s rural poverty decline, urban poverty rises’, 8 September (http://english.peopledaily.com.cn/200409/08/eng20040908_ 156256.html). Xinhua News Agency (2006a) ‘Investigating the Minimum Standard of Living Scheme: how many MSLS recipients are fraud cases?’, 1 April (http://news. xinhuanet.com/politics/2006-04/01/content_4370572.htm). Xinhua News Agency (2006b) ‘Tackling welfare fraud, Guiyang City launched its first public hearing on the applications for the Minimum Standard of Living Scheme’, 14 April (http://news.xinhuanet.com/newscenter/2006-04/14/ content_4422046.htm). Yang, Z.J. (2006) ‘Five Guarantees: the past, present and future development of Five Guarantees: the case of Xian An District of Hubei Province’, 21st Century, March (www.cuhk.edu.hk/ics/21c/supplem/essay/0511027). [In Chinese] Zhang, S.F. and Tang, J. (2005) The benefits of the Minimum Standard of Living Scheme were only enough for food and clothes, Beijing: Institute of Sociology of the Chinese Academy of Social Sciences (http://203.93.24.66/shxw/shzc/ P020050908295415620463). [In Chinese] Zheng, G.C. (2002) ‘China’s social security: transition, evaluation and development’, in G.C. Zheng (ed) The transition and evaluation of China’s social security system, Beijing: The People University of China Press, pp 2-76.

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six

Labour policy Key issues Economic reforms have fundamentally transformed the nature of labour in China. Hundreds of thousands of workers became unemployed as a result of the transformation of state-owned enterprises into profit-oriented units and the implementation of the Household Responsibility System. In the light of these changes, the Chinese government had to define a new relationship between workers and capital as well as introducing new labour legislation in a market economy. Thus, this chapter discusses: • China’s labour policy before its economic reforms; • China’s employment conditions in the context of reforming state-owned enterprises, introducing private enterprises and increasing the number of surplus workers in the countryside; • anti-unemployment policies and unemployment insurance measures adopted by the Chinese government to address the needs of workers; and • the impact of China’s labour policies on the well-being of workers.

Introduction As the most populated country in the world, China has always faced huge challenges in the area of labour policy, and the situation has become worse since China’s market transition, which was due to the huge increase in the labour force, the insolvency of the inefficient SOEs and the large scale of rural–urban migration. The key challenge facing China’s labour policy is how to respond to this pressing problem of unemployment. This chapter starts with a brief review of Chinese labour policy prior to the economic reforms, followed by an overview of labour policy changes in the reform era. It then focuses on unemployment problems in the context of market transition and the Chinese government’s policy responses. The last part examines the impact of the labour policy reforms, in particular the government’s unemployment measures, from a well-being perspective.

Labour policy before the economic reforms After the CCP came to power in 1949, the new government set out to abolish all labour laws and policies implemented by the ousted nationalist government, and to formulate new labour policies in accordance with socialist principles.The 93

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key goals of socialist labour policy were to turn wage workers into key players of the means of production and to ‘set them free’ from unemployment and capitalist exploitation. As discussed in Chapter Three earlier, a universal, lifelong employment policy was adopted and comprehensive welfare packages provided for workers. In socialist China, labour policies were characterised by clear ideological principles.Work was identified as the right and duty of citizens.The state assumed responsibility for creating job opportunities and for providing jobs for its people. Under the principle of ‘unified employment and assignment’, the central planners worked out an annual state plan for the use of labour and applied it to all work units (also known as danwei in Chinese) throughout the country through labour bureaux at all government levels.Workers could not refuse their job assignments, and neither could enterprises refuse to accept workers allocated to them by the government. Dismissal only occurred when the worker had seriously violated labour discipline or committed a crime. As a result, the notion of a labour market was non-existent in China, and the state exercised a virtual monopoly over the allocation of urban labour (White, 1989). Under the policy of lifelong employment, or in a common Chinese expression, ‘the iron rice bowl’, workers were guaranteed employment by the government, and employment, once obtained, was guaranteed for life. A job could even be passed from retired parent to child.The practice of occupational inheritance was popular at the end of the 1970s and in the early 1980s (Korzec, 1992), so it was very common for parents and their children to be employees of the same work unit.Although many young people did not have jobs in the late 1960s and through the 1970s, they were not treated as unemployed, but as ‘people waiting for jobs’ to be assigned by the government. The universal employment policy continued until the early 1980s when the economic reforms were initiated, and tenured employment came to an end in 1986 when the contract-based employment system was introduced. Although job security was guaranteed, wage levels were very low. The labour remuneration system was normally based on an egalitarian model. In Chinese parlance, such a wage system was named the ‘big rice pot’. Workers at the same level shared the same level of wage reward regardless of their performance and diligence. As a result, low work incentives were a chronic headache of the SOEs. Low wages were compensated by a relatively generous package of work-related welfare provisions, as illustrated in Chapter Three. As a rule, workers’ welfare and benefits were taken care of by their work units. For the urban population, the remunerative packages were as generous as in any advanced western welfare state. The incorporation of the welfare and benefits structure into the employment system was one of the most remarkable features of life under Chinese socialism, and it contributed greatly to the formation of work units.As a basic socioeconomic institution in Mao’s China, the majority of urban workers and their dependants were involved in all kinds of work units, such as SOEs, state organs, government 94

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departments and other organisations in the public sector. Lu and Perry (1997) define five basic features of a work unit: it controlled personnel, provided communal facilities, operated independent accounts and budgets, had an urban or industrial role and was in the public sector. Functioning as a self-sufficient ‘mini-welfare state’, the work unit system comprised three basic elements: job tenure (‘iron rice bowl’), an egalitarian wage (eating from the ‘big rice pot’) and a welfare package (Lu, 1989). The work unit system implied a special relationship between workers and the state. In his classic study of Chinese state industry,Walder proposed the concept of ‘organised dependence’ to describe the complete economic, social and political dependence of workers on the enterprise, the management and their supervisors. At the same time, enterprises were also dependent on their employees for the fulfilment of production quotas and other state-assigned duties (Walder, 1986). So, in the Maoist era, China’s labour policies were characterised by clear ideological principles.The paternalistic state took comprehensive care of workers in exchange for the workers’ loyalty to the socialist government. Jobs were created by the state rather than by the market. Workers were treated as the owners of production and enjoyed lifelong job security. However, with the ideological commitment, the unified employment and assignment system, the difficulty in dismissing workers, workers’ mindset as being ‘owners’, and the egalitarian remuneration system, Chinese SOEs were paralysed by overstaffing, lack of work incentives and low productivity. The CCP Central Committee stated that the old system: … has depleted the autonomy of the SOEs, brought about a situation where the SOEs eat from the ‘big pot’ of the state and workers eat from the ‘big pot’ of the SOEs, therefore, the enthusiasm, activism and creativity of both the SOEs and workers have been stifled. (CCPCC, 1984) In the reform era, Mao’s labour policies and the formation of the work unit system were regarded as the main factors contributing to economic backwardness and poverty in China. As a result, labour policy reform was unavoidable in the post-Mao era.

Labour policy after the economic reforms The initial momentum of labour policy change originated from massive unemployment facing the post-Mao Chinese government at the end of the 1970s and the early 1980s. In 1978 and 1979, numbers of urban registered unemployed people hit 5.3 million and 5.7 million respectively, while the urban registered unemployment rate rose to 5.3% and 5.4% respectively (China Labour Statistical Yearbook, 1997, p 8).The main reasons for the high unemployment rate included the natural increase in labour supply, stagnation in economic growth, and, more 95

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importantly, the return of a huge number of young people who were sent to villages during the Cultural Revolution. Facing unprecedented employment pressures, all kinds of countermeasures were taken by the post-Mao Chinese government. On top of increasing capital investment and building new factories, other measures included forcing enterprises to accommodate surplus urban labour power, which led to the phenomenon of ‘five people doing the job of three’, and instituting a new employment practice according to which retired workers’ children were allowed to take up their parents’ jobs. However, such measures led to overstaffing and a lower quality of workers in enterprises, and the worsening of economic performance (Feng, 1982, pp 16-17). The post-Mao leadership eventually decided to reduce the administrative stranglehold of the state over labour allocation and to allow the urban population to create job opportunities themselves. In 1980, a new labour policy, was introduced, named ‘three-in-one’, which refers to three channels of job placement, namely, employment through the introduction of labour bureaux, employment through workers’ voluntary organisations, and self-employment (Ministry of Labour and Personnel, 1989).This new policy indicated that for the first time the government recognised its limited capacity to provide jobs for all of the urban labour force. Under this new policy framework, on top of the jobs assigned by the government, urban people were allowed to engage in self-employed businesses, especially in individual businesses. Meanwhile, the government paid much more attention to the development of the labour market. Since the early 1980s, the government endeavoured to foster the growth of the labour market through a number of policy measures, including the setting up of job retraining centres, establishing ‘labour service companies’ and public employment agencies, providing employment information and advice and helping unemployed people become self-employed, for example, through providing suitable business venues and reducing taxes during their first year of operation (Lee, 2001). The reforms of SOEs injected new dynamics into the reform of labour policy. Prior to the reform era, the Chinese economy was dominated by SOEs, which accounted for more than 70% of industrial output and absorbed 80% of the urban labour force. However, since the early 1980s, SOEs have been facing tough challenges. Firstly, many SOEs were loss-making and survived on state subsidies. Secondly, SOEs were facing increasing competition from non-state enterprises, especially from the newly emerging village and township enterprises (VTEs) and foreign-funded enterprises. At the early stage of the economic reform, the government began experiments to reform the rigid employment and wage system practised in SOEs in order to encourage them to be more competitive. Bonuses and awards were made to enhance workers’ incentives, and wages were linked to performance. The most significant innovation was the labour contract system experiment. This policy was piloted in a few cities in 1980 and was extended in 1983. Labour policy reform reached its turning point in 1986 when the SC issued decrees to encourage multiple systems of employment, to allow open recruitment 96

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of workers, to introduce labour contracts for all new workers entering SOEs, to permit dismissal of recalcitrant staff and to bring in a system of unemployment insurance (SC, 1986a, 1986b, 1986c, 1986d; Josephs, 1990). Undoubtedly, the most significant break with the old employment system was the introduction of labour contracts, and this has fundamentally rewritten the relationship between workers and the state. From 1986 onwards, all new recruits into SOEs had to sign labour contracts, and renewal of contracts was subject to the mutual agreement of both parties and was not automatic. In effect this meant the end of the ‘iron rice bowl’. From the early 1990s, labour policy reforms were driven by attempts to transform SOE management and the passing of the Company Law in 1993 sought to push SOEs to the market and to transform them into modern corporations. The goal was for SOEs to be transformed into a modern enterprise system compatible with the requirements of a market economy (see Chapter Three). In order to achieve this, SOEs had to be disentangled from social welfare responsibilities.This, in turn, highlighted the urgent need for a modern social security system. Subsequently, social welfare schemes such as pensions, housing, healthcare and schooling have been gradually separated from the commercial activities of the SOEs. To sum up, the following changes took place in Chinese labour policies in the economic reform era. Firstly, lifelong employment was replaced by contractbased employment, which means that the ‘iron rice bowl’ no longer exists. Secondly, job assignment by the government was replaced by the labour market. Thirdly, remuneration was linked to a worker’s performance, which means no unconditional eating from the ‘big rice pot’. Fourthly, labour law played an increasing role in regulating labour relations. Fifthly, the work unit system was dismantled, which means that workers had to make their own contributions to their welfare and benefits. Hence, an employment-based social insurance system took shape. As a result, unemployment began to be a nightmare facing many Chinese workers, especially state workers.

Market transition and unemployment in China For over 30 years, under its policy of full and lifelong employment, China did not recognise the problem of unemployment. Workers in SOEs were free from the threat of unemployment. A special term, ‘waiting for employment’, was coined for those who were not assigned jobs by the government, in particular young school leavers (Wong and Ngok, 1997). With the dawn of a market economy, Chinese thinking on unemployment also changed. By the late 1980s, Chinese economists appreciated that unemployment was not a unique phenomenon of capitalism but a common feature of a commodity economy. Both academics and officials in China started to accept the fact that unemployment was both inevitable and natural in the transition to a market system (Feng, 1988). To better reflect reality, the term ‘unemployment’ began to appear in official use from 1993. In the Labour Law (1994), which became effective in 97

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January 1995, unemployment was taken into the legal lexicon for the first time (Wong and Ngok, 1997). According to the official definition, ‘unemployed’ in China referred to ‘people who are registered as permanent residents in the urban areas engaged in non-agricultural activities, aged within the range of working age (16-50 for male and 16-45 for female), capable of labour, unemployed but desirous to be employed and have been registered at the local employment service agencies to apply for a job’ (China Statistical Yearbook, 2000, p 163). As a matter of fact, unemployment emerged as a serious social problem in China from the late 1980s (see Table 6.1). Many factors contributed to this. First of all, employment pressure is a natural consequence of China’s huge labour force. Each year, about 7-8 million new labour market entrants require work placements. Secondly, China has a tremendous problem of underemployment as a result of the old universal employment policy. To achieve full employment, the Chinese government used to press enterprises to employ an excessive workforce. It was estimated that there was about a 30% surplus of workers in SOEs and also a substantial surplus of employment in collectives, township and village enterprises and foreign-linked firms (Rawski, 1999). Thirdly, there was a staggeringly large pool of surplus rural workers who could not find meaningful work in agriculture. It was estimated that the figure was about 100-200 million, and, among them,

Table 6.1: Registered urban unemployment in China (1987-2005) Unemployed Total working Urban working population Unemployment Year population (million) population (million) (million) rate (%) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

527.8 543.3 553.3 647.5 654.9 661.5 668.1 674.6 680.7 689.5 698.2 706.4 713.9 720.9 730.3 737.4 744.3 752.0 758.3

137.8 142.7 143.9 170.4 174.7 178.6 182.6 186.5 190.4 199.2 207.8 216.2 224.1 231.5 239.4 247.8 256.4 264.8 273.3

Note: Figures for 2005 are from the MLSS (2006a). Source: China Labour Statistical Yearbook (2005, p 157) 98

2.8 3.0 3.8 3.8 3.5 3.6 4.2 4.8 5.2 5.5 5.8 5.7 5.8 6.0 6.8 7.7 8.0 8.3 8.4

2.0 2.0 2.6 2.5 2.3 2.3 2.6 2.8 2.9 3.0 3.1 3.1 3.1 3.1 3.6 4.0 4.3 4.2 4.2

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some 50-60 million peasant workers had joined the tidal wave of the floating population in the country (Wong, 1994). However, the magnitude of unemployment was not fully reflected in the official statistics in China (Chen, 2004). At first glance, the urban unemployment rate in China looked decidedly low, when compared with the situation in the west. Several reasons contributed to the low official figure. Firstly, the rural population, including those who left villages and were actually living in cities and towns, were excluded from the statistics. Secondly, redundant workers in SOEs were not included. Thirdly, only the registered urban unemployed were counted. The unemployment situation in China has therefore been deliberately underestimated. To have a full understanding of the unemployment problem in China, we should take into consideration the so-called laid-off workers and the surplus labour force in rural China. If all the jobless people were counted, the real unemployment rate would be much higher. According to two surveys polling more than 50 wellknown Chinese academics and state officials working on labour and employment issues, the real unemployment rate in urban China would have reached 7% (Mo, 2002, p 166) or even higher. However, as Solinger (2001) suggests, coming up with any kind of reliable estimate on the size of urban unemployment may be impossible given the opaqueness of the labels involved and the questionable methods of counting unemployed people. The problems of laid-off workers ‘Laid off ’, as discussed in Chapter One, is a transitional arrangement for redundant workers, mainly those from SOEs. They are classified as no longer working for the enterprise but still retaining their employment relationship with SOEs. As China’s market economy progressed, the state’s dilemma about how to handle overstaffed SOEs increased in magnitude. Keeping loss-making enterprises going imposed a huge financial burden on the treasury, eliminated prospects of increased efficiency and obstructed the transition to a modern market economy (Lee, 2001). However, to allow hopeless state firms to go bankrupt was a dangerous option. Massive unemployment would spell disaster for workers and their families, who until that time depended almost entirely on their work units for wages, social security and other welfare benefits (Leung, 2005). Large-scale redundancies could lead to social unrest and instability. So, up to the mid-1990s, measures to lay off workers in SOEs were undertaken with caution in order to avoid serious social disorder. In 1993, there were 3 million laid-off workers; this number swelled to 3.6 million in 1994 and 5.6 million in 1995 (Lee, 2000, p 924). However, the disappointing progress of SOE reform forced the government to speed up the reform pace in 1997, when the CCP decided to introduce a modern enterprise system by means of restructuring, regrouping, carrying out renovations and reinforcing their management of most SOEs (Ma et al, 2001). Furthermore, the Zhu Rongji administration decided to enable the majority of loss-making large and medium-sized SOEs to escape from their current predicaments within 99

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three years. From then on, the government would help only the key enterprises while the rest would be allowed to close down.The essence of the policy was to ‘grip the large and let go of the small’. This strategy gave the green light for the revamping of small and medium-sized SOEs. Most significantly, it legitimated massive lay-offs of the surplus workforce (Leung, 2005). As a result, the number of laid-off workers soared, and peaked at 11.7 million in 1999 (see Table 6.2). After immense efforts by the state at various levels to foster re-employment, the number fell to 6.1 million at the end of 2000. The situation improved slightly in 2001 when redundant worker numbers dropped to 4.6 million. According to official figures, from 1998 to 2003, the accumulated number of laid-off workers reached 28.2 million (Information Office of the SC, 2004). Table 6.2: Number of laid-off workers (1993-2002) (accumulated figures at the end of the year) Year Number of laid-off workers Percentage of the urban working people 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

300 360 564 891 1,151 1,080 1,174 613.5 463.6 410

1.9 2.0 3.0 4.5 5.7 5.2 5.6 2.7 1.9 1.7

Note: Unit = 10,000 people. Source: Wang (2004, p 67)

Surplus rural workers As reflected in the above-mentioned official definition of unemployment, it is only regarded as a problem relating to the urban population. The massive numbers of surplus rural workers, who cannot be absorbed by agriculture, were not included in the unemployment statistics due to the urban-biased labour policy pursued in China. The exact number of the surplus rural labour force is hard to calculate because there are no systematic statistics, but it is generally estimated that the surplus rural labour force was between 100 and 200 million in the 1990s (Gu, 2003).While some Chinese economists have made efforts to estimate the size of the surplus labour force and the unemployment rate in rural China, there were huge variations in their results. According to Gu (2003), a reasonable figure for the unemployment rate in rural China in 2000 was about 50% – half of the total rural labour force was surplus to requirements. Aside from ideological considerations, several reasons were suggested for the exclusion of the rural surplus labour force from official unemployment statistics. 100

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Firstly, some of those rural workers still retained their links to agriculture. Their search for paid work was seasonal and coincided with periods of inactivity in the countryside. Secondly, the majority of peasant workers could always return to their farms when they could not find work in the cities. Unlike urban people, who do not have the means for maintaining a livelihood when cut off from paid work, many rural workers possessed a necessary key to survival in being able to return to agriculture. Thirdly, such peasants were not permanently registered in the cities and hence had no claim to the customary rights of employment, welfare and social security open to urban residents. Increasing numbers of rural migrants had already made their way into cities.Although many of them engaged in manufacturing and service industries, they were under the continual threat of unemployment. Contemporary labour policy has not paid much attention to them because their official permanent place of abode was still in their rural home communities, despite their de facto stay in cities. Rural–urban boundaries have become more permeable, however, so it is no longer possible to justify this demarcation. Finding jobs for the rural masses has become a daunting task for the government.

Anti-unemployment policies in China During this market transition, the biggest challenge for China’s labour policy was how to cope with the problem of unemployment caused by redundant workers released from the state sector and the huge size of the new labour force. Between 1998 and 2005, China’s central authorities issued three important policy documents on social security and re-employment of laid-off workers. Central government emphasised the duties of all levels of government to create jobs or to enhance the employability of laid-off workers. In doing so, the government concentrated its labour policy on job creation and made use of all kinds of policy efforts to increase employment opportunities for workers, in particular laid-off workers.This was officially named an ‘active employment policy’ as from the late 1990s.The basic contents of the active employment policy include employmentoriented macro-economic policies, employment service policies and social security policies (Information Office of the SC, 2004; Wang, 2004; Ngok, 2007). The first component of the active employment policy comprised: employmentoriented macro-economic policies, including investment policy; fiscal policy; monetary policy; and industrial policy, which aims to promote economic growth and increase employment opportunities. Since the late 1990s, the Chinese government has promoted positive fiscal policy and stable monetary policy to maintain its strong economic development. In 2002, it decided to vigorously support tertiary industry, and to develop community service so as to maximise job opportunities for weak groups in the labour market, in particular laid-off workers and workers aged 40 and 50 (see below for details). Meanwhile, the government took active efforts to support labour-intensive enterprises and industry, especially small and medium-sized enterprises. 101

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The second component of the active employment policy was employment service policy. By 2003, a relatively sound grassroots employment service network was established in many big cities and some small cities. An internet-based labour market information network was established in nearly 100 big cities (Information Office of the SC, 2004). Such a network could communicate job information to the community level. An important aspect of the employment service policy was the establishment of the RSCs nationwide to provide employment-related services to laid-off and unemployed workers. Details on the RSCs are elaborated on further below. The third component of the active employment policy was related to social security policy for workers. Since 1998, the Chinese government endeavoured to establish a safety net for unemployed workers. Firstly, the system of unemployment insurance, which was first introduced in 1986, was improved to provide benefits for unemployed state workers. Secondly, a living allowance was provided to laid-off workers by their employing units or the RSCs. Thirdly, the MSLS (see Chapter Five for details) was established, which provided public assistance for the urban poor, mainly retirees and unemployed workers, and which served as a safety-net welfare system (Wong, 1998). In Chinese parlance, these anti-unemployment welfare policies were called the ‘three security lines’, aiming to provide a basic safety net for unemployed workers, laid-off workers and retirees (China Internet Information Centre, 2002). It is noteworthy that the active employment policy mainly targeted laid-off and unemployed SOE workers. The main reason for this was that China lacked a socialised social security system and was short of non-work-based social services for the urban population. In the following sections, two important antiunemployment policies are examined: unemployment insurance and RSCs. Unemployment insurance The first step in developing an unemployment insurance system started in 1986 when the labour contract system was first introduced nationwide in China. In order to facilitate its implementation, the SC issued the first set of regulations on unemployment insurance in the post-Mao China (SC, 1986d). The regulations required a contribution of 1% of the basic wage from enterprises in return for unemployment benefits of between 50% and 75% of basic pay up to a maximum of two years, depending on the period of employment and contributions. Four kinds of workers were eligible for unemployment benefits: (1) workers in enterprises that declared bankruptcy; (2) workers made redundant in enterprises that received an official notice of bankruptcy and were undergoing reorganisation; (3) contract workers whose contracts expired or were terminated by the enterprises; and (4) workers who were dismissed by the enterprises. In 1993, new regulations changed the contribution rate to 0.6% of the payroll, a more realistic calculation of workers’ actual income, composed of not just basic pay but also bonuses and other payments (SC, 1993). Payment levels were also 102

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amended to 120-150% of the local social relief rate. Three more categories of jobless people were covered in the 1993 regulations: (1) workers employed by enterprises that were dissolved by state regulations; (2) workers made redundant in enterprises that suspended operations by state regulations; and (3) other workers eligible for unemployment insurance. The coverage of the unemployment insurance scheme was subsequently broadened to include employees in all kinds of urban firms (SC, 1999). Employers pay 2% of their payrolls and individual employees pay at least 1% of their wage. Only registered, non-voluntarily unemployed workers who had contributed to the scheme for at least one year were eligible for unemployment benefits. The unemployment insurance payment level is higher than the local poverty line but lower than the local minimum wage standard. The maximum time period for receiving unemployment benefits was 24 months and was determined by the workers’ length of contribution to the scheme. With the establishment of the MSLS in the late 1990s, unemployed workers could apply for public assistance when their unemployment benefits expired. Re-employment services and the Re-employment Service Centre To enable redundant workers to find jobs, a nationwide programme called the ‘Re-employment Project’ was launched by the Ministry of Labour in early 1995, after the completion of successful experiments in 30 cities. As a city with many overstaffed state enterprises, Shanghai was one of the pioneers in implementing the Re-employment Project. Shanghai created the RSC and mobilised many resources to help SOEs to deal with laid-off workers.The RSC had a number of core functions: to look after laid-off workers, to create re-employment channels for them and to combine the provision of minimal welfare for laid-off workers with re-employment programmes. Funding for the RSC came from three sources: (1) earmarked funds from the municipal treasury; (2) management fees collected by the Labour Bureau from enterprises employing migrant workers; and (3) funds raised by the related industrial sector (Chen, 2000). The money collected paid for the basic living costs of redundant staff, their medical bills and their social insurance premiums. The buffer effect of the RSC in averting serious discontent among redundant workers in Shanghai was widely recognised. Shortly after the Shanghai scheme was introduced, the SC started to encourage other cities to follow in Shanghai’s footsteps and the establishment of the RSC won national praise as an integral part of ‘a social security system with Chinese characteristics’ (Tian, 1999, p 1). It then became a national policy whereby all firms planning redundancies had to set up RSCs. Laid-off workers and the RSC had to sign an agreement to specify their mutual obligations. The RSC had to provide an integrated package of services and benefits including financial support, career retraining and job referrals. In addition to granting basic living allowances, the centre contributed to laidoff workers’ social insurance premiums (such as pensions and health insurance), 103

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and paid the cost of medical treatment for workers with leave of absence. The centre also organised job training, vocational guidance and job introductions.The living allowance was terminated if the laid-off worker twice refused to accept jobs referred by the centre. The centres were funded in equal shares by the local state, the enterprise and social insurance funds. This tripartite funding approach is known as the ‘3-3-3’ system (Wong and Ngok, 2006). As a special form of labour policy between planning and the market, the national implementation of RSCs played a positive role in China’s economic restructuring and market transition in several ways (Wong and Ngok, 2006). Firstly, RSCs assisted in the formation of a labour market. Their establishment reduced overstaffing in SOEs and enhanced their efficiency. Labour resources could be allocated to meet market demands, hence potentially disruptive social reforms could be pursued with a higher degree of safety. Instead of dumping surplus workers into the labour market directly, RSCs regulated the release of unwanted staff in a gradual and orderly manner. Secondly, RSCs played a dual role in plugging the gaps existing in China’s unsound social security system in three ways: they preserved workers’ entitlements to pensions, unemployment insurance and health insurance; firms got financial relief as they shouldered only one third of the costs of these schemes; and the pressure on unemployment insurance was alleviated because two years elapsed before unplaced laid-off staff members started claiming unemployment benefits. Later with the consolidation of labour markets and the extension of the social security scheme, RSCs and conferral of laid-off status have become unnecessary. Since 2002, RSCs in many cities have been on their way out, and redundant state workers have no longer been conferred with laid-off status. However, the conversion of laid off to open unemployment and the phasing out of RSCs does not mean the end of the problem of surplus state workers in China. Surplus workers are still being released from SOEs, and their re-employment and livelihoods still impose great pressures on the state.

Labour policy and well-being Physical well-being As illustrated above, laid-off workers first depended on the living allowance provided by their work units or the RSC for two to three years before claiming unemployment benefit, which could last for a maximum of two years. Once unemployment benefit was exhausted, the last resort open to unemployed people with financial difficulties was the locally administered MSLS. Even so, the basic living allowance of many laid-off workers was equivalent to only 40-60% of their previous pay.This partly explains why about 10% of the urban population – most of whom were unemployed workers and their families – experienced financial hardship in the 1990s (Wong and Ngok, 1997).

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With the end of laid-off status and the closure of the RSCs, unemployment insurance and the MSLS have become the main sources of financial help for unemployed workers. The maximum time for an eligible unemployed person to receive unemployment benefit is two years, and the level of benefit is reduced gradually over time.The 1990s witnessed very rapid increases in numbers receiving unemployment benefit. In 1994, 1.9 million beneficiaries were recorded. By 2005, more than 100 million employees were covered by the scheme, 3.6 million unemployed workers received unemployment benefits and the total income of the scheme reached ¥33.3 billion (MLSS, 2006a). The greatest challenges facing the administrators of the unemployment insurance scheme were how to enlarge the pool of funding and increase the level of social pooling. Currently, the main sources of funding are employer and employee contributions.The government’s role was confined to the passing and monitoring of laws and regulations, and this indirect form of involvement was insufficient. In addition, the level of risk sharing was very low. Generally, unemployment insurance schemes were organised and managed by local governments at city or county level. Due to the varying economic situations of different localities, the capacity of the unemployment insurance scheme varied from city to city, or county to county. More importantly, the majority of migrant workers or peasant workers were not covered by the scheme. Psychological well-being To some extent, the RSC policy seemed to combine the social and psychological well-being of unemployed workers. RSCs provided laid-off workers with living allowances and continued entitlements to social insurance. RSCs also enhanced their employability by the provision of job training and placement services, in fields such as cooking, hairdressing, public relations, law and marketing.At the end of 2000, some 6 million workers were laid off from SOEs; 93.5% had entered an RSC, with 97.3% of them drawing a basic living allowance. As a result of services provided by the RSCs and other agencies, 4.4 million laid-off workers were re-employed in 2003 (Information Office of the SC, 2004). In addition, RSCs had some positive psychological effects on the mentality of laid-off workers. Accustomed to lifetime jobs and ‘organised dependence’ on their employers (Walder, 1986), China’s state workers were poorly prepared for unemployment. Serving as a bridge or halfway house between employment and unemployment, RSCs provided a much-needed spell of cognitive and psychological reorientation.This facility was vital to workers caught up in their country’s painful passage from planned economy to market economy. Personal and generational disadvantages afflicting surplus workers made the adjustment period even more crucial, particularly for older workers. Overall, however, China’s labour policy did not pay much attention to workers’ social and psychological well-being. Due to the lack of appropriate policy responses, many redundant workers became anxious and some even resorted to desperate actions – since the mid-1980s actions such as work stoppages, demonstrations, 105

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attacks on management cadres, acts of violence and even suicide have not been uncommon. In 1997, a wave of worker protests arose mainly because of delayed wage and pension payments in several cities in Sichuan. Also, from early March until May 2002, thousands of displaced workers in Heilongjiang and Liaoning Provinces engaged in large-scale protests over unpaid benefits and the corruption of cadres. The protests spread to a number of cities, and probably constituted the largest social protest movement since the 1989 pro-democracy movement (Cheng and Ngok, 2004). Social integration The long-standing strong urban bias in China’s labour policy remained intact to a large extent in the reform era, as labour policy beneficiaries were still mainly from the urban population. Such a policy orientation led to serious segmentation of the labour market in China. Under the planned economy, the Chinese labour force was divided into two sections: the rural and urban labour forces. After the economic reforms, a new form of labour force in between the rural and urban forces emerged, due to the rural-to-urban migration in the context of the HRS – migrant workers (in Chinese official parlance,‘peasant workers’).As labour policy failed to respond in a timely way to this new form of labour force, migrant workers were not incorporated into the urban labour market, and instead constituted the third labour market in China, in addition to the rural labour market and the urban labour market. There were different rules of the game in each market. The labour market for migrant workers is increasing. The number of migrant workers jumped dramatically from 30 million in 1990 to 200 million in 2007 (Ngok, 2007; People’s Daily Online, 2007). As temporary residents and casual employees in the non-state and informal economy, migrant workers were excluded from the existing labour policy regime. Compared with the urban labour force, migrant workers were treated unfairly in terms of job security, social insurance, assisted housing, subsidised education for their children, healthcare and social assistance.Without recourse to social protection, migrant workers had to fall back on self-reliance and the marketplace, and their marginal status was compounded by their lack of legal protection and political rights (Solinger, 1995). Migrant workers mainly engage in dirty, onerous and even dangerous jobs with low pay. They are always paid less than urban workers, and pay arrears are not uncommon. As the formal labour regime fails to provide enough protection for migrant workers, they have had to resort to informal, even illegal, means to claim their rights and interests as workers. Such reactions have led to many labour disputes and conflicts, even imposing a threat to social stability in China. Because of the sensitive nature of industrial disputes and grievances, however, systematic data on related occurrences have been kept secret. Fortunately, due to their numerical strength and increasing role in China’s industrialisation, some positive changes have happened in the Chinese labour policy regime for migrant workers since 2003, when the Hu-Wen Administration 106

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took office. On 18 January 2006, the SC reclassified migrant workers as part of the Chinese industrial working class and pledged that prejudice against peasant workers would be gradually dispelled in the process of building a unified labour market of equal competition between urban dwellers and farmers (SC, 2006).The government would try to remove obstacles restricting rural migrant workers in urban and inter-regional employment. In order to help farmers to adapt better to the competitive market environment, the government promised to provide peasant workers with vocational training and public employment services (SC, 2006). In fact, some new labour policies were adopted to take care of migrant workers. For example, migrant workers were allowed to join official trade unions, and qualify for public employment services and government-sponsored vocational training programmes. In some cities, migrant workers were even given the status of ‘new citizens’. Nevertheless, it will take a long time to improve the working and living conditions of migrant workers and to build up a unified labour market in China. Learning and development Since 1998, under the active employment policy framework, the Chinese government has used a range of programmes to encourage unemployed workers to set up their own businesses, to enhance their employability as well as to tackle the employment barriers facing some specific groups (Information Office of the SC, 2004). Many grassroots labour and social security workstations were established nationwide and, by the end of 2005, almost all SOs established their own labour and social security workstations, with more than 26,000 staff. About 95% of urban communities established sites to provide labour and social security services, with more than 100,000 working staff (MLSS, 2006a). Chan and Bowpitt note that the Chinese government provides special assistance for disadvantaged unemployed workers, offers taxation exemptions for selfemployment and provides job placements for unemployed young people. The details are as follows (Chan and Bowpitt, 2005, pp 83-6). ‘Jobs beneficial to the community’ and the ‘40-50 Project’: as the majority of unemployed workers, especially the laid-off workers of SOEs, are over 40 years old but with a low level of education and skills, it is very difficult for them to get jobs in the open market. In view of this, the Chinese government launched a policy programme named the ‘40-50 Project’ to cater for unemployed female workers aged over 40 and unemployed male workers aged over 50.The principal aim of this project was to increase the employment opportunities of unemployed workers in these two groups. The jobs offered to these older workers were mainly community service work such as cleaning, planting, public security and the maintenance of public facilities. Apart from providing additional financial assistance, the government would also pay the social insurance premiums for those engaging in jobs beneficial to the community. For example, the Shanghai 107

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Municipal Government created more than 60,000 jobs a year for unemployed people to work in community services such as environmental protection, city environmental services, transportation, helping disabled people and older people in the community, and hygiene and cleaning. Concessions and training for self-employment: the government provided laid-off workers with a series of financial incentives to engage in self-employment, including exemptions on business tax, personal income tax, city maintenance tax, education additional tax and commercial administrative fees and charges. On top of financial help, the government also provided training for those who planned to run their own business. For example, in 2004, the Shanghai Municipal Government changed its policy on subsidising vocational training.After obtaining a ‘Certificate on Training Subsidy’ from employment training and guidance centres, unemployed workers could choose any training programmes that helped enhance their employment opportunities. Small-scale loan policy: state banks were ordered to actively help unemployed people who needed financial assistance for running businesses or engaging in self-employment. To underpin the operation of the small-scale loan policy, the government promised to set up trust foundations and provide financial interest subsidies to the bankers. Work placement scheme: the government also initiated special programmes to address the increasingly serious problem of youth unemployment, in particular of university graduates. The Shanghai Government implemented a ‘Youth Placement Scheme’ where unemployed university graduates would be arranged work placements in well-established local and international companies for 3-6 months. In some cases, the training period could be extended to 12 months.The government pays living costs for participants and training costs for the companies involved. In this way, unemployed young people could learn the required skills and gain relevant working experience. The above programmes clearly show that the Chinese government has attempted to combine welfare and training by providing unemployed people with the required skills to get jobs in the open market or to start their own businesses. In 2006 the government pledged to keep its urban unemployment rate below 5% between 2006 and 2010, despite mounting pressure from a continually increasing labour force (MLSS, 2006b). Equal value Since the economic reforms of the late 1970s, Chinese workers’ rights and interests, in particular those of migrant workers, have not received enough attention. On top of labour abuses such as wage arrears, unpaid overtime working and 108

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work-related injuries and even death, one prominent labour problem in China is discrimination in the labour market, especially in job recruitment. Although employment discrimination is not a new thing due to the notorious HRS, it has become more rampant in the reform era, especially since the 1990s as the labour market has become tighter. All kinds of employment discrimination can be found in the Chinese labour market. The fundamental discrimination is, of course, that based on household registration that puts rural workers in an unfair position. Also significant is gender discrimination – even female university graduates find it difficult to find appropriate jobs. Other discrimination is based on age, location, appearance, stature and even blood type and accent.The MLSS and China Human Resources Development reported that among 73,176 respondents, as many as two thirds of them had suffered employment discrimination (China Daily Online, 2006). In order to pursue equal value in the labour market, the Standing Committee of the NPC passed the Employment Promotion Law on 30 August 2007 (Xinhua News Agency, 2007). The law prohibits discrimination against job-seekers on the basis of their ethnicity, ‘race’, gender, religious belief, age or physical disability. By enhancing the skills of workers, it requires governments above county level to support vocational training and employers to provide ‘pre-employment training, on-the-job training and reemployment training’ (Xinhua News Agency, 2007). In addition, government-run employment service agencies have to provide free services for job-seekers. Self-determination Although labour policy is associated with the interests of the majority of the population, the process of labour policy making is not very open. As well as the CCP, the main actors in Chinese labour policy making include the SC, the MLSS, the NPC and its Standing Committee, and the All-China Federation of Trade Unions (ACFTU). Societal policy actors are rare in China due to the underdevelopment of civil society, and the channels for ordinary people to affect labour policy making are very limited or completely denied. As the national agency in charge of policies relating to labour, employment, wages and welfare, the central labour administration was one of the pillars of the centrally planned economy. Since the initiation of economic reform, China’s central labour administration has undergone periodical institutional and functional changes in response to the requirements of the transition from the planned economy. Nowadays, with the shaping of a new legal framework of governance for the Chinese labour bureaucracy, legal means have been widely used to achieve labour force allocation and management. Market mechanisms, rather than administrative intervention, were valued. Labour markets, instead of central planning, have become the main medium for the allocation of labour resources. With the growth of the labour market, the central labour administration has given up its authority on the direct management of labour and the wages of enterprises, 109

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and has extended its policy scope to the whole labour force. Accordingly, microcontrol has been replaced by macro-management. Labour and wage control is no longer the main task of the central labour administration. Instead, its primary responsibility is to provide workers with employment services and all kinds of social security services, including pensions, unemployment benefits and medical care services. With the introduction of new labour relations institutions, such as the individual labour contract, collective contract and collective negotiation and the tripartite structure, the labour bureaucracy has given up its monopolistic role in regulating labour relations. As mass organisations, trade unions carry the burden of representing worker interests and supporting the state. Based on the concept of a ‘transmission belt’, the ACFTU is supposed to provide a two-way channel between the party and the workers: ‘The ACFTU is assigned two functions: by top-down transmission, mobilization of workers for labour production on behalf of the nation’s collective good; and bottom-up transmission, protecting workers’ rights and interests’ (Chan, 1993, p 36).This dual characteristic is inherently contradictory, however, and in the economic reform period, the ACFTU has often been caught up in this difficult dilemma. On the one hand, it has to obey the party and support economic reforms, including enterprise reform, whose unfolding has increased the risks and insecurity for the labour force. On the other hand, it has to serve as workers’ advocate, condemning any trampling of labour interests and rights. To some extent, the ACFTU has voiced workers’ concerns. It played an important role in the initiation and promulgation of relevant social legislation and regulations, including decrees on the minimum wage and working hours and new legislation (Ngok, 2000). Although public participation in policy making is still limited in China, scope for public input into the policy debate is increasingly being extended. Public participation in policy making has been encouraged by the government: for example, in the making of the Labour Contract Law, a draft was released for public discussion in April 2006 by the Standing Committee of the NPC. As opinions on this new law were so diversified and divergent, the law-making process was delayed. Originally, the law was supposed to be enacted in 2006, but it came out finally in June 2007 after four sessions of deliberation by the Standing Committee. A just polity During the transition to a market economy without democratisation, China developed a repressive labour regime based on the joint repercussions of the rural–urban dual social structure and a highly exploitative global capital. Such a repressive labour regime is characterised by (a) a pro-capital developmental state, (b) a discriminatory labour market, (c) the denial of freedom of association, and (d) the collusion between government and capital against labour.The key feature of this labour regime is that while capital can operate according to the logic of a market economy, labour is not allowed to act as an organised interest, as its counterparts in market economies do. 110

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It is widely recognised that decentralisation is a major driving force of China’s economic miracle as it maximises the incentive of local governments to develop their own economy. However, the development-oriented local governments tend to seek economic growth at the cost of labour interests. Even collusion between local governments and enterprises to exploit workers is not uncommon. It is well known that China has suffered some of the worst mining accidents in the world over the past few years. According to the Beijing Times, more than 7,000 workers were killed in mine blasts, floods and collapses in China in 2006 (Asia Sentinel, 2007). The collusion between officials and business people is regarded as the key reason for these widespread mining accidents. Migrant workers are the main victims of the repressive labour regime, with regard to labour rights and social services, and the pro-capital policies of the local governments further repress their rights.Their basic rights have been systematically ignored, including freedom of association, the right to bargain collectively, the right to minimum wages and the rights to legal labour standards, such as working hours and occupational safety and health. Further, China’s labour repression has been encouraged by a system of world trade and finance, which has failed to enforce minimum standards of decency at work (AFL-CIO, 2004). As both central and local governments fail to provide sufficient legal protection for workers and limit the power of employers, labour disputes have become very common in China’s market transition. Official statistics show that the number of labour dispute cases increased from 19,098 in 1994 to 226,000 in 2003, and the number of workers involved increased from 77,794 to 800,000 in the same period. In 2003, the number of collective disputes reached 11,000, involving 515,000 workers.The main reasons for the disputes include labour remuneration, economic compensation and social insurance and benefits (Qiao and Jiang, 2005). In recent years, due to the intensification of labour disputes and increasing labour unrest, the government has tightened up its inspection and supervision of labour relations, and established more supervisory agencies. By the end of 2005, about 95% of local governments established special agencies for labour and social security inspection with 20,000 full-time inspection staff.The key areas of labour inspection in recent years include wage payment, especially for migrant workers, child labour, the signing of labour contracts and social insurance payments (MLSS, 2006a). Meanwhile, new labour policies and legislation, for instance, the Labour Contract Law (2007), were made to provide protection for workers, especially migrant workers.

Conclusion This chapter has examined the evolution of China’s labour policy before and after the economic reforms.The market transition initiated in the early 1980s brought about fundamental changes in, and posed great challenges for, China’s labour policy. In the past, China’s labour policy focused on the protection of workers’ job security and benefits. Since the economic reforms, China’s labour policy 111

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has lost its socialist flavour, and has become part of economic policy, prioritising economic efficiency.As a result, a labour market has developed, and a more flexible employment system was established.While labour mobility increased, job security was reduced. Meanwhile, the market transition has made unemployment the top labour problem in China. Given China’s huge labour supply, the top priority of its labour policy is job creation. However, the emphasis on job creation is at the cost of social protection for workers. Entering the new millennium, with the development of China’s market economy in general and its labour market in particular, the Chinese government has begun to direct much more attention to social protection for workers, and in particular those from villages. References AFL-CIO (2004) ‘The condition of the working class in China’, Dissent, Summer, pp 11-12. Asia Sentinel (2007) ‘The tragedy of China’s coal industry’, 19 August (www. asiasentinel.com/index.php?option=com_content&task=view&id=644&Ite mid=31). CCPCC (Chinese Communist Party Central Committee) (1984) Decisions on the reform of the economic system, Passed by the Third Plenary of the Twelfth Central Committee’s meeting on 20 October, Beijing: CCPCC. Chan, A. (1993) ‘Revolution or corporatism? Workers and trade unions in PostMao China’, The Australian Journal of Chinese Affairs, no 29, pp 31-61. Chan, C.K. and Bowpitt, G. (2005) Human dignity and welfare systems, Bristol:The Policy Press. Chen, A. (2004) Urban unemployment and segmented labour markets’, in A. Chen, G. Liu and K. Zhang (eds) Urbanisation and social welfare in China,Aldershot: Ashgate, pp 141-67. Chen, F. (2000) ‘The re-employment project in Shanghai: institutional workings and consequences for workers’, China Information, vol XIV, no 2, pp 169-93. Cheng, J. and Ngok, K.L. (2004) ‘The potential for civil unrest in China’, in A. Heijmans, N. Simmonds and H. van deVeen (eds) Searching for peace in Asia Pacific, Boulder, CO and London: Lynne Rienner Publishers, Inc, pp 166-80. China Daily Online (2006) ‘Stop discrimination in job recruitment’, 10 February (www.chinadaily.com.cn/english/doc/2006-02/10/content_518913.htm). China Daily Online (2007) ‘Draft law to help financing of SMEs’, 24 August (www. chinadaily.com.cn/bizchina/2007-08/24/content_6041268.htm). China Internet Information Centre (2002) ‘Labour and social security profile’, 12 November (http://service.china.org.cn/english/2002/Nov./48592.htm). China Labour Statistical Yearbook (1997) Beijing: China Statistical Press. China Labour Statistical Yearbook (2005) Beijing: China Statistical Press. China Statistical Yearbook (2000) Beijing: China Statistical Press. Feng, L.R. (1982) Six questions concerning employment, Beijing: Institute of MarxismLeninism-Mao Zedong Thought, Chinese Academy of Social Science. 112

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Feng, L.R. (1988) ‘Youth unemployment in China’, International Social Science Journal, vol 40, pp 285-96. Gu, J.P. (2003) A study of the changes of unemployment and employment in China, Beijing: China Agricultural Press. Josephs, H.K. (1990) Labour law in China: Choice and responsibility, Salem, NH: Butterworth Legal Publishers. Korzec, M. (1992) Labour and the failure of reform in China, Houndmills and New York, NY: Macmillan Press and St Martin’s Press. Information Office of the SC (State Council) (2004) China’s social security and its policy, Beijing: Information Office of the SC (www.china.org.cn/ e-white/20040907/index.htm). Lee, G. (2001) ‘Labour policy reform’, in L. Wong and N. Flynn (eds) The market in Chinese social policy, Basingstoke: Palgrave, pp 12-37. Lee, H.Y. (2000) ‘Xiagang, the Chinese style of laying off workers’, Asian Survey, vol XL, no 6, pp 914-37. Leung, J. (2005) ‘Social welfare in China’, in A.Walker and C.Wong (eds) East Asian welfare regimes in transition: From Confucianism to globalism, Bristol:The Policy Press. Lu, F. (1989) ‘The work-unit: a special type of social organisation’, Social Sciences in China, no 1, pp 42-51. Lu, X. and Perry, E. (1997) ‘Introduction’, in X. Lu and E. Perry (eds) The changing Chinese workplace in historical and comparative perspective, New York, NY: M.E. Sharpe, Inc, pp 3-17. Ma, N., Mok, K.H. and Cheung, A. (2001) ‘Advance and retreat: the new twopronged strategy of enterprise reform in China’, Problems of Post-Communism, vol 48, no 5, pp 52-61. Ministry of Labour and Personnel (1989) China labour and personnel yearbook 1949-1987, Beijing: China Labour and Personnel Press. MLSS (Ministry of Labour and Social Security) (2006a) The labour and social security development statistical bulletin 2005, Beijing: MLSS (www.molss.gov.cn/ gb/zwxx/2006-06/12/content_119277.htm). MLSS (2006b) The outline of the eleventh five-year (2006-2010) plan of the development of labour and social security undertaking, Beijing: MLSS (www.molss.gov.cn/gb/ zt/2006-11/08/content_146879.htm). Mo, R. (2002) ‘Employment is still in trouble’, in X. Ru, X.Y. Lu and P. Li (eds) The year 2002: Analysis and forecast of social conditions in China, Beijing: Social Sciences Academic Press, pp 165-74. Ngok, K.L. (2000) ‘The development of the Labour Law of the People’s Republic of China: a comparison of three versions’, Chinese Law & Government, JanuaryFebruary, pp 3-21. Ngok, K.L. (2007) Labour policy in China: Marketization and globalization perspectives, Beijing: Social Sciences Academic Press. People’s Daily Online (2007) ‘Rural migrant workers to enter China’s top legislature’, 8 March (http://english.people.com.cn/200703/08/eng20070308_ 355509.html). 113

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Qiao, J. and Jiang,Y. (2005) ‘An analysis of the labour disputes and labour-related mass incidents in the process of marketisation’, in X. Ru, X.Y. Lu and P. Li (eds) The analysis and forecast of Chinese social situation in 2005, Beijing: Social Sciences Academic Press, pp 297-8. Rawski,T. (1999) China: Prospects for full employment, Geneva: International Labour Organization (www.ilo.org/public/english/employment/strat/publ/etp47. htm#2.3). SC (State Council) (1986a) Provisional regulations on the implementation of the labour contract system in state-owned enterprises, Beijing: People’s Press. SC (1986b) Provisional regulations on the hiring of workers in state-owned enterprises, Beijing: People’s Press. SC (1986c) Provisional regulations on the dismissal of workers and staff for work violations in state-owned enterprises, Beijing: People’s Press. SC (1986d) Measures on insurance of SOE workers waiting for jobs (tentative), Document no 1986/77, 12 July, Beijing: SC. SC (1993) Regulations on unemployment insurance for workers and staff in state-owned enterprises, Beijing: People’s Press. SC (1999) Regulations on unemployment insurance, Beijing: People’s Press. SC (2006) Several opinions on the solution of the problems of peasant workers, Beijing: People’s Press. Solinger, D. (1995) ‘The Chinese work-unit and transient labour in the transition from socialism’, Modern China, vol 21, no 2, pp 155-83. Solinger, D. (2001) ‘Why we cannot count the “unemployed”’, The China Quarterly, no 167, pp 671-88. Tian, X.B. (ed) (1999) The establishing and operation of the Re-employment Service Centre, Beijing: China Labour Press. Walder, A.G. (1986) Communist neo-traditionalism: Work and authority in Chinese Industry, Berkeley, CA: University of California Press. Wang, Y.Z. (2004) Labour and social security issues in China, Beijing: Economic Management Press. White, G. (1989) ‘Restructuring the working class: labour reform in post-Mao China’, in D. Arif and M. Maurice (eds) Marxism and the Chinese experience, New York, NY: M.E. Sharpe, pp 152-68. Wong, L. (1994) ‘China’s urban migrants – the public policy challenge’, Pacific Affairs, vol 67, no 3, pp 335-55. Wong, L. (1998) Marginalization and social welfare in China, London: Routledge. Wong, L. and Ngok, K.L. (1997) ‘Unemployment and policy responses in mainland China’, Issues & Studies, vol 33, no 1, pp 43-63. Wong, L. and Ngok, K.L. (2006) ‘Social policy between plan and market: xiagang and the policy of the Re-employment Service Centres in China’, Social Policy & Administration, vol 40, no 2, pp 158-73. Xinhua News Agency (2007) ‘New law allows job seekers to litigate against discrimination’, 30 August (http://news.xinhuanet.com/english/2007-08/30/ content_6634058.htm). 114

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seven

Health policy Key issues China was once regarded as a model of healthcare provision for developing countries. However, its socialist medical system was severely damaged following the scrapping of communes and the withdrawal of healthcare provisions by work units. Against this background, this chapter examines: • the key features and structure of the Chinese healthcare system in 1978; • China’s healthcare initiatives after 1978, including the change in the nature of hospital management and ownership, the introduction of the medical insurance scheme for urban workers, and the building of a New Rural Cooperative Medical Scheme; and • the impact of Chinese government medical reforms on the well-being of patients.

Introduction Before the era of economic reform, China achieved widely recognised accomplishments in healthcare: central government established a well-organised and efficient health system that provided a low-cost medical service and wide coverage for the general public. However, the economic reforms widened health inequalities, excluding a large number of poorer people from access to basic healthcare. Healthcare reform was criticised by an official report as having ‘failed’ (PTDRC, 2005). Against this background, this chapter examines China’s healthcare measures since 1978 and discusses their impact on the well-being of Chinese citizens.

Healthcare provision before the economic reforms The main features of China’s health system during the planned economy were well-organised provision, wide coverage and preventive care (PTDRC, 2005), as is explored in more detail below. Well-organised provision Healthcare provision in cities and rural areas was systematically delivered through a three-tier network. In urban areas, street clinics formed the lowest level of 115

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healthcare units by providing outpatient facilities for residents. District hospitals were the middle-tier health institutions, giving treatment to patients referred by street clinics. All complicated cases would be treated at city hospitals. And, government work units with more than 100 employees ran their own clinics, providing primary care services. Large SOEs even set up their own hospitals, while medium- and small-sized firms operated clinics or healthcare stations (Dong, 2001). Thus, the different levels of healthcare institutions were systematically designed to be closely linked together. The three-tiered health system was also found in rural areas, based around the rural Cooperative Medical Scheme (CMS),‘village medical stations’ and ‘barefoot doctors’. Production brigades collected medical fees and then submitted them to their commune’s ‘trusted unit’. Medical subsidies were also provided for poor people and ‘Five Guarantees households’. The trusted unit was responsible for managing medical fees and monitoring the implementation of healthcare. In 1976, about 90% of administrative villages were covered by the CMS (PTDRC, 2005). The CMS formed a solid foundation for rural health services. Village clinics were staffed by ‘barefoot doctors’ who received one year of training beyond junior high school. Patients would be referred to commune health centres that had 10-20 beds and were staffed by doctors with three years’ medical education. The county hospitals, the highest tier of the rural health system, were staffed with senior doctors who provided tertiary care for more complicated cases. According to the World Bank, this type of medical system provided ‘a structure for technical supervision of lower-level by upper-level facilities, as well as an efficient patient referral system for the treatment of health problems’ (Liu and Yi, 2004, p 6). Just before China carried out its dramatic economic reforms in the late 1970s, central government still emphasised the role of the CMS as ‘a socialist healthcare scheme’, reaffirming healthcare as a collective responsibility (MH, 1979). Wide coverage The medical care system provided coverage for many different social groups, including the Government Health Scheme for all government employees, disabled veterans, teachers and university students; the Labour Health Insurance Scheme for workers of SOEs; and the CMS for rural residents. By 1975, it was estimated that the Government Health Scheme and Labour Health Insurance Scheme covered the medical needs of almost all the urban population, while the CMS provided healthcare security for about 85% of people in rural areas (Chu and Rask, 2002, p 7). Preventive care Before the economic reforms, medical workers focused on preventive services, through well-organised networks (MH, 2005).The three-tier healthcare network in urban and rural areas incorporated the functions of prevention, treatment and 116

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hygiene. Anti-epidemic stations were set up at provincial, prefecture and county/ district levels, while anti-epidemic departments were established in township-level hospitals. Health workers from village and street clinics also provided primary healthcare services. The government actively financed preventive services such as immunisation, prenatal care, family planning and public health inspections and campaigns. In addition, health workers also mobilised the public to participate in a ‘Patriotic Health Campaign’ in order to improve environmental health (PTDRC, 2005). Because of this medical care approach, many virulent contagious diseases were eliminated or effectively controlled (PTDRC, 2005). In short, pre-reform health services followed socialist values by treating medical care as a public good as well as a basic human need. On the financial side, the government provided grants covering the preventive medical services of antiepidemic stations and maternal and child health. Also, public hospital services were heavily subsidised and medical costs to users were set at a level far below the recurrent costs (Tang and Meng, 2004). Because of this perspective, ‘profitoriented services didn’t exist’ (PTDRC, 2005). Furthermore, central planning and collective social and economic units in the form of government health institutions, SOEs and communes laid a solid foundation for providing effective healthcare for the general public. Indeed, the World Health Organisation (1983, pp 73-4) recognised the achievements of China’s primary healthcare: Among the countries of the world, one in particular – namely China, where almost a quarter of the world’s population lives – has strikingly demonstrated how ‘health for all’ can be achieved…. Experience in China, therefore, shows all the principles of primary health care in operation. By studying it, a clearer idea can be gained of what primary health care is, and what it is not. The effectiveness of this health system was also revealed from positive health figures. Between 1949 and 1981, the number of hospital beds increased from 99,800 to 1,195,750; life expectancy rose from 35 years to 67.9 years, and the infant mortality rate decreased from 400 to just 48 per 1,000 babies (Liu and Yi, 2004).

Healthcare provision after the economic reforms Since the economic reforms there were many changes in the principal sources of finance for healthcare provision, the ownership of health institutions and the operation of hospitals. Structurally, the MH, directly supervised by the SC, is responsible for making health policies, conducting research and managing medical colleges. A similar health structure has been set up at each level of local government (see Figure 7.1). As for healthcare delivery, both urban and rural residents would be served by a ‘three-tier’ healthcare system. In urban areas, community health units and district 117

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Figure 7.1: Main structure of the urban health sector in china (2003) national level Ministry of Health

Chinese Academy of Medical Science Affiliated Hospitals Training and research institutes Others

National CDC

provincial level Department of Health

Hospitals Training and research institutes

Provincial CDC MCH centre Municipal level Bureau of Health

Hospitals Training centres

Municipal CDC MCH centre

District level Bureau of Health

Hospitals Community health centres Private clinics

CDC MCH centre

Notes: CDC: Centre for Disease Control and Prevention; MCH: maternal and child health. Source: Tang and Meng (2004, p 17)

hospitals would provide primary healthcare, while municipal and provincial hospitals focused on tertiary medical services. In rural areas, village clinics were the lowest health tier, township public hospitals the second tier, and county/provincial hospitals the highest tier for inpatients. However, following economic reform, this healthcare system deteriorated as a result of the localisation and privatisation of health services. The provision of health services became the responsibility of local governments that only provided limited subsidies for hospitals and clinics (see Figure 7.1). The previous well-organised referral system nearly broke down and there was ‘the almost total absence of primary care’ in China (Moreton, 2002). Hospitals were now playing a dominant role in healthcare, and as many as 80% of urban residents sought treatment from various kinds of hospitals on ‘an 118

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episodic basis’, even for minor illnesses (IDRC, 2007; see also Moreton, 2002). In the countryside, both private and public clinics were unwilling to provide preventive care without reimbursement (Meng et al, 2004). In short, the present health services in China have become hospital-oriented, while the link between clinics and hospitals is now relatively weak. According to Liu (2002), China’s healthcare reforms can be divided into two stages. The first stage (1980-91) concerned cost containment, and the second stage (since 1992) relates to privatisation of healthcare as well as cost containment. Healthcare reform since the 1980s is ‘characterised by marketoriented mechanisms for financing and administrating health facilities’ (Meng, 2006, p 16). Unfortunately, the consequences of reform suggest that socialist welfare values could not be sustained in a socialist market economy. Hillier and Shen (1996, p 258) point out: It is fair to say that after more than a decade of economic and agricultural reform, China is still facing difficulties in providing goodquality, affordable and equitable health services for the majority of the rural population and both the urban and rural poor. These comments are completely different from those of the World Health Organisation made in the early 1980s.Thus, the following section explores China’s healthcare changes following its economic reforms. Management and ownership changes Medical reform dramatically changed the nature of hospital ownership, management, medical personnel recruitment and the income of hospital staff. As mentioned in Chapters Five and Six, the decentralisation of welfare provision was one of the strategies adopted by central government to minimise its financial burden. Accordingly, local authorities were granted the autonomy to allocate resources to different levels of local administrative units. Unfortunately, health services were not a top priority in many local authorities. The changing role of government in medical care has been clearly shown from its share in the total national health expenditure (excluding its spending on the Government Insurance Scheme exclusively for civil servants), which dropped from 28% to 14% between 1978 and 1993. During this period, its financial support for the rural CMS also fell from 20% to just 2% (Dong, 2001). Overall, healthcare as a percentage of government expenditure decreased from 3.1% to 2.3% between 1985 and 1995 (Jackson et al, 2005). And government subsidies as a proportion of total hospital incomes fell dramatically, from 21.4% in 1980 to only 8.7% in 2000 (see Table 7.1). By applying its economic values of ‘work motivation’,‘management efficiency’ and ‘financial independence’ to health services, the Chinese government attempted to improve hospitals’ productivity through new management strategies, pushing 119

Social policy in China Table 7.1: Composition of hospital incomes in China (1980-2000) (%) Sources of income

1980

1985

1990

1995

2000

Medical service Sale of drugs Government subsidies Others Total (%)

18.9 37.7 21.4 22.1 100

22.2 39.1 20.2 18.6 100

28.6 43.1 11.6 16.7 100

34.7 49.8 7.5 7.9 100

40.2 47.1 8.7 4.0 100

Total income (¥100 million)

292.6

428.6

702.2

1,003.4

2,296.5

Source: Derived from Tang and Meng (2004, p 28)

them to be more financially independent. In 1982, The hospital operation ordinance was published, which introduced a ‘responsibility system’ for hospital chief executives (MH, 1982). Another document published in 1997 also encouraged ‘social agencies and individuals to run health services based on independent management and being responsible for their own profits and losses’ (CCPCC and SC, 1997). Accordingly, the chief executive was to be granted decisionmaking power on the employment of staff and their rewards and punishments. The surplus income of hospitals could be retained for hospital development or for paying staff bonuses. In other words, medical organisations were expected to be ‘independent accounting units of profit-making entities with independent management’ (PTDRC, 2005, p 4). Financial rewards in the form of bonuses were used to enhance the productivity of hospital staff. Meng (2005) identifies several forms of bonus including volumebased, revenue-based and responsibility-based systems. Government cutbacks have directly shaped hospital staff ’s practices – by attempting to balance hospital accounts, medical professionals have tried to generate more revenue by providing unnecessary services and selling more drugs. Some hospitals increase income by charging for various types of services including X-rays, laboratory tests and injections.They have also invested in expensive medical equipment so as to charge higher costs. Consequently, ‘many health facilities in China have been driven by profit rather than the health service needs of the local population’ (Tang and Meng, 2004, p 29). Despite efforts to regulate the prices of medical care and drugs, central government measures have had little impact on enhancing the affordability of health services for the public. Central government has instructed each local authority to set price limits on some hospital items. This measure is called ‘the official fee schedule’ (Meng et al, 2004, p 11). Local governments also set the prices for drugs listed on the urban medical insurance scheme for workers. In response to these constraints on medical charges, some hospitals, however, use other types of drugs and also increase frequencies of drug consumption in order to increase their revenues (Meng, 2006). According to Liu and Yi (2004, p 11), hospitals have encouraged doctors to prescribe more and costlier drugs in order 120

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to compensate for their losses caused by the implementation of the government’s below-cost regulated medical care services. Thus, hospital managers have abused drug use and Chinese hospitals have become ‘revenue-maximising organisations’ (Meng, 2006, p 53). Outside urban hospitals, drug sales also accounted for 90% and 66% of incomes in village clinics and township health centres respectively (Meng et al, 2004). By forcing health institutions to fund themselves on drug purchases by patients, the Chinese government’s medical reforms have destroyed its well-established health prevention framework. The privatisation of healthcare has also been promoted by central government’s policy of financing medical services through multiple sources (CCPCC and SC, 1997). In particular, the private sector was encouraged to provide medical services.The pace of the development of private hospitals was accelerated by the government’s new approach to healthcare structures. In 2002, central government required each township to provide only one government-run hospital, and the ‘rest of the existing hospitals could be transformed to other types of ownership’ (Meng, 2005, p 2). The underlying cause of the policy was the poor financial condition of township hospitals, one third of which were in deficit (Meng, 2005). Consequently, various forms of hospital ownership have appeared, such as a joint stock cooperative system, complete transfer of the assets, rent out and contracting out. The most common form of ownership is the joint stock cooperative system where shareholders could be the state, health staff and private investors. Most hospitals whose assets were transferred became profit-oriented private hospitals. The main purpose of contracting out is to achieve cost-effectiveness by reducing the financial burden to hospitals of non-medical services. Services such as catering, purchasing medical materials, security, patient registration, medical guidance and hospital meeting rooms have been contracted out to private companies. In rural areas, the collapse of communes directly threatened the services provided by village clinics. Without a collective medical fund for paying village doctors, many village clinics were unable to survive. Some village clinics were contracted out or privatised, and this privatisation of healthcare providers has caused severe public health problems. For example, the immunisation coverage rate was reduced because government subsidies were unable to cover the costs of health practitioners (Liu and Yi, 2004). With a limited budget for health prevention, the quality of public health has declined, revealed from the re-emergence of schistosomiasis (a parasitic disease) and malaria in southern provinces. Meng (2006), after studying the operation of tuberculosis control programmes in four counties in Shandong Province, found that government subsidies only covered 40-65% of the salaries of health workers in township health centres. In order to solve their financial difficulties, these centres charged users for services. In short, the reduction of government subsidies, the increase of private health practices and medical charges have led to public healthcare in China being ‘systematically neglected’ (Liu and Yi, 2004, p 51).

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Privatisation of medical care in urban areas As a result of the reconstruction of SOEs, workers are no longer able to rely on their enterprises for lifelong welfare benefits. In the post-economic reform era this means that China needs ‘a society-based rather than an institution-based social security system’ (Meng, 2006, p 10).Without having a comprehensive programme for tackling medical demands, central government has simply shifted the medical burden to local authorities. As a result, various forms of medical reforms have appeared in different regions (Sun, 2002). Some provinces and cities started to ask patients to make more contributions to their medical care; some paid a lump sum to workers for their annual outpatient treatments; others asked workers to pay for a certain proportion of medical costs; some SOEs even paid a lump sum to hospitals that were expected to provide treatments for workers. Financing healthcare through social pooling was also tried in some areas. For example, a town in Hebei Province used social pooling for financing the medical costs of retired workers, and a vegetable enterprise in Beijing also adopted social pooling for paying the medical costs of workers who suffered life-threatening illnesses (Sun, 2002). However, voluntary intervention and fragmented measures based on decentralisation were unable to tackle the medical needs of hundreds of thousands of workers. First of all, the ability of SOEs to pay for medical costs of workers varied because of ‘wide disparities in profitability loss’ (Liu and Yi, 2004, p 32). Many SOEs were losing money, and ‘late payment or non-payment of medical costs is common’ (Bloom et al, 2002, p 8). The unmet medical needs and the medical burden of SOEs not only threatened the legitimacy of the government but also formed a barrier to SOE reform. It was not until the publication in 1994 of the Views on reforms of the medical care system for enterprise workers that a common strategy for solving the medical needs of urban workers appeared (State Development and Reform Commission et al, 1994).The document claimed that the ultimate objective of medical reform was to provide medical insurance for all workers based on a social pooling fund and an individual account. It further argued that this type of financial model would be beneficial to the development of social security, the transformation of SOEs into modern enterprises and the reduction of the financial burden of enterprises (State Development and Reform Commission et al, 1994). Social pooling was believed to be a solution to the medical needs of workers in enterprises running deficits, which had a reimbursement rate as low as 50% (Liu, 2002).The strategy of using multiple sources for financing health was further confirmed by the Notification on extending the trials on medical insurance scheme in 1996. This pilot scheme aimed at extending the combination of social pooling and individual accounts via combined contributions from the state, enterprises and workers (SC, 1996). In particular, it linked the quality of medical care to workers’ contributions so that work motivations could be preserved.

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Medical reforms in urban areas reached a decisive stage in 1998 with the publication of the Decision on establishing the basic medical insurance system for urban employees (SC, 1998).This policy paper included the following requirements (SC, 1998): a) Compulsory medical insurance for workers in SOEs, private enterprises, state administrative departments and institutions in urban areas. b) Inclusion of both a social pooling account and an individual account. Employers contribute 6% of their total wage bills, while employees pay 2% of their wages as premiums. Workers who are already retired do not need to make any contributions. All contributions from workers, together with 30% of the premium from their employer, go to the individual account. The remaining 70% of the employer’s premium goes to the social pooling account.The social pooling account is mainly used for paying for inpatient treatment, special and chronic diseases, while the individual accounts pay for general outpatient services. c) Minimum and maximum levels of payments from the social pooling fund. The minimum payment is 10% of the worker’s average annual wage in a region, and the maximum is four times their average annual wage. An insured worker, however, needs to pay a proportion of his/her medical cost (between the minimum and maximum levels of insurance payments). d) Enterprises are allowed to set up a supplementary medical insurance scheme, funded by no more than 4% of their total wage bills. Thus, a compulsory health insurance scheme was finally established after two decades of economic reforms. The scheme, however, only serves urban workers so that migrant workers, homemakers and unemployed people are excluded from basic medical protection. Although some extent of wealth redistribution can be achieved through the social pooling fund, patients are unable to meet all their medical costs.They still need to rely on personal resources and informal support for paying for treatment. The scheme only provides a minimal level of medical assistance for a limited number of working citizens. In short, accessing health services in the post-economic reform era has been shaped by a combination of work position, savings and family support (Liu et al, 2004). Promotion of ‘cheap treatment hospitals’ To address the problem of expensive medical costs at existing hospitals, the former Minister of Health Gao Qiang proposed the establishment of ‘cheap treatment hospitals’. This type of hospital mainly provides medical treatment for deprived groups such as laid-off workers, unemployed workers, migrant workers, older people and recipients of the MSLS (People’s Daily Online, 2006b). In fact, a similar type of hospital can already be found in some provinces, such as local governmentfunded ‘cheap treatment hospitals’ in Xinjiang. Also, 10% of beds in hospitals at 123

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the provincial level were expected to be classified as ‘cheap hospital beds’ (People’s Daily Online, 2006a). In Beijing, the Shang Tu Hospital provides relatively cheap medical services, aimed to benefit the general public. In Guangzhou, some privately run hospitals offer cheap health treatments. It should be stressed that the establishment of ‘cheap treatment hospitals’ is a relatively new idea, as a response to deteriorating services in public hospitals. A researcher from the MH points out that the future development of ‘cheap treatment hospitals’ and their operational barriers are still unclear (People’s Daily Online, 2006b). Development of community health services The development of community health services is the Chinese government’s response to expensive hospital-based treatments as well as a reflection of its changing attitudes towards healthcare. In recent years, central government has treated community health as ‘public welfare oriented, rather than profit-oriented’ (China Daily, 2006). In 2006, the NPC decided to build more community clinics in cities to give local residents ‘more choice and convenience’, being ‘the first option for patients with minor medical problems’ (People’s Daily Online, 2006c).According to Wu Yi, the Chinese Vice Premier, the development of the community medical service system would be China’s healthcare priority due to its convenience and its health prevention functions (Xinhua News Agency, 2007). There were 3,400 community medical service centres and about 12,000 community clinics in urban areas in 2006 (China Internet Information Centre, 2006).The government’s objective was to establish comprehensive community medical services in all major cities by 2010.To achieve this goal, it would be providing more resources for community clinics and more training for community doctors and nurses. Even before their promotion by central government, community-based health services were already established in some regions. In Shanghai 18,500 communitylevel doctors were classified as ‘family doctors’. In Guangdong Province, the Shenzhen municipal government established community medical service centres in 2005. This type of medical centre was ‘one of the first trials in the country to solve the problem of rising medical costs for low-income migrant workers’ (People’s Daily Online, 2006e). In this medical scheme, a participating company only has to pay a monthly medical insurance contribution of ¥8 for each of its employees, while each employee contributes ¥4. When a migrant worker is sick, he only has to pay ¥12 to see a doctor. He can reimburse his medical cost for a single service with less than ¥90. He can also claim all his medical expenses up to a maximum of ¥60,000. It was reported that 3.9 million outpatients and 1,206 inpatients were treated at 132 designated medical centres in 2006 (People’s Daily Online, 2006e).The Chinese government is obviously attempting to change its healthcare direction from expensive hospital-based services to low-cost and preventive community-based services.

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Basic Urban Resident Medical Insurance Scheme The Chinese government has recently launched a pilot programme to extend medical protection to members of the urban population not covered by labour medical insurance (People’s Daily Online, 2007a). The Basic Urban Resident Medical Insurance Scheme (BURMI) is a voluntary scheme, which targets children, individuals with flexible employment patterns, those not in employment, workers whose SOEs are in financial difficulties and urban migrant workers (People’s Daily Online, 2007b). Prior to this, several provinces including Jilin, Jiangsu, Zhejiang and Henan had already set up similar medical protection schemes for urban residents. BURMI mainly provides financial assistance for patients suffering life-threatening illnesses. Accordingly, central government subsidises the health insurance contributions of residents in the economically less developed central and western regions, while local authorities are expected to provide financial assistance for disadvantaged groups in their areas. Jilin was chosen as a pilot province for BURMI in 2007, and different levels of subsidies have been applied to different types of participants (People’s Daily Online, 2007b). These medical insurance schemes are summarised in Table 7.2 below. Table 7.2: Medical insurance subsidies to different target groups in Jilin’s pilot scheme The nature of the participant

Level of subsidy

Recipients of the MSLS or ‘hardship household’ or disability certificate holders

At least 80% subsidy from the local government

People aged over 60

¥50 from provincial government and also at least ¥50 from the scheme-organised region

Primary and secondary school pupils

¥5 from provincial government and at least ¥5 from the scheme-organised administrative unit

Older workers with flexible employment patterns

With a subsidy of ¥80

Individuals with flexible employment patterns

With a subsidy of ¥50

Note: This table was constructed by the authors based on information from People’s Daily Online (2007b).

The main weakness of this scheme is a relatively low level of assistance.According to a senior official of Jilin Province, this scheme can only pay 60% of a patient’s prescription fees, and, as one respondent pointed out, the insurance only covers ¥3,000 of his daughter’s ¥15,000 medical bills (People’s Daily Online, 2007b). In short, BURMI only provides minimal medical assistance for urban non-working residents.

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Privatisation of medical care in rural areas Healthcare in rural areas deteriorated following the introduction of the Household Responsibility System and the disbanding of communes in 1986. As a result, the foundation of the rural CMS, which was based on collective production units and collective resources, nearly disappeared (Zhang, 2003). As a result, 900 million of the rural population became ‘uninsured overnight’ (Blumenthal and Hsiao, 2005). They had to rely on personal savings and assistance from informal networks to pay for medical costs. To improve rural health services, the MH (1990) published a circular on the Operational objectives for providing medical care for all rural residents in 2000 (trial) (MH, 1990). The ultimate objective of this policy paper was to provide primary healthcare for all rural residents. Accordingly, central government asked local authorities to set up a specific account for medical care, financed through contributions from collective means and individuals. Local authorities were further urged to formulate clear healthcare objectives and to treat rural health services as a key element in their social and economic plans (MH, 1990). Further, village and township governments were told to allocate 8% of their expenditure to primary healthcare. Although the MH thus set some clear objectives for rural health services, it failed to address fundamental healthcare barriers, including the financial difficulties of lower-level administrative units and the unclear division of health duties between higher-level and lower-level governments. Also, the impact of privatisation on healthcare was not examined.As no concrete actions were taken to tackle existing health problems, this policy only paid lip service to the medical needs of rural residents. In 1997, the SC published the Decision on medical reforms and development (CCPCC and SC, 1997). By asking local governments and individuals to make financial contributions to the CMS and also encouraging local initiatives on health services, this document reaffirmed central government’s principles on the ‘socialisation of medical costs’ and the ‘localisation of health services’. It also set an objective of making primary healthcare available to everyone by 2000. While seeing the CMS as the basic healthcare unit, central government did not provide effective financial and organisational initiatives that could practically improve rural healthcare. Thus, after three decades of economic reforms, the official approach to rural healthcare still centres on personal responsibility and local duty without addressing the real concerns of rural residents. Local initiatives on rural healthcare As a result of the localisation and socialisation of health resources, financed by multiple sources, the development of medical services in the countryside mainly depended on the efforts of local leaders and the economic capacity of a region. Several healthcare models were initiated by local governments. It was reported that 126

Health policy

by the end of 1998, 712 counties re-established CMS, involving more than 6,300 health organisations, served by 1.04 million health workers. Modifying Zhang’s (2003) typology, CMS in rural areas can be classified into three models: • Social welfare cooperative medical schemes that tackle general diseases but not serious illnesses. Members of this scheme only have to make a small contribution to receive medical cover for general diseases. However, this scheme only provides limited financial subsidies (10% of medical costs) for members with serious and chronic illnesses. • Risk-sharing cooperative medical schemes that mainly provide subsidies for members who have to pay high medical costs. Individuals and collective enterprises make contributions to establish a medical fund. Then medical subsidies are paid to members to cover a high percentage (for example, 80%) of their medical expenses caused by serious illnesses. • A mixed model of welfare and risk coping.This model is better organised than the other two, sometimes involving insurance professionals, and has wider social pooling. Individuals pay premiums and local administrative units provide some financial subsidies.The medical fund is jointly managed by representatives from local government, the health services department and an insurance company. Social pooling is arranged at county and township levels to provide more resources for both general diseases and serious illnesses. Some regions run their CMS along medical insurance lines.An insurance company will calculate the amount of premiums collected by a Cooperative Medical Insurance Committee (composed of various interested parties). By presenting a medical certificate issued by the insurance company, patients can consult doctors. Participants in the scheme, however, are required to pay a proportion of treatment costs. Before 2003, no unified and holistic medical care schemes were established in rural China after the collapse of the original CMS. Instead, fragmented and diversified medical care programmes were formed by local initiatives. In this way, the extent of health protection relied heavily on the commitments of local officials as well as the economic capacity of a region. Establishment of a New Rural Cooperative Medical Scheme More concrete and practical health policies for addressing the problems of rural healthcare have been formulated only in recent years. In 2002, the Decision on further strengthening health services in rural areas was published in which central government admitted that: Health service provisions [in rural areas] such as health care organizations are still less developed, financial support and health workers are inadequate, basic facilities are old, the implementation of 127

Social policy in China

CMS in rural areas is problematic, some regions have serious epidemic and regional diseases. (CCPCC and SC, 2002) The government’s overall objectives are to build a rural healthcare system by 2010 and to establish an NRCMS.This policy paper was a turning point in rural healthcare development because it not only promised more financial contributions from central government but also formulated a medical care framework in rural areas: • With the successful implementation of the NRCMS, a farmer only has to pay an average of ¥10 for medical insurance, and central government and local government contribute an additional ¥10 for it respectively. All contributions are deposited in the Rural Cooperative Medicare Fund, which is mainly used for tackling serious illness. • The respective responsibilities on medical care of central government and local authorities have been defined. Accordingly, central government’s main duties are to work out overall plans and specific programmes to tackle issues affecting the public health of the rural population. Provincial government has been requested to assess basic health facilities needed by health organisations at county, township and village levels. County government has been made a key institution responsible for all rural health services, in particular providing support for medical care organised by lower administrative units. Health organisations at county level have to provide emergency services, train medical staff and promote health education. Health institutions at township level mainly provide basic and public healthcare. Health clinics at village level deliver health education and provide basic medical care for schools, families and communities. • Health services in rural areas are mainly provided by the public sector, supported by multiple sources. Input from the private sector, however, is also encouraged. • Future increases of medical expenditure by all levels of government should mainly go to the development of health services in rural areas. Central government finance is mainly used to support health services in poor regions. Provincial and municipal governments are expected to provide financial support for public health services in counties and villages. • Local authorities are required to set up a separate grant-supported medical assistance scheme for helping the medical costs of poor families. The above initiatives show that the central government paid serious attention to the medical needs of rural areas by establishing a systematic healthcare framework at county level. It also addressed the long-term financial difficulties of health institutions at the lower level of government. More importantly, the government ensured that the public sector would play a leading role in healthcare provision. In short, more organised and practical actions were taken by central government to deal with the medical gap caused by the breakdown of communes. Moreover, 128

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by taking a more positive attitude towards the role of the public sector, central government became aware of the limitations of the private sector when it came to building a healthy society for all its citizens. Supply and training of health personnel Since the economic reforms there has been an increase in the number of medical workers. According to a WHO report in 2007, 82.8% of births in China were attended by health personnel – this was higher than in India (48.3%), but lower than in Malaysia (100%) (WHO, 2007). The Chinese government implemented a ‘3-5-7’ medical teaching programme to train three different types of doctors. ‘3’ means a three-year secondary school programme for rural doctors; ‘5’ is a five-year undergraduate programme for qualified doctors and ‘7’ is a seven-year training programme for medical scientists. As for nursing training, most courses are for three years, for junior high school graduates. In 1999, three-year training programmes were offered in cities such as Beijing, Shanghai and Shenzhen. The registration ordinances for nurses and doctors were enacted in 1995 and 1999. In order to ensure an acceptable standard of nursing, a national examination for nurses was set up. Similarly, a national examination was established for all doctors who wanted to practise in the medical profession.Table 7.3 gives more details on the qualifications of doctors in China. Table 7.3:The qualifications and medical institutions of doctors (2002) Educational level

% of Township doctors Hospital health centre MCH centre CDC

Doctor’s degree 0.5 Master’s degree 1.8 University 25.7 Junior college 31.2 Secondary technical school 33.5 High school and below 7.4 Total 100.0

0.8 3.0 38.8 33.2 20.7 3.6 100.0

0.0 0.0 2.9 24.9 56.5 15.8 100.0

0.0 0.5 18.6 36.8 41.0 3.0 100.0

0.0 0.5 14.0 33.6 43.8 8.1 100.0

Note: MCH centre = maternity and child health centre; CDC = centre for disease control and prevention. Source: MH (2006a)

Although the doctor–patient ratio in China is close to the equivalent ratio in most developed countries, the qualifications held by Chinese doctors are currently relatively low. Only 14.3% received five years’ medical training, and 26.7% completed only two to three years of medical education (Liu and Yi, 2004). Also, 47% of health regulators at county level said they needed more training in order to fulfil their work properly (Meng et al, 2004). In addition, health services research has played only a minimal role in policy making. Meng and his colleagues (2004, p 15) stress that ‘many policies are still formulated on the basis of weak or no evidence and health policy implementation is not systematically evaluated’. 129

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It should be emphasised that the Chinese government has in recent years attempted to raise the standards of health professionals. Non-medical professionals are now strictly prohibited from health treatment and consultation activities (MH, 2005, p 2). The MH also set a ratio of nurses to hospital beds in general wards as 0.4:1 and in intensive care wards as 2.5:1 to 3:1. There is a requirement that the total number of hospital nurses should reach at least 50% of the total number of medical technicians (MH, 2005, p 2).The quality of health professionals in China is therefore improving, and central government has demanded that hospitals observe medical management legislation, regulations and instructions (MH, 2005, p 2).

Healthcare reform and well-being As noted above, the development of health services was shaped by the Chinese government’s approach to the privatisation and decentralisation of social policy. The following sections examine the impact of healthcare reform on the wellbeing of Chinese people. Physical well-being Without doubt, the Chinese government has achieved great improvements in several key health areas. From 1981 to 2000, the life expectancy of Chinese people rose from 67.9 years to 71.4 years (China Development Research Foundation, 2005). Data from UNICEF show that between 1990 and 2000, the death rates of children and women in China dropped and immunisation coverage was extended: • Infant Mortality Rate: from 85 to 33 per 1,000 live births • Under-five mortality rate: from 61 to 35 per 1,000 live births • Underweight children: from 19% to 11% (UN Health Partners Group in China, 2005) • Maternal mortality: from 89 to 43 per 100,000 live births (1990-2002). Immunisation coverage in the following areas was extended from 1983 to 2004 (WHO and UNICEF, 2005): • • • • •

Bacillus Calmette-Guerin (BCG): from 34% to 95% Diphtheria-Pertussis-Tetanus (DPT1): from 80% to 97% Diphtheria-Pertussis-Tetanus (DPT3): from 58% to 91% Polio vaccine (Pol3): from 81% to 92% Measles vaccine (MCV): from 78% to 84%.

In addition, the percentage of underweight children decreased from 18.1% to 7.8% and the average height of children aged 3-18 increased by three centimetres (China Development Research Foundation, 2005). In the light of these health 130

Health policy

improvements, the author of a report for the United Nations (UN) Economic and Social Commission for Asia and Pacific concluded, ‘The health of Chinese citizens has reached a comparatively high level among developing countries’ (Mao, 2007, p 5). However, the positive achievements of recent healthcare provision in China have been undermined by the exclusion of many poor patients from health services, intermittent health insurance coverage within the population and unequal healthcare between urban and rural areas. The underlying cause of this problem was the withdrawal of the Chinese government’s commitment to public healthcare. As shown in Table 7.4, the government’s share of total national healthcare expenditure dropped dramatically, from 36.4% to 15.5% between 1980 and 2001. Also, its health spending as a percentage of GDP declined from 2.4% in 1993 to only 0.95% in 2003. Due to central government reducing subsidies for healthcare, hospitals and clinics had to rely on charging fees in order to balance their books.This explains why during the same period individual expenditure as a percentage of total health expenditure rapidly increased from 23.2% to 60.5% (see Table 7.4). Meng (2006) even reported that user charges accounted for 70-93% of revenues in nine hospitals studied. Medical expenses became a heavy burden for many people. In 2003, the average inpatient expenditure per admission was as high as ¥3,911 (£261), which was 27.9% of an urban worker’s and 149.1% of a farmer’s per capita annual income (Mao, 2007). Because of financial pressures, many patients were unable to get proper treatment. In 2005, the MLSS of Hubei Province found that 40% of 14,000 rural workers examined continued to work despite illness: their coping strategy was:‘wait first, endure second, and take medicine third’ (The Epoch Times, 2006). Similarly, a national health survey (MH, 2004), with a sample of 57,000 households, reported that among those who were sick, 57% in urban areas and 45.8% in the countryside did not seek medical consultation.The survey further revealed that out of the 29.6% of patients who rejected hospitalisation, 70% claimed financial difficulties as the main reason. In short, a large number of Chinese patients are enduring pain and suffering deteriorating health conditions simply because of poverty. The privatisation of healthcare badly hit preventive services because they raised less revenue for hospitals than their inpatient services. Moreover, many rural medical workers turned to private practices or to cities to find better salaries. Preventive medical care has therefore become increasingly unaffordable and inaccessible.According to the UN, 70% of the 850,000 children dying annually in China suffered from preventable and treatable respiratory infections and infectious and parasitic diseases (UN Health Partners Group in China, 2005). The introduction of compulsory medical insurance for urban workers and the re-implementation of the rural CMS schemes were unable to provide the same scope of health protection across the population as under the old planned economy.This was because the labour insurance scheme was work-oriented and urban-biased, meaning that a large number of rural residents and non-working 131

132

13.4 2.9

23.2

(billion yuan)

per capitaa

40.4

Total health expenditure as share of GDP (%)

Health expenditure

Notes: a Nominal prices.

1995

1997

1998

1999

2000

2001b

4.0

65.0

37.0

38.0

25.0

73.4

3.9

190.6

50.3

32.7

17.0

225.8

4.6

273.8

56.9

27.7

15.4

338.5

4.8

302.6

57.8

26.6

15.6

377.7

5.1

331.9

59.2

25.5

15.3

417.9

5.3

376.4

60.6

24.5

14.9

476.4

5.4

403.6

60.5

24.0

15.5

515.0

1,854.8 5,847.8 7,446.3 7,834.5 8,206.8 8,944.2 9,593.3

1990

Source: Liu and Yi (2004, p 46)

c Social health expenditure includes: • direct health investments and subsidies to the Government Insurance Scheme by government agencies; • direct health investments and the Labour Health Insurance Scheme by SOEs and urban collective enterprises; • rural collective health investments and CMS; • extra-budgetary capital investment; • private direct investments in practices.

Due to the adjustment of statistical specification, total health expenditure in 2001 did not include expenditure on higher medical education, personal spending on nourishing food and health protection goods approved by the MH and sold in market as dietary supplements.

b

(% of government health expenditure)

Individual health expenditure (% of total health expenditure)

Social health

36.4

expenditurea, c

13.2

(billion yuan)

451.8

Government health expenditure (% of total health expenditure)

Total health

expenditurea

GDPa (billion yuan)

1980

Table 7.4: National health expenditure by resources in China (1980-2001)

Social policy in China

Health policy

citizens were excluded from health protection. As shown in Table 7.5, all types of health insurance schemes only covered 55.2% of urban residents and 21% of the rural population. A big portion of Chinese people have been left unprotected and have to rely on personal savings and informal support to cope with their medical costs. In short, the marketisation of healthcare in China over the past three decades has shifted Chinese people from state dependency to self-reliance and family dependency. In addition, the degree of protection offered by urban labour insurance was very limited as the maximum amount claimed was only four times the average annual income. Dong (2001) used the case of middle-aged workers in Shanghai as an example, pointing out that the workers could only save ¥300 a year into their individual accounts.After using all the money from their individual accounts, they still needed to pay ¥1,400 more before using money from the social pooling account. According to a representative of the American International Assurance Company (Shanghai Branch), the new insurance scheme was ‘almost equal to no insurance’ and ‘the pressures will be on our commercial insurance’ (Dong, 2001, p 19). Similarly, a representative of the Pingan Insurance Company said that for many people the government-sponsored insurance was ‘just like having no medical benefit at all. They are not covered much by the public fund and mostly they have to rely on their own ability to pay’ (Dong, 2001, p 19). Thus, the existing urban insurance scheme provided little protection for participants, leaving ‘most life threatening illnesses uncovered’, failing to achieve ‘the equity and poverty alleviation goal’ (Liu, 2002, p 146). While forcing many patients to pay for their medical costs themselves, the existing healthcare system does not have an effective mechanism for helping those with major financial difficulties. Up to now, both central government and local governments have only requested that hospitals assist with the medical costs of poor patients, without making specific budget arrangements and guidelines. Meng (2006) reported that none of his nine respondent hospitals had formulated systematic and effective measures for assisting poor patients – help was mainly in Table 7.5:Types of health insurance schemes and coverage in China (2003) (%) Medical scheme Urban

Rural

Cooperative insurance Compulsory insurance for urban workers Catastrophic disease insurance Government scheme Labour insurance Other types of insurance Commercial insurance Sub-total Self-payment Total (%)

9.6 1.5 0.1 0.2 0.1 1.2 8.3 21.0 79.0 100.0

6.6 30.4 1.8 4.0 4.6 2.2 5.6 55.2 44.8 100.0

Source: MH (2007)

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the form of giving discounts on specific items, rather than meeting all the medical needs of poor patients. For example, only one of the hospitals offered discounts on drugs (this was only 10%) and, although six hospitals provided assistance for surgical operations, they all gave discounts of less than 50% (see Table 7.6). Table 7.6: Discounted items for poor patients in nine hospitals Categories of service items CT and MRI scans Bed Registration fees Regular examinations and lab tests Surgical operation Treatment Nursing Injection Drugs

Discount as proportion Number of hospitals of cost of item (%) providing discounts 30–50 10–50 100 (6 hospitals) 10 (1 hospital) 20–50 10–50 50 (3 hospitals) 10 (2 hospitals) 10 (1 hospital) 100 (1 hospital) 10 (1 hospital) 100 (1 hospital) 10

8 8 7 6 6 5 2 2 1

Source: Meng (2006, p 37)

Table 7.6 highlights that under a profit-driven medical system, the needs of poor people are not a hospital’s main concern. It was not until 2004 and 2005, nearly two decades after the dissolution of communes, that preliminary medical assistance schemes were introduced in rural and urban areas respectively (see Chapter Five). As these initiatives are still in their early stages, their effectiveness for helping poor people remains unclear. The above evidence, however, clearly shows that a healthcare gap was left after China transformed its health services from a planned medical system into market-driven health services. As a consequence, many poor people were denied basic medical care. Psychological well-being Many Chinese people face tremendous pressures caused by the economic transition, unemployment and competition in education and work. Psychological distress has therefore replaced respiratory, cardiovascular and cerebrovascular diseases as ‘the biggest threat to the health of Chinese people’ (People’s Daily Online, 2002). Statistics from the MH showed that, in 1998, 5% of Chinese people experienced psychiatric and psychological disturbance and as many as 13 in every 1,000 faced neurotic illnesses (People’s Daily Online, 2002). Also, in 2002, more than 16% of college students suffered mental health problems such as anxiety, fear and depression (Red Cross Society of China, 2007). Poor psychological health 134

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may partly explain a high suicide rate in China as the MH revealed that at least 280,000 people commit suicide every year (China Daily Online, 2004). Facing an increasing number of people with psychological problems, China’s health facilities and its mental health professionals, however, lag behind in providing quality and adequate services.Although psychiatric ailments accounted for around 20% of the burden of public health, the Chinese government only allocated 2% of its medical budget to mental health services (Newsweek International Edition, 2006). In the early 2000s, there were 13,000 mental health professionals, and less than 1,000 psychiatric institutions with 150,000 beds.This means that there was only one psychiatric bed per 10,000 people and less than one psychiatric worker per 100,000 people (Chang and Kleinman, 2002). The Chinese government’s privatisation and decentralisation of health services has directly driven up hospital charges, which are now too high for the general public to be able to access mental health treatment. According to the Vice Minister of Civil Affairs, 50% of mental health patients cared for by his department in 1987 were self-funding (cited in Pearson, 1995), and the admission cost to a psychiatric ward (along with a monthly deposit) was as high as the annual income of a rural household (Pearson, 1995). This explains why 30% of hospital beds were empty (Chang and Kleinman, 2002) even though one third (7.8 million) of people with schizophrenia and 95% of those with affective disorders did not receive any formal psychiatric diagnosis or treatment (Murray and Lopez, cited in Chang and Kleinman, 2002, p 86). The negative consequences of the marketisation of healthcare were revealed from the report which states that as many as 70% of patients with mental ill health had no medical treatment in 2004 (Interfax Information Service, 2006). The above evidence shows that the fundamental problems of China’s mental health services have been the lack of affordable and accessible psychiatric treatment (Chang and Kleinman, 2002, p 86). While recognising the responsibility of the Chinese government’s health reforms over the past two decades, we should also acknowledge the poor mental health provisions before the rule of the CCP, and the social destruction caused by the Great Leap Forward movement and the Cultural Revolution. Before 1949, there were less than 500 psychiatrists and only eight psychiatric hospitals in China (People’s Daily Online, 2001). It was only after 1976 that the Chinese government started ‘a revitalisation of psychiatry and the extension of state-run services for the mentally ill’ (Chang and Kleinman, 2002, p 87).Thus, the psychological health of Chinese people has long been neglected and the development of psychiatric services has been relatively slow. Additional resources and efforts are now urgently required to fill the gap in mental health services. Learning and development By shifting healthcare provision from a socialist-oriented to a market-oriented system, China’s primary healthcare, once considered the most valuable contribution of Chinese people to the world, has been seriously debilitated. As demonstrated 135

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above, hospitals have put much emphasis on prioritising curative treatment in order to raise more revenue and both public and private clinics are unwilling to carry out preventive care without reimbursement (Meng et al, 2004). According to Yu (2005), less than half (42%) of the 143 village and township clinics in Luzhou City launched health education programmes. And furthermore, only 3.7% of the total nursing staff of these clinics were carrying out any health educational activities.Yu concludes, ‘most village and township clinics have neglected the work of health education’ (Yu, 2005, p 479). Similarly, Cheng and her colleagues (2005), after examining the condition of health education in nine cities, found that none of the 18 community health service centres/stations studied had established a health education office or set up a specific budget for health education. Also, only five of 13 hospitals studied had education teams and only three had a separate budget for launching educational activities. Blumenthal and Hsiao (2005) criticised the Chinese government as it ‘has not yet invested in public education regarding personal hygiene and public health practices’. With limited government support and in a market-dominated healthcare system, China’s health education has been largely neglected. In recent years, the Chinese government has attempted to shift healthcare resources from hospital to community-centred services. In particular, it is trying to make community clinics the focus point of health treatment and education. Unfortunately, existing community health centres have suffered a shortage of qualified medical personnel and lack modern facilities. For example, a manager of a medical health centre in Guangzhou, one of China’s most economically developed cities, was disappointed with the functions of some old medical equipment that ‘cannot effectively do some basic treatments’ (People’s Daily Online, 2006d). Equal value In China, health inequalities have seriously damaged the health conditions of deprived groups and also detracted from its remarkable economic achievements. China was ranked 187 out of 191 countries by a World Health Organisation study in terms of the equality of medical treatment (BBC News, 2006). Three types of health inequalities in today’s China are particularly important: discrimination against rural residents, citizens in poor regions and migrant workers. As the UN Health Partners Group in China (2005) pointed out, a key problem of the Chinese healthcare system was that ‘large disparities in health exist across geographical localities and economic groups’. Overall, the government has put more medical investment into cities rather than into rural areas – 15% of China’s population living in cities and industrial districts attracted about 60% of public health spending (Beach, 2001). In 2004, per capita health expenditure in cities was ¥1,261.9 compared with just ¥301.6 in rural areas (MH, 2006a). Medical insurance in rural areas is not mandatory; most rural residents have to rely on personal and family resources to fund medical treatments. According to Liu and Yi (2004, p 5), nearly 90% of rural households made ‘out-of-pocket’ payments in 136

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order to get medical care. Also, the number of health workers in the countryside dropped dramatically from 2.4 million in 1980 to just 270,000 in 2001 (Liu and Yi, 2004). It is evident that most rural residents have to be responsible for their own medical costs due to the lack of an effective medical insurance scheme as well as less investment from the government. More importantly, China’s health improvement figures mentioned earlier have masked some of the disadvantages of rural residents.The mortality rate of underfives in urban areas was 15 per 1,000 live births, in contrast to 40 in rural areas (UN Partners Group in China, 2005), while the infant mortality rate in 2000 was 14 per 1,000 births in cities, compared with 34 in the countryside.The prevalence rate of malnourishment among the under-fives was 3% in cities and 14% in rural areas (China Development Research Foundation, 2005). The Chinese Academy of Preventive Medicine also reported a health gap between urban and rural children. In urban areas, the proportions of under-fives who were underweight and developmentally delayed were 2.7% and 4.1% respectively, in contrast to 12.6% and 22.6% in rural areas (Beach, 2001). In addition, the maternal mortality rate in cities was 0.33%, half of the countryside’s rate of 0.62% (China Development Research Foundation, 2005).As for health prevention, the immunisation coverage in 1999 was 96% in cities compared to 84% in rural areas (Hsiao, 2004). Thus, the health gap between cities and the countryside is obvious. Under a socialist market economy, the Chinese government mainly focuses on the physical wellbeing of industrial and commercial workers at the expense of farmers (Cheung and Xingyuan, 2004). Health inequality also exists between regions and even within the same region. Although the government uses equalisation grants to help poorer localities, regional inequalities are still manifest.The root of this problem is the central government’s decentralisation approach that ‘creates unfunded mandates in poorer areas, leading to vast inequalities between regions’ (UN Health Partners Group in China, 2005, p 45). The Development Research Centre of the SC (PTDRC, 2005, p 67) also noted that the financial powers of central government and its transfer payment across regions were ‘still not strong enough’. Health indicators have revealed a big health gap between poorer and richer provinces. For example, the infant mortality rates in Beijing and Shanghai (rich provinces) were below 9 per 1,000 births, in contrast to 30-40 per 1,000 births in poor provinces such as Qinghai, Guizhou and Gansu (Meng, 2006). The maternal mortality ratio in Shanghai was 9.6 per 100,000 live births in 2002; the ratios in Guizhou, Qinghai and Tibet, however, were 111, 130 and 399 respectively (UN Health Partners Group in China, 2005). Richer regions also have more health workers per thousand people – in Beijing, every 1,000 people were served by 4.14 doctors and 3.46 nurses; in Guizhou the ratios were only 0.97 doctors and 0.58 nurses (Liu and Yi, 2004). The most obvious health inequality is the exclusion of migrant workers and their families from accessing healthcare in urban areas. For example, Zhan and his colleagues, based on data from 1993 to 1996, found that only 6.7% of migrant workers (in contrast to 73.7% of permanent residents) in Shanghai were 137

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covered by a health insurance scheme (cited in Amnesty International, 2007). After examining a wide range of literature, Biao (2004) pointed out that migrant workers encountered four sets of health problems. Firstly, they are working in the most dangerous jobs in cities, which led to physical injuries or chronic diseases. For example, 10 migrant workers died and another 195 suffered pneumoconiosis in Liaoning Province as a result of working long hours in an unprotective environment. Most of them lost their capacity to work and some of them had to stop medical treatment because of financial difficulties. Secondly, compared with local residents, pregnant migrant women in Shanghai were checked later and less frequently, and were more prone to early delivery as well as to giving birth to underweight babies. Han and colleagues (cited in Meng et al, 2004) reported that the use of pre-marital medical examinations, antenatal examinations and postnatal examinations by migrant women was 20-40% less than by women with permanent residency. Thirdly, as a result of high hospital costs, many pregnant migrant women chose to have home deliveries; for example, as many as 20% of migrant women in Haidian District of Beijing gave birth at home (Dong, 2001, p 17). Fourthly, even the children of migrant workers could not escape disadvantages in healthcare. Many migrant children did not obtain vaccinations or attend regular health checks. For example, only 50-70% of migrant children in Guangdong Province obtained the rubeola vaccination.The rates for BCG and poliomyelitis vaccinations were 57-80% and 50-74%. Migrants made up 53% of the reported rubeola cases and their children 12.9% of all the poliomyelitis cases in 2001 (Biao, 2004). Similarly, it was reported that the incidence rates of measles and encephalitis among migrant workers in Beijing were 9 and 15 times more than local urban residents respectively (China Daily Online, 2003). Being excluded from accessing urban medical assistance, most migrant workers visited hospitals only when their illnesses could no longer be endured. In short, the HRS politically constructed migrant workers as urban foreigners, excluding them from claiming equal health services. Self-determination In recent years, central government has promoted openness in hospital administration, making medical managers responsive to patient feedback. In 2005, the MH stressed that the operation of hospitals should be ‘patient-centred’, upholding the principle of serving the public (MH, 2005). Accordingly, patient satisfaction has been made one of the criteria in assessing the service quality of hospitals. In 2006 the MH argued that more transparent hospital administration could ‘enhance communication between patients and medical professionals and establish a harmonious relationship between these two parties’, and proposed that ‘hospital management should be monitored by the general public’ (MH, 2006b). 138

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It also set a goal of implementing transparent measures in all medical institutions by the end of 2008. As a result, many hospitals now publish their medical charges and set up ‘suggestion boxes’ to collect patients’ feedback. For example, a children and women’s hospital in Luo Yang City posts its hospital administrative issues on the public notice board, has set up a suggestion box and hotline to answer users’ inquiries and provides an electronic screen showing key services (Drugs and Health Care Post, 2007a). Undoubtedly, these new measures can improve communication between hospitals and patients. However, the role of patients’ feedback in shaping the operation of a hospital is questionable. Fundamentally, there is no clear and systematic measure for monitoring how a hospital responds to patients’ demands. Although some regional governments such as Henan Province established a highlevel mechanism for checking the service qualities of its 6,200 hospitals (Drugs and Health Care Post, 2007b), this is not a nationwide mandatory practice. Because of conflicting interests between patients and profit-driven hospitals, it is highly likely that patients’ voices will fall on deaf ears. More importantly, there are few concrete legislative and policy measures to safeguard patients’ rights. Patients in psychiatric hospitals receive little protection as most wards are locked, and there is no clear policy on ‘how to guard against such abuses as involuntary commitment in the absence of compelling reason, forced use of ECT and medications, and prolonged psychiatric evaluations even when mental illness is not indicated’ (Chang and Kleinman, 2002, p 92). Because of limited legislation for safeguarding patients’ rights and also the lack of an effective mechanism for patients to shape China’s healthcare policies, the general public has no voice in the development of medical treatment. A just polity The administration of healthcare institutions and the quality of medical staff directly affects patients’ well-being, and several criticisms could be made about China’s health administration. The first is that healthcare policies were made by ‘fragmented authorities among different ministries’ (Liu, 2006).As the World Health Organisation pointed out, there were at least nine ministries that were dealing with health policies, in addition to various partly public-funded health institutions such as the national and local centres for disease control, the Chinese Academy of Medical Sciences and the National Institute for Control of Pharmaceuticals and Biological Products. Also, ministries such as the Ministry of Defence and the Ministry of Railways, and the Ministry of Mining ran separate clinics and hospitals that were beyond the control of the MH. There was no single health agency responsible for coordinating health activities and collaboration among health agencies was relatively week (Office of the World Health Organisation Representative in China, 2004, p 10). As a result, it is difficult to formulate a coherent frame to address the concerns of the public.

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By steering China’s medical care system from a planned to a market-oriented economy, central government has not effectively monitored the activities of health institutions and medical professionals. Pharmaceutical companies and hospitals have been involved in pushing up the consumption of drugs at the expense of the interests of patients. ‘Over-prescription becomes endemic’ and this can threaten the health of patients, in addition to increasing their medical costs (Biao, 2004, p 13).The mechanisms that regulate the practices of private health institutions are inadequate. Central government has allowed private medical practice since 1980, with 80,200 private practitioners registered by 1995 (Pearson, 1995). However, there is little control over the quality of private healthcare. As Liu and Yi (2004, pp 75-6) pointed out: … private practicing is still not fully trusted…. Quality problems are worse in the countryside, where many rural medics received minimal training and do not understand how to use many of the medicines that line their shelves, or even the risks of infection or failure to use proper sterilisation techniques. A UN research group has also suggested that the supervision of medical services was ‘very weak’ (UN Health Partners Group in China, 2005, p xv), and episodes of malpractice occur in both private health institutions and public hospitals. The Shanghai Price Bureau found that 27 items charged for by hospitals were actually illegal. Also, only 107 among 256 newly established health institutions could meet official requirements (Dong, 2001, p 12). More importantly, many healthcare-related corruption cases were serious. According to the MH, the government investigated 790 medical corruption cases involving more than ¥57 million between August 2005 and July 2006. As a result, 230 people were subject to administrative disciplinary actions and 266 people received other types of punishment (Xinhua News Agency, 2006). Due to financial difficulties, some local authorities even used medical contributions from individual accounts to pay for the existing pensions and salaries of civil servants and for other local government expenses. Health resources were also manipulated by people who used their power and personal relationships to access first-class hospital wards, scarce drugs and expensive examinations and treatments (Dong, 2001). In short, in order to improve the quality of its healthcare system, the Chinese government needs to develop ‘a critical mass of well informed, open-minded, and highly responsible leaders and executives at all levels’, who are held accountable for their actions (Liu, 2006). In addition, there is a clear need for legislation that would help enforce the collection of social insurance contributions. Some regions use the tax collection system; others rely on local social insurance bureaux. At present, the success in collecting premiums depends on ‘the employers’ willingness and ability to pay’ (Liu, 2002, p 144) rather than any social security legislation.

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Conclusion Over the past three decades, China’s well-organised and comprehensive healthcare system around communes and SOEs has been decimated by the introduction of the Household Responsibility System and the reconstruction of SOEs. The Chinese government then gradually built up a new medical system matching its socialist market economy. Firstly, it transformed the status of previously state-owned and SOE-owned hospitals. Secondly, it reduced health subsidies so that medical institutions had to raise revenues by selling drugs and charging medical fees. Thirdly, it introduced a mandatory medical insurance scheme to provide healthcare protection for urban workers. Fourthly, it encouraged local governments to take initiatives to meet the medical needs of their regions. As a result of these measures, market forces and professional interests now dominated China’s healthcare system, and the nature of medical care was transformed from a public welfare good to a commodity. Fundamentally, the Chinese government failed to formulate a detailed, comprehensive, coherent alternative healthcare system to replace the old statecontrolled system. As a World Bank report pointed out, The overall process is through local experiments and then the central government develops models later to be adopted (and adapted) on a national scale. The health reforms have been passive, partial, and uncoordinated. As a result, it is often the case that one problem has not been solved by a reform, new problems have brought out. (Liu and Yi, 2004, p 73) In short, a market-oriented approach, localised provisions, piecemeal intervention and urban-biased services have been key features of China’s medical care system. As illustrated in the second part of this chapter, China’s medical policies are associated with regional disparities, inequalities between cities and the countryside and increasingly unaffordable medical costs for poorer members of the population. This explains why an official report claimed that China’s healthcare reform over the past two-and-a-half decades was a failure (PTDRC, 2005). Central government has recently admitted the negative impact of its marketdriven approach and recognised the importance of the government’s role in providing good quality and accessible health services. Now, the Chinese government is taking a more active role in correcting the deficiencies of market forces and making more investments in public health. For example, it introduced an NRCMS in 2003. Further, it has borne the expenses of all immunisation since 1 June 2005. Moreover, it is planning to introduce a medical care insurance scheme covering urban deprived groups. All of these are good attempts to address current health problems, but there is still a long way to go to establish a comprehensive and well-organised healthcare system, and to successfully tackle China’s health inequalities. 141

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People’s Daily Online (2006c) ‘Community set to serve more patients’, 7 March (http://english.people.com.cn/200603/07/eng20060307_248479.html). People’s Daily Online (2006d) ‘The examination of the difficulties of community health service’, 20 March (www.peopledaily.ac.cn/BIG5/ paper49/17143/1502986.html). People’s Daily Online (2006e) ‘Pilot scheme benefits migrant workers’, 3 April (http://english.people.com.cn/200604/03/eng20060403_255447.html). People’s Daily Online (2007a) ‘China launches program to extend medical insurance to more urban residents’, 5 April (http://english.people.com.cn/200704/05/ eng20070405_363901.html). People’s Daily Online (2007b) ‘The launch of the Basic Urban Resident Medical Insurance Scheme: a low level of assistance with a full coverage?’, 18 April (http://finance.people.com.cn/BIG5/1045/5632366.html). PTDRC (Project Team of the Development Research Centre of the State Council) (2005) An evaluation of and recommendations on the reforms of the health system in China, Beijing: Development Research Centre of the State Council. Red Cross Society of China (2007) ‘Sunshine in your heart project introduction’, Beijing: Chinese Red Cross Public Health Education Office (www.nphe.org/ english/gcjs.htm). SC (State Council) (1996) Notification on extending the trials on medical insurance scheme, Beijing: SC. SC (1998) Decision on establishing the basic medical insurance system for urban employees, Beijing: SC. State Development and Reform Commission, MF (Ministry of Finance), ML (Ministry of Labour) and MH (Ministry of Health) (1994) Views on reforms of the medical care system for enterprise workers, 14 April, document no 1994/51, Beijing: State Development and Reform Commission, MF, ML and MH. Sun, S.H. (2002) ‘The transition and evaluation of China’s medical protection for enterprise workers’, in G.C. Zheng (ed) The transition and evaluation of China’s social security system, Beijing: The People University of China Press, pp 119-59. Tang, S. and Meng, Q. (2004) ‘Introduction to the urban health system and review of reform initiatives’, in G. Bloom and S.Tang (eds) Health care transition in urban China, Aldershot: Ashgate, pp 17-38. UN (United Nations) Health Partners Group in China (2005) A health situation assessment of the People’s Republic of China, Beijing: UN Health Partners Group in China. WHO (World Health Organisation) (1983) Primary health care – The Chinese experience, Geneva: WHO. WHO (2006) The world health report 2006, Geneva: WHO. WHO (2007) ‘Proportion of births attended by skilled health personnel’, Geneva: WHO (http://www.who.int/reproductive-health/global_monitoring/data. html). WHO and UNICEF (2005) WHO/UNICEF review of national immunisation coverage 1980-2004: China, 25 August, Geneva: WHO/UNICEF. 145

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eight

Education policy Key issues Education was once treated by the Chinese government as a political means to socialise the general public to a socialist system. Also, the principle of equality underpinned the education of children of both workers and farmers. The Chinese government since the economic reforms, however, aims to train more skilled workers to facilitate economic development. Also, local government has to bear more responsibility for providing education.This chapter deals with the following issues: • the objectives and content of China’s education before the economic reforms; • the development of China’s post-reform education policies in terms of basic education, vocational education and higher education; • the development of private education; and • the impact of China’s education reforms on the well-being of students and their families.

Introduction Economic modernisation, market-oriented reform, globalisation and the emerging knowledge-based society have dramatically affected China’s education development and policy since the initiation of the economic reforms and the open door policy in the late 1970s. This chapter begins with a brief outline of the contrast between education policies before and after the economic reforms. Following this, education policy changes in the economic reform era are examined in relation to basic education, vocational education and higher education. The final part of this chapter assesses the impact of education policy changes on the well-being of Chinese people. It argues that the combination of the inappropriate retreat of the state from education provision and the excessive application of market principles into the education system has resulted in serious education inequality. The chapter concludes that the Chinese government has to play a more active and substantial role in the provision of compulsory education in order to achieve balanced and coordinated development.

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Education policy before the economic reforms After taking power in China in 1949, the communist government was determined to thoroughly transform the old education system, to instil a new perception of the purpose of education and to create a new educational system. Education for the children of workers and farmers became the first priority in the new China (Chen, 1999). The first step the government took in order to achieve this was the nationalisation and strict central control of existing schools and universities. Secondly, many special schools were established for workers’ and farmers’ children, including primary, middle and spare-time schools. Thirdly, campaigns were launched to increase the literacy of working people. Fourthly, special tutorial schools were set up to provide education for communist cadres with poor educational backgrounds. Fifthly, tuition fees were minimised to make education services affordable for ordinary families. As a result, more and more children from working families were able to achieve a basic level of education. Meanwhile, a new schooling system was taking shape, and this was composed of pre-school education (3-4 years), primary education (5 years), secondary education (6 years) and higher education (2-5 years).The coexistence of full-time schooling and part-time schooling was labelled the ‘two education systems’, a remarkable feature of the education system in the early years of the new China (Xue and Chen, 1997). A salient characteristic of the education policy in Mao’s China was that education should serve politics. Under this principle, the political function of education was emphasised. Political and ideological indoctrination figured prominently in the school curriculum. Students were required to accept compulsory political education – their performance in political movements and activities carried high weighting in assessments. Meanwhile, to cultivate new socialist citizens, labour (work) was emphasised in education.The integration of education with productive labour was regarded as an important principle in education policy and practice. Due to its limited educational resources and financial pressures resulting from the poor economic performance of the planned economy, Mao’s China developed an unbalanced educational policy that privileged urban areas over rural areas and favoured higher education over elementary education.When the country was in desperate need of talent to rebuild the new socialist country, higher education was promoted as part of the country’s development strategy because the socialist economy needed a trained labour force committed to socialism. In order to cultivate the technicians and professionals required for this particular stage of economic development in the country, a state-funded elitist higher education system with a focus on science and technology disciplines was developed in Mao’s China (Hayhoe, 1996). Children from both rural and urban families with outstanding academic performance could enjoy free-of-charge higher education services. However, such an unbalanced education policy led to the uneven development of education between rural and urban areas, between basic and higher education, and between physical/natural sciences and social sciences. It 148

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had far-reaching negative consequences on educational development in rural China and its legacy remained in the post-Mao era. Mao’s China followed the Soviet Union’s educational theories and governance. In doing so, a highly centralised educational system was developed, characterised by unified planning, administration, syllabuses, curricula, textbooks, enrolment and allocation of school and university places (Hao, 1998) – the state monopolised the provision, financing and governance of education. The highly centralised educational system stifled the incentives of educators, educational institutions and local government to develop education, therefore slowing down educational and economic development in China. In addition, educational policy and development in Mao’s China were heavily affected by political campaigns. For example, after the launch of the Great Leap Forward in 1958, Mao decided to abandon the existing Soviet model of education and to establish an educational system with Chinese characteristics. In doing so, educational management power was decentralised, schooling years were shortened irrationally and ideological elements and productive labour (rather than academic ability) were highlighted. More importantly, the Cultural Revolution (1966-76) was a disastrous period for the development of China’s education system. During this period, China’s education suffered a great loss. Educational programmes and practices developed since 1949 were criticised as capitalist education. Teachers were treated as capitalist intellectuals. The unified secondary school and university entrance examinations were cancelled. Students and teachers were sent to factories, the countryside and military camps for reeducation, and some schools and universities were closed. This chaos lasted till the death of Mao Zedong in 1976.

An overview of education policy in the economic reform era In the era of economic reform, China’s educational policy was reoriented towards socialist modernisation and economic competitiveness. To do this, educational system reform was launched in 1985 and deepened in 1993. In fact, educational reform has been a continuous process in China since the mid-1980s. Economic and educational reform have brought about far-reaching changes to China’s education policy and development. Firstly, a perception of education as a consumption item has been developed. This orientation has opened a new official stand on educational financing. Since education is a consumption item, the consumer has to pay, and the fee-charging principle has therefore been introduced into the Chinese educational system (Ngok and Kwong, 2003). Secondly, the government has no intention of monopolising educational provision. Post-Mao leaders have acknowledged that over-centralisation and stringent regulation in the Maoist period stifled the initiative and enthusiasm of local governments and educational institutions and resulted in the inadequate provision of education (Hao, 1998). Meanwhile, the state also recognised that it was financially impossible for it to satisfy people’s increased demand for education on its own. Therefore, central 149

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government decided to relax control and roll back its role in education, thereby justifying retrenchment in government funding and shifting the burden of funding and provision to other sectors. Even private individuals are allowed to offer education. Accordingly, the marketisation of education has become a new policy trend in China.Thirdly, the role of local government in education has been increased. Since the mid-1980s, local authorities have been encouraged to play a greater role in the financing, provision and regulation of education, and they have to raise the money for education services that central government has not provided. Finally, with the rising role of the market in education development and the marketisation of education services, efficiency rather than equity is regarded as the main concern of education policy. In the post-Mao era, the principle of efficiency figures very highly in the free market economy, and the rhetoric of economic efficiency has gained momentum in the Chinese education sector. By adopting the policy of decentralisation and making use of market forces in the educational arena, the Chinese government opened the doors for fundamental changes in the orientation, financing, curriculum development and management of education (Agelasto and Adamson, 1998). As a result, China has achieved great strides in educational development – not only has the scale of education been extended, but the quality of education has also been increased, parallel to the development of science and technology and the national economy in China. In the following sections, changes and developments in China’s education policy and practices are examined in relation to basic, vocational and higher education; the development of non-state education provision is also explored. Basic education Primary and secondary education in China spans 12 years, the first nine years of which are compulsory. It is divided into primary, junior secondary and senior secondary stages. Children at the age of six or seven are eligible for primary education, which normally lasts six years, although in some regions five-year primary education still exists. Junior secondary education normally spans three years. Regular senior secondary education lasts three years. After the completion of the three-year senior secondary education, students are qualified to apply for higher education. One critical goal of central government policy has been to provide universal nine-year compulsory education across the country and this has been enshrined in legislation since 1986. However, it is local governments’ responsibility to finance compulsory education: primary schools are sponsored by villages, junior high schools by towns and townships and senior high schools by counties.The impact of the financial decentralisation policy on China’s basic education system has been double-edged (Cheng, 1995). On the one hand, it has diversified educational financing as enormous resources from non-governmental sources and from the non-educational sectors have been mobilised to support primary education, and even non-state provision of education has been encouraged. Meanwhile, local 150

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incentives to develop education have been enhanced as the sense of local control has been cultivated. Therefore, primary education has been localised in China. On the other hand, the financial decentralisation policy has led to remarkable disparities and inequalities in educational development. Under this policy, primary education has been heavily dependent on the local economy.While the decentralisation policy has principally benefited the more developed regions of China, in the less developed regions, especially the impoverished areas, primary education has suffered. Because of the variation of local economic situations, educational disparity between localities is tremendous in terms of school buildings and facilities, teachers’ qualifications and remuneration, educational opportunities and teaching quality. Remarkably, such a disparity even exists in Guangdong, the most developed coastal province in China. Disparities are found not only in urban and rural parts of Guangdong, but also within its capital city Guangzhou (Mok, 2001). Although the policy of universal provision of compulsory education has encountered great difficulties in rural and poor areas, it has been implemented successfully in large cities and economically developed coastal areas. In these areas, senior education as well as basic education has been universalised. The universal provision of six-year primary education was basically achieved in the early years of the new millennium (see Table 8.1). By 2005, the net enrolment rate of school-age children reached 99.15% with virtually no gender gap (ME, 2006).Although the fulfilment of universal attendance beyond six years of primary schooling encountered real difficulties in rural areas (Cheng, 1995), currently, more than 98% of primary school graduates can go to junior secondary school. In 2005, the national gross enrolment rate at the junior secondary level was 95%. Table 8.1: Enrolment rate of school-age children in primary schools (1965-2004) Year

Total number of Number of school-age Net enrolment school-age children children enrolled rate (%)

1965 1980 1985 1990 1999 2000 2001 2002 2003 2004

11,603.2 12,219.6 10,362.3 9,740.7 12,991.4 12,445.3 11,766.4 11,310.4 10,908.3 10,548.1

9,829.1 11,478.2 9,942.8 9,529.7 12,872.8 12,333.9 11,561.2 11,150.0 10,761.6 10,437.1

84.7 93.0 95.9 97.8 99.1 99.1 99.1 98.6 98.7 98.9

Note: Unit = 10,000. a The

enrolment rate of school-age children before 1991 was calculated on the basis of primary school pupils aged 7-11 enrolled. From 1991 onwards, its calculation has taken account of the age of entry and the length of schooling prevailing. Source: China Education Yearbook Editorial Committee (2005, p 104)

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However, the drop-out rate at this level hit 2.6% in the same year. About half of junior secondary school students have the chance to study in senior secondary school (ME, 2006). Vocational education The Chinese vocational education system consists of three levels: junior, senior and tertiary. Junior vocational education takes place after primary education and is part of the nine-year compulsory education.To meet labour force needs and the development of the rural economy, junior vocational schools are mainly located in rural areas where the economy is less developed. Secondary vocational education comprises technical schools, specialised secondary schools and vocational high secondary schools: it is open to junior secondary school graduates or youths with equivalent cultural knowledge, and it lasts for 3-4 years. The basic task of these schools is to provide secondary-level specialised and technical training for production, and all students should master basic knowledge, theory and skills in their specialist areas. The main targets of tertiary vocational education are graduates from regular high secondary schools and secondary vocational schools. Lasting for 2-3 years, the aim of the tertiary vocational education is to train secondary and high-level specialised technicians and management staff.With economic growth and the especially rapid development of manufacturing and service industries, the Chinese government has paid much more attention to vocational education since the early 1990s, leading both to its legal protection and to its expansion, allowing vocational institutes at tertiary level to enrol an extra 200,000 students. As a result, 45 new vocational institutes were established to accommodate these extra students (Bai, 2006). In 2004, the total enrolment for tertiary vocational education was 2.4 million, accounting for 53% of the total higher education enrolment figure (4.5 million) (ME, 2005). Despite the eagerness of China’s export-oriented manufacturing sector to employ high-level technicians and skilled workers and the high employment rate of vocational school students, the development of vocational education in China is handicapped by parents’ preference for non-vocational education. Most parents want their children to go to regular secondary school and then pursue regular higher education. Nevertheless, because of the shortage of highly skilled labour – and in order to transfer surplus rural labour to industrial and service industries – in recent years the Chinese government has placed much more attention on vocational education. Higher education The scale of Chinese higher education has expanded steadily from the late 1970s, and particularly from the late 1990s. In 1999, in order to ease unemployment pressures and meet the increasing demand for higher education, the Chinese government decided to rapidly expand the higher education sector (Kang, 2000). 152

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Since then, China’s higher education has entered an era of swift growth (see Table 8.2). In 1997, the gross enrolment rate of higher education in China was 9.1%; it increased to 15% in 2002, marking China’s entry into ‘mass higher education’, as defined by Trow (1973). In 1999, there were 1.6 million enrolments for regular higher education institutions, representing a 47% increase from 1998. In the following years, this growth in student numbers continued, and the number of new students reached 4.5 million in 2004, which means that 19% of the relevant age group had access to higher education (see Table 8.2).The goal to reach a net enrolment rate of 15% had already been fulfilled in 2002, eight years earlier than the original schedule (ME, 1998). Alongside its expansion in scale, China’s higher education policy has undergone other dramatic changes. Firstly, the principle of user charges was introduced: since 1997, all students enrolling in higher education have had to pay tuition fees, while students from poorer families have had to apply for scholarships or subsidies from their universities or other study institutions (Agelasto and Adamson, 1998).Tuition fees figure more prominently in the incomes of higher educational institutions that receive low funding from the government.Tuition fees are a growing source of income for universities, and many students from poor families find themselves unable to afford to go on to higher education. In 2005, the national average level of tuition fees was about ¥5,000 to ¥6,000 per year depending on the programme that students pursued. In the same year, the per capita disposable income of urban residents was about ¥10,500, while the net income of rural residents was about ¥3,200. On average, per capita annual Chinese income was about ¥6,200 (Southern Weekly, 2006).That is to say, the university tuition fee is nearly equivalent to the per capita annual income of Chinese people. As well as user charges, there

Table 8.2: Regular higher education institutions and enrolled students (1990-2005) Number of Year institutions New enrolments Graduates 1990 1995 1998 1999 2000 2001 2002 2003 2004 2005

1,075 1,054 1,022 1,071 1,041 1,225 1,396 1,552 1,731 1,792

609,000 926,000 1,084,000 1,597,000 2,206,072 2,682,800 3,205,000 3,821,700 4,473,400 5,044,600

614,000 805,000 930,000 848,000 949,767 1,036,300 1,337,300 1,877,500 2,391,200 3,068,000

Total enrolments 1,206,300 2,906,000 3,409,000 4,134,000 5,560,900 7,190,700 9,033,600 11,085,600 13,335,000 15,617,800

Source: Figures from 1990 to 1999 cited from China Statistical Yearbook 2000 (State Statistics Bureau, 2000). Figures from 2000 to 2005 cited from the annual National Education Development Statistical Bulletin 2005 (ME, 2006).

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have been other fundamental changes in the graduate job assignment system (Bai, 2006). In the past, the government was responsible for assigning jobs to all graduates. Nowadays, students have to join the labour market and look for a job of their own accord. Another key change has been the localisation of higher education since the early 1990s. The core of the decentralisation policy was encouraging provincial-level government to cooperate with central government via the ME to sponsor and administer all ME-led universities located in the provinces. As a result, more and more universities are sponsored by provincial governments, even city governments (see Table 8.3).The localisation of higher education has contributed greatly to the regional disparity in higher education development.The rapid expansion of higher education in recent decades mainly benefited people in the coastal provinces and large cities where economic prosperity promoted educational development (Chan et al, 2004). Poorer regions and provinces encounter more financial difficulties when aiming to invest in and expand their higher education systems in terms of both the quantity and participation rates of higher education institutions. Table 8.3: Affiliation of regular higher education institutions (HEIs) (1997-2004) HEIs affiliated to HEIs affiliated directly to central government to provincial government 1997 1999 2000 2003 2004

Total number Affiliated Affiliated of HEIs to ME to non-ME 1,020 1,071 1,041 1,552 1,731

35 46 72 73 73

310 202 44 38 38

Sub- Subtotal Public Private total 345 248 116 111 111

655 786 888 1,268 1,394

20 37 37 173 226

675 823 925 1,441 1,620

Sources: Zhou (2006, p 56); China Education Yearbook Editorial Committee (2005, p 104)

Development of non-state education provision In order to attain sufficient resources to meet the increasing demand for education, from the early 1980s the Chinese government began to encourage business enterprises, private institutions, individuals and even foreign institutions to support academic programmes in existing educational institutions or to sponsor educational institutions (Ren, 1996; Zhou and Cheng, 1997). Since then, different types of educational institutions run by the non-state sector have emerged. Officially, these institutions are registered as minban, which means ‘run by the people’. Any educational activities that are not sponsored by public money can be defined as minban education. As the 1982 Constitution stipulates, ‘the state encourages collective economic organizations, governmental enterprises and other social groups to initiate and administer various kinds of legal educational activities’ 154

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(NPC, 1982). This so-called ‘non-state-sponsored’ education aims to utilise multiple channels of financing and encourage diversification in the provision of educational services. Moreover, it can also encourage competition, thus increasing effectiveness and efficiency in the provision of educational services. Although non-state schools have developed quickly in recent years, they remain peripheral in the educational system; state schools and universities remain the principal providers of education in China (Hayhoe, 1996). Also, with a longestablished reputation, state higher education institutions are able to recruit better students. Nevertheless, the private sector is now involved in running a wide range of educational institutes including kindergartens, primary schools, junior secondary schools, senior vocational secondary schools, and higher learning institutions (Table 8.4). In particular, there were 1,624 private higher learning institutions in 2005 with a total of 3,217,800 students (ME, 2006). Table 8.4: Main types of private education provision in China (2005) Type of school Number of schools Kindergarten Primary school Junior regular secondary school Junior vocational secondary school Senior secondary school Senior vocational secondary school Higher learning institutions

68,800 6,242 4,608 25 3,175 2,017 1,624

Students enrolled 6,680,900 3,889,400 3,724,200 14,900 2,267,800 1,541,400 3,217,800

Source: ME (2006)

Teacher training With the development of education, especially the call for quality education, the training of educational professionals has become an important issue.Traditionally, training of schoolteachers is the task of teachers’ schools and normal colleges or universities in China. While primary schoolteachers are trained mainly by junior teachers’ schools, which are not qualified to confer post-graduate or bachelor academic degrees, teachers at high schools are trained mainly by normal universities or teachers’ colleges, which are qualified to award diploma, bachelor, master and doctorate degrees. Other universities and colleges also have a role to play in teacher training, however. In addition, further teacher training institutions, established by the education departments of local governments, are responsible for short-term or part-time training programmes for practising schoolteachers. In order to attract more young people to join teaching teams, in March 2007 central government decided to waive college fees for six teacher training universities directly controlled by the ME (Wen, 2007). In order to promote the notion of education for quality, the Chinese government has made more effort to develop high-quality teachers. In doing so, non-traditional 155

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universities are encouraged to run education schools. In localities with good educational facilities, teachers in primary and junior high schools are required to upgrade their educational qualifications to diploma or degree level, while a proportion of teachers and principals in senior high schools should have masters degrees by 2010. Teaching staff in universities are expected to have doctorate degrees. In addition to academic training, much attention is also directed to technical and skills training for teachers, for example, training in computer skills. Another important development in professional training is the introduction of a teacher accreditation system. In order to upgrade the quality of the teaching profession, teachers are required to pass the qualification examinations and to gain a teaching certificate.

Education policy and well-being Psychological well-being China’s education system is strongly examination-oriented.Although opportunities for all kinds of education have been widened, students are still under heavy pressure to pass examinations. As most schools are obsessed with testing and getting people into university, rather than with education in a broader sense, teachers ignore students with little potential to excel in examinations. Although most school boys and girls endure long hours of homework, parents tend to fill their children’s after-school time with all kinds of activities including intensive academic programmes, English classes, piano playing and swimming. It is widely known that Chinese children, even those who are treated as ‘little emperors’ by their parents and grandparents, are often not very happy, as they have little time to enjoy their childhood. Some surveys among school-age children even suggest large numbers have considered suicide (Robertson, 2006). Since the late 1990s, a new education policy orientation has been fostered by the government to counter the culture of examination-centred education. This new orientation, named ‘education for quality’ (CCPCC and SC, 1999), aims to change the culture of education for examinations, improve education quality and promote the holistic development of students. The government argued that the current education values, system and structure, as well as curricula and teaching methods, are relatively outdated in the context of globalisation and a knowledgebased economy (CCPCC and SC, 1999). Further, it claimed that previous educational approaches had a negative impact on the all-round development of young people and were not suitable for the agenda of improving the ‘quality’ of the Chinese population. The purpose of ‘education for quality’ was to integrate ethical, academic, physical and aesthetic education into learning programmes. In short, central government aimed to balance students’ academic performance, their ethical practices and other extra-curricula activities such as labour and technical education and social practices (CCPCC and SC, 1999). However, although ‘education for quality’ has become a buzzword in China’s education discourse, 156

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the orientation of the existing examination-oriented education system is too entrenched to alter in the short term. Many university students, particularly those from rural and poor families, are under strong financial pressure as tuition fees and living expenses continuously rise (Ding, 2004). In the academic year 2005-06, about 20% of the 23 million registered students in universities nationwide were from poor families (Southern Weekly, 2006). On top of financial pressure, unemployment has become another formidable problem for university students, especially those whose universities have a low reputation that forms a barrier for them to seek better jobs. In 2004, the average employment rate of university graduates was about 73%. In the inland regions, the figure is much lower. Students who lack the ability to cope with economic strains, employment pressures and the examination-oriented education system suffer mental health problems. It was estimated that the suicide rate among college and university students in China is about six per 100,000 people (China Daily Online, 2007b). In recent years, university authorities have paid more attention to the mental health of students, and professional counselling services have also been introduced to university campuses. Social integration With the introduction of the financial decentralisation policy in the education sector in the mid-1980s and the localisation of education, basic education in China has slowly been stratified by the varying local financial situations.There are four times more primary and secondary schools in the countryside than in cities. Although the majority of children live in the countryside, rural schools receive only 38% of total basic education funding (Robertson, 2006). Schools in cities and rich areas attract better teachers and more government resources. However, the financial circumstances of schools vary largely, even in cities. Although basic education is almost universally available, high-quality schools are scarce. As most families in cities try to give their single child the best education, the competition for high-quality basic education is very fierce. Better-off families choose to send their children to state schools with good reputations or to secure a place in luxury private or international schools, or even overseas schools by paying a one-off ‘golden handshake’ charge. On the other hand, children from low-income families have no choice but to go to the poorer schools in poorer areas. Migrant children have suffered most from the stratified basic education system. Some children migrated with their parents, others joined their parents later, and a small number were born in the cities (Kwong, 2004). By the end of 2004, more than 6.4 million rural children of compulsory education age were living with their parents in cities. However, 9.3% of them were out of school and only 31.5% of migrant youth aged 13 were still receiving education (People’s Daily Online, 2006). Prior to 2006, migrant children were unable to receive local government education: as a result of the HRS, the law did not safeguard their basic educational right. Migrant workers had to pay extra registration fees to get school places for 157

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their children in their host cities. As the costs were exorbitant in relation to their income, many migrant workers were reluctant to send their children to school. In view of the huge demand for basic education from the migrant children, private schools for them were established in areas where migrant workers clustered. These schools were normally not well equipped and suffered from a lack of qualified teachers and financial resources, but the low tuition fees were very attractive to migrant workers. Unfortunately, while the host cities refused to provide public education for the migrant children, they also refused to recognise the schools that accommodated these children. From time to time, local authorities in many cities launched special actions to close these schools because they failed to meet the official school standards stipulated by educational law. Under such circumstances, many migrant children missed education opportunities. Finding a way to provide migrant children with appropriate schooling has been a critical education problem in China’s era of urbanisation and industrialisation. In September 2003, the SC required the cities that hosted migrant workers to provide their children with compulsory education. Local financial departments were to provide financial subsidies to the schools that enrolled relatively large numbers of migrant students. Meanwhile, financial support would be offered to private schools specifically for migrant children (General Office of the SC, 2003). Since 2003, many cities opened their state schools to migrant workers’ children. For example, according to statistics from the Beijing education authorities, the city had about 370,000 migrant children, 239 unauthorised schools and a total enrolment of 95,092 students. In September 2003, the Beijing Municipal Government ruled that rural children could have the same education treatment as urban children when they went to state schools. State schools were given a ¥80 bonus for each migrant child they accepted, and qualifying migrant schools were given government subsidies (Beijing Review, 2006). However, it was not until 2006 that a law was enacted offering migrant children an equal right to access compulsory education in their host cities.As this is new legislation, further studies are required to evaluate the integration of migrant children into local schools. Human learning and development The Chinese government has always worked hard to ‘improve the ethical, scientific and cultural qualities of the whole nation’ and to ‘upgrade the knowledge and technical skills of the labourers’ (Wei, 2002, p 2). In 1994, the SC issued the outline on the reform and development of education, which aimed at reducing the illiteracy rate of youths and adults to below 5% by the end of the 20th century (Zhang, 2005).Accordingly, the so-called ‘two basics’ education plan was launched in the 1990s in order to implement nine-year compulsory education and eradicate illiteracy among young and middle-aged adults. Moreover, more and more social agencies are providing educational services as a result of central government’s decentralisation and marketisation measures. By comparing the data of the 1990 and 2000 National Population Censuses, Wei (2002, p 4) pointed out that the 158

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education attainment of Chinese people obviously improved in this period. For example, the illiteracy rate for those over the age of 15 decreased from 15.9% in 1990 to 6.7% in 2000.This meant that the Chinese government lifted 100 million of the population out of illiteracy (Zhang, 2005). At the same time, the number of people with only primary education dropped from 37,057 per 100,000 people to 35,701. More people were able to receive higher education. The number of people with a university education jumped from 1,422 to 3,611 per 100,000 people in a decade, while the number of those with a senior secondary education was up from 8,039 to 11,146 (Wei, 2002). There were also some positive figures on the enrolment rates for several levels of education after 2000. More than 99% of school-age children in 2005 were enrolled in primary schools, while about 95% of graduates of primary schools had the chance to study in junior high schools (ME, 2006). In addition, the number of students in all kinds of higher education institutions exceeded 23 million, and the gross enrolment rate for higher education reached 21% in 2005 (ME, 2006). With the improvement in education levels, younger generations from a wide range of family backgrounds, especially those with university degrees, have achieved upward social mobility and grown into the emerging middle class in modernising China. Unfortunately, the Chinese government has recently suffered a setback in illiteracy eradication. The number of illiterate Chinese people increased by 30 million between 2000 and 2005. As a result, China’s share of the world’s illiterate population rose from 11.3% to 15% (China Daily Online, 2007a).The high illiteracy rate in recent years has been caused by a lack of adequate funding, the declining efforts of local governments and the increased drop-out rate among rural young people (China Daily Online, 2007a). There are as many as 200 counties in China that ‘haven’t popularised primary school education’ (China Internet Information Centre, 2007).Without having continuing education, some regions suffered a reilliteracy rate of 8%. Nationally, as many as 200,000 people have become newly illiterate every year (Zhang, 2005). While most developed countries spend more than 5% of their GDP on education, China’s fiscal educational expenditure in 2005 was about ¥516 billion, accounting for only 2.8% of its total GDP (ME et al, 2006).Therefore, more investment from central government and more efforts from local governments are essential for the eradication of illiteracy in China. Equal value While educational opportunities have rapidly expanded, inequality of educational opportunity has become more prevalent in China. To some extent, the development of China’s education system has damaged education equality, just as China’s economic prosperity has been achieved at the expense of social equity and environmental quality. First of all, there is an increasing rural–urban disparity in terms of educational opportunities (Mok, 2001). Although rural–urban disparity is a long-standing 159

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problem in China’s social development, educational disparities between rural and urban regions have widened since the late 1970s. Rural education has long suffered from insufficient investment: many rural pupils are studying in school buildings with structural defects and many rural teachers always face pay arrears. Many rural pupils drop out from schools for economic reasons. It was estimated that over 60% of the rural population had had an education of less than six years of primary education (Zhang, 1998), with most of those who missed out being concentrated in the impoverished western regions of China. According to the Beijing Review (2006), 65% of China’s population was in the countryside, and as many as 150 million out of a total of 200 million secondary and primary school pupils received education in rural areas. However, less than 40% of education funds were assigned to rural education. By 2002, the average length of education that rural people above 15 years old had received was seven years, three years less than their urban counterparts. Only 1% of the rural labour force aged between 15 and 65 received education above the junior college level, compared to 13% of urban residents. Moreover, three quarters of the illiterate or semi-literate population are found in the countryside, in particular in western China or in regions populated by minority groups (Zhou, 2003). Secondly, regional disparities in the education system have widened following the localisation of education.There has been a big variation between provinces in education development. For example, the average per capita education expenditure for a junior high school student in 1995 was ¥1,536 in Shanghai in contrast to only ¥312 in Sichuan (Liu, 2002). The rapid expansion of higher education in recent decades mainly benefited people in the coastal provinces and big cities. In Beijing, the higher education enrolment rate of senior high school graduates reached 70% in 2001. In Shanghai, 39% of 18- to 22-year-olds were recruited by HEIs. On the other hand, the gross enrolment rate into higher education in Jiangsu was only 15% (Yang, 2003). Educational inequality also exists within regions. Under the examinationoriented education system, most educational resources were allocated to so-called ‘key schools’. In every city there were a few key schools that were given more resources. As places in these key schools were limited, they all set a high entry threshold to manage enrolment. In principle, enrolment in these key schools should be based on academic performance of the candidates. In practice, pupils’ family backgrounds are also important. Families with higher social status could make use of their personal connections to send their children to these key schools. Rich families could exchange school places for money: if students wanted to go to a school not assigned by the government, their parents could pay a large sum of money called a ‘school-choosing fee’ in order to enrol. For example, the fee for the city’s No 8 Middle School in Chongqing stands at ¥35,000, which is equivalent to the annual income of a working-class family. In 10 cities surveyed by the Beijing Review, 42% of the students enrolled in key schools came from families of party cadres or government officials and middle- or high-level managers, who

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comprised only 10% of all children, and in Beijing, this proportion stands at 57% (Beijing Review, 2006). Thirdly, gender inequality in education is still serious in China, especially in rural inland areas where education opportunities for girls have been ignored due to widespread poverty and low household incomes. In 1997, 70% of the 145 million illiterate adults in China were female (Liu, 2002). Gender inequality intensifies as children progress through the education system. At the level of primary education, gender inequality is minimal, but in the higher education system, especially at post-graduate level, the percentage of female students is very low (see Table 8.5). Since 2003 policy makers started to address the issue of educational inequality under the new policy guideline of ‘building a harmonious society’. New policies and measures were adopted to promote educational equality between rural and urban areas and between regions. More financial resources were invested in rural education. In 2004, central government decided to waive the tuition and miscellaneous school fees of students in the poor regions who were receiving compulsory education. In 2005, this policy was extended to students in the western regions. According to the Compulsory Education Law (revised in 2006), expenditure on compulsory education was to be jointly shouldered by central and local governments. Local governments must budget for compulsory education. In cities, education resources, such as teachers, school facilities, programme designs and investments, were to be allocated equally between all schools. There would no longer be a division between key schools and common schools. In a bid to improve the quality of education in rural schools, the revised law also required teachers in urban schools to spend a period working in rural schools to compensate for Table 8.5: Gender inequality in Chinese education (2004)

Education categories

Total number of students

Male students

Female students

Female students as a % of total

Higher education PhD studies MPhil studies Undergraduate



16.6 65.4 1,333.5

11.4 36.5 724.8

5.2 29.0 608.68



Regular senior secondary education

2,220.4

1,203.3

1,017.1

45.8

Regular junior secondary education

6,475.0

3,407.8

3,067.2

47.4

Regular primary education

11,246.2

5,965.1

5,281.2

47.0

2,089.4

1,145.6

943.8

45.2

Pre-school education

31.4 44.2 45.7

Note: Unit = 10,000. Source: China Education Yearbook Editorial Committee (2005, p 102)

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the inadequate rural education resources. In fact, many local governments have already launched teacher exchange programmes (Beijing Review, 2006). In 2007, the Chinese government gave greater priority to spending on education, promising a 42% rise in central government’s education expenditure. This was a boost to efforts to lift education spending to 4% of GDP, a goal that was set in 1993 and that was originally expected to be reached in 2000. Meanwhile, total spending on rural primary and secondary schools was boosted by 21% to ¥223.3 billion. Central government also promised to eliminate tuition and other fees for all rural students, easing the financial burden on 150 million rural households (Wen, 2007). Another important measure to increase educational equality was to provide financial support for university students with financial difficulties. In 1994, central government began to allocate special money to assist the poorest students at institutions of higher learning under the central ministries and commissions. Since then, a framework of financial aid for university students has taken shape, consisting of (a) all kinds of studentships and scholarships, (b) student loan schemes, (c) study–work programmes, (d) special aid for students in serious difficulties, and (e) tuition fee rebates. Among these, of great importance were the student loan schemes that comprised (a) state student loans, (b) university loans, and (c) commercial loans. The State Student Loan System was instituted in 1999 by the government, and was operated by commercial banks and assisted by universities. Under this system, banks play a crucial role. Although banks and financial institutions are encouraged to provide private loans to students, they hesitate to do so because there is no guarantee that they can get their money back, as China’s financial system does not have an effective mechanism for overseeing personal incomes and keeping track of the movements and incomes of loan recipients. In 2003, the system was improved to make banks more active in offering loans. As the demand for loans was huge, the coverage of the State Student Loan System is still limited. In order to promote fairness in education, central government pledged greater support for poorer students in March 2007. The government decided to set aside ¥9.5 billion in 2007 and ¥20 billion in 2008 to fund scholarship and assistance schemes for university students (Wen, 2007). It seems that the Chinese government has made up its mind to promote greater educational equality in the near future. Self-determination Since the economic reforms, the state has relinquished its monopolistic role in education provision and has allowed room for non-state social agencies to become involved. Although the size and scope of education has been enlarged and more providers have become involved in education provision, the education policymaking process is still rigidly closed. The party still holds policy-making power and controls all the policy initiatives. In other words, the decentralisation and marketisation of education services has not changed the policy-making style in 162

Education policy

the education sector. In principle, students, education professionals and the wider public have not been given enough opportunities to affect policies. Taking the issue of tuition fees as an example, as mentioned previously, the cost of education has been a major concern for Chinese parents. However, they have no say in fee levels. Basically, governmental education departments and institutes control the formation and adjustment of tuition fees. Major education policy decisions are made in a top-down way.The policy of building world-class universities (‘The 985 Project’) was initiated by the former President Jiang Zemin in 1998. The decision to expand higher education in 1999 was made by central government according to a suggestion proposed by an economist (Kang, 2000). No debates on these major policy initiatives were conducted. Under the 985 Project, Peking University and Tsinghua University, two top universities, were chosen by central government to develop into world-class universities. For this purpose, these two universities were granted ¥1.8 billion each in the three successive years from 1998 to 2001 (Ngok and Guo, 2007). This was a large investment in relation to the total educational expenditure in China. However, such an investment was decided by the ME without examination and approval by the legislature. The ME, the highest education administration in China, exercises strong administrative control over educational institutions, including universities. Seemingly, universities in China may have enjoyed very high autonomy in accordance with law, reaffirmed in the Higher Education Law enacted in 1998. Universities as legal entities are legally autonomous in the following six areas: admission of students, establishing of academic specialties, choice of teaching plan and textbooks, research and development, external cooperation, and internal setup and staff recruitment. However, this autonomy is only meaningful on paper; it is substantively compromised by the strict administrative regulations issued by the ME. Unlike their counterparts in the UK and the US, Chinese universities are not buttressed by legal statutes, as no university has its own ordinance.Within universities, the central elements of academic life, such as the admission of students, the curriculum, the criteria for the award of degrees, the promotion of academic staff and the basic direction of the academic work of the institution, are not controlled by an academic community composed of professors (Ngok and Guo, 2007). Academic freedom is still constrained by one party’s politics. A just polity The main institutions in China’s education policy sector include the education bureaux at all levels, schools and universities. Within the policy context of decentralisation and marketisation, educational administrations and educational institutions have become an alliance with common interests. They both benefit from the marketisation of the education service. Although the overwhelming majority of educational institutions in China are publicly funded, they are run as profit-making enterprises. Education is widely regarded as one of the industries that can produce large-scale profits in China. China’s media has exposed the 163

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widespread corruption in the education sector. Public opinion has shown the greatest concern for corruption in education, which was considered to have exceeded the corruption in the Chinese judiciary (Yang, 2004). The most common form of educational corruption is unauthorised fee collection, which is rampant in the whole education sector, especially in primary and secondary schools. Such a phenomenon has gradually attracted the attention of the public since 1993 and has become one of the hotspots for public and media campaigns in recent years. In 2002, the Minister of Education, in collaboration with local education authorities, organised 170,000 investigation groups that checked 145,000 primary schools and 41,000 junior secondary schools, discovering ¥420 million of unauthorised fees, of which ¥350 million had been returned (Liu, 2004). The main beneficiaries of the unauthorised fee collections in education included grassroots education administrations, primary schools, secondary schools and local authorities (Liu, 2004). Public schools with good reputations always charge students miscellaneous fees on top of their regular education costs. Miscellaneous fees charged by schools include extra class fees, books and materials fees, uniform fees, photocopying fees, air conditioning fees and administration fees. Annual charges can range from several hundred to several thousand yuan. Similarly, HEIs also charge all kinds of fees. Some universities charge students in the name of expansion, some have lowered admission scores in order to collect more money from students who would otherwise not have qualified for places, and some charge students course-retaking fees, examination fees and job introduction fees. According to Bai (2006), some institutions’ tuition fees exceeded the price ceiling of the provincial governments; some students had to pay as much as an extra ¥100,000. On top of schools and universities, governmental education departments have been regarded as one of the main sources of official corruption in China. In the eyes of the public, the education department is the source of the indiscriminate charging of tuition fees. A conservative estimate indicated that annual school selection fees (a fee charged to students not possessing registered residential status in the district where the school is located) in Beijing City were over ¥1 billion in 2002. In Beijing, the school selection fees of some key secondary schools reach between ¥40,000 and ¥70,000 per student, far more than the officially permitted limit (Liu, 2004). In August 2002, when the State Planning Commission publicised reports and complaints about price irregularities, indiscriminate charging of education fees took first place among the different types of complaints, outnumbering those about the price of medicines and medical services, housing and real estate and housing management (Yang, 2004). Although the government has taken many measures to curb unauthorised fee collection and has launched anti-corruption campaigns in the education sector, these have been very ineffective.

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Conclusion As a result of decentralisation and marketisation, China’s educational system has experienced dramatic changes over the past three decades. These changes have altered the relationships between central and local governments and between the state and schools, and have also changed the role of the state in education. The increasing responsibility of local governments for educational investment has reduced the role of central government and increased the power of the provincial and county governments in educational planning and administration. The introduction of fees and the adoption of multiple channels of funding have diminished central and local governments’ responsibilities for education financing and have increased school autonomy. However, the decentralisation and marketisation of education have also led to further inequalities in education opportunity and quality. While decentralisation has stimulated the involvement of local governments and other non-state sectors in education development, regional inequality in education has increased. References Agelasto, M. and Adamson, B. (1998) Higher education in post-Mao China, Hong Kong: Hong Kong University Press. Bai, L.M. (2006) ‘Graduate unemployment: dilemmas and challenges in China’s move to mass higher education’, The China Quarterly, no 185, pp 128-44. Beijing Review (2006) ‘Educational reform aims to reduce urban and rural inequality’, 20 December, All Chinese Women’s Federation (www.womenofchina. cn/focus/education/12242.jsp). CCPCC (Chinese Communist Party Central Committee) (1985) The decision of the Central Committee of the Communist Party of China on the reform of educational structure, Beijing: People’s Press. CCPCC (1993) The program for reform and development of China’s education, Beijing: People’s Press. CCPCC and the SC (State Council) (1999) The decision on deepening the educational reform and promoting the education for quality (www.moe.edu.cn). Chan, D., Mok, K. and Tang, A.G. (2004) ‘Education’, in L. Wong, L. Whyte and S.X. Gui (eds) Social policy reform in Hong Kong and Shanghai, New York, NY: M.E. Sharpe, pp 85-126. Chen, Z.L. (1999) ‘Fifty years of education in the People’s Republic of China’, Education Studies, no 9, pp 1-8. Cheng, K.M. (1995) ‘Education – decentralisation and the market’, in L. Wong and S. MacPherson (eds) Social change and social policy in contemporary China, Aldershot: Avebury, pp 70-87. China Daily Online (2007a) ‘China’s illiteracy rate shoots up’, 2 April (www. chinadaily.com.cn/china/2007-04/02/content_841643.htm).

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China Daily Online (2007b) ‘Next generation facing fatal pressure’, 28 May (www. chinadaily.com.cn/china/2007-05/28/content_881390.htm). China Education Yearbook Editorial Committee (2005) China education yearbook 2005, Beijing: People’s Education Press. China Internet Information Centre (2007) ‘China questions and answers’, 4 September (www.china.org.cn/english/MATERIAL/161871.htm). Ding, X.H. (2004) ‘The challenges faced by Chinese higher education as it expands in scale’, Chinese Education and Society, vol 37, no 1, pp 36-53. General Office of the SC (State Council) (2003) The notice on forwarding the opinions of the Ministry of Education and other ministries on bettering the work of compulsory education for children of rural migrant workers, Beijing: SC. Hao, K.M. (ed) (1998) Twenty years of educational reform in China, Zhengzhou: China Ancient Books Press. Hayhoe, R. (1996) China’s universities 1895-1995:A century of cultural conflicts, New York, NY: Garland Publishing. Kang, L. (2000) ‘On policy decision making and the institutional innovation’, in Z.G.Yuan (ed) On China’s educational policy, Beijing: Educational Science Press, pp 9-19. Kwong, J. (2004) ‘Guest editor’s introduction’, Chinese Education and Society, vol 37, no 5, pp 3-6. Liu, R. (2002) ‘An analysis of the reasons of educational inequality in China’, China Education and Research Network (www.edu.cn/20020510/3025877_1.shtml). Liu, Z.P. (2004) ‘The pain of education: incurable unauthorised fee collection’, in D.P. Yang (ed) China’s education blue book 2003, Beijing: Higher Education Press, pp 288-315. ME (Ministry of Education) (1998) Action plan to vitalize the education into the 21st century, Beijing: ME (www.moe.gov.cn/). ME (2005) National education development statistical bulletin 2004, Beijing: ME (www.moe.gov.cn/edoas/website18/info14794.htm). ME (2006) National education development statistical bulletin 2005, Beijing: ME (www.moe.gov.cn/edoas/website18/info20464.htm). ME, State Bureau of Statistics and MF (Ministry of Finance) (2006) ‘National education expenditure statistical bulletin 2005’, China Education News, 31 December. Mok, K.H. (2001) ‘Education policy reform’, in K.Wong and N. Flynn (eds) The market in Chinese social policy, Basingstoke: Palgrave, pp 88-111. National Center for Education Development Research (2001) Green paper on China’s education 2000, Beijing: Educational Science Press. Ngok, K.L. and Guo, W.Q. (2007) ‘The quest for “world class universities” in China: critical reflections’, The Journal of Comparative Asian Development, vol 6, no1, pp 21-44. Ngok, K.L. and Kwong, J. (2003) ‘Globalization and educational restructuring in China’, in K.H. Mok and A.Welch (eds) Globalization and educational restructuring in the Asia Pacific Region, London: Palgrave, pp 160-88. 166

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NPC (National People’s Congress) (1982) Constitution of the People’s Republic of China, Adopted at the Fifth Session of the Fifth National People’s Congress and promulgated for implementation by the proclamation of the National People’s Congress on 4 December. People’s Daily Online (2006) ‘More than nine percent of Chinese school-age migrant children out of school’, 10 December (http://english.people.com. cn/200612/10/eng20061210_330847.html). Ren, L.S. (1996) ‘Exploration of the market effects of schools run by societal forces’, Chinese Education and Society, vol 29, no 5, pp 15-19. Robertson, B. (2006) ‘China’s new education system’, Far Eastern Economic Review, vol 169, no 6, pp 37-43. Southern Weekly (2006) ‘University graduates’ debt and difficulties of job-seeking’, 25 May (www.nanfangdaily.com.cn/zm/20060525/xw/tb/200605250002. asp). State Statistics Bureau (2000) China statistical yearbook 2000, Beijing: China Statistics Press. Trow, M. (1973) ‘Problems in the transition from elite to mass higher education’, Paper for the Conference on Future Structures of Post-secondary Education, Paris, 26-29 June. Wei, M.H. (2002) ‘China case study’, Discussion document prepared for ILI/ UNESCO LAP 2nd experts’ meeting, 7-8 March, Paris: UNESCO. Wen, J.B. (2007) Report on the work of the government, delivered at the Fifth Session of the Tenth National People’s Congress on 5 March. Xue, G.Z. and Chen, G.H. (1997) A research of education in mainland China,Taipei: Wunan Book Publisher. Yang, D.P. (2004) ‘Corruptness in education: at tentative discussion’, Chinese Education and Society, vol 37, no 1, pp 89-100. Yang, R. (2003) ‘Progresses and paradoxes: new developments in China’s higher education’, in K.H. Mok (ed) Centralisation versus decentralisation: Educational reforms and changing governance in Chinese societies, Hong Kong: Comparative Education Research Centre, University of Hong Kong, pp 173-200. Zhang, L. (1998) Educational development research in the impoverished areas of China, Nanning: Guangxi Education Press. Zhang, T. (2005) ‘Literacy education in China’, Background paper prepared for the Education for All Global Monitoring Report 2006 – Literacy for Life, Paris: United Nations Educational, Scientific and Cultural Organisation. Zhou, J. (2003) ‘On the achievements and objectives of rural education in China’, China News Service, 15 September (www.chinanews.com.cn/n/200309-16/26/346934.html). Zhou, J. (2006) Higher education in China, Singapore: Thomson Learning. Zhou, N.Z. and Cheng, F.P. (1997) ‘Research on higher education in China’, in J. Sadlak and P.Altback (eds) Higher education at the turn of the new century: Structures, issues and trends, Paris: UNESCO Publishing, pp 209-30.

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nine

Housing policy Key issues Over the past three decades, the nature of housing in China has transformed from being a public welfare provision to become a commodity. The property sector is now China’s key economic mechanism for driving economic growth. In recent years, the Chinese government has adopted mainly macroeconomic measures to regulate the activities of the property market.This chapter focuses on the following issues: • housing practices and their related problems before China’s economic reforms; • the process and constraints of the privatisation of public housing in urban areas; • initiatives taken by central government to regulate the property market and meet the housing needs of different social groups; • the development of rural housing and the needs of land-losing farmers; and • the impact of housing reforms on the well-being of citizens.

Introduction The Chinese government radically changed its perception of housing from a nonproductive welfare service to that of a commodity. Accordingly, various measures were adopted to stop SOEs from building and allocating accommodation for workers. Instead, workers had to satisfy their housing needs in the open market. The Chinese government has recently, however, openly admitted the limitations of the property market in addressing the housing needs of poor people.According to the Minister for Construction Wang Guangtao, the government acted to ensure the provision of housing for poor people, because ‘From our reform and explorations for more than 10 years, we have found that it’s not enough to solve the problem of social inequity in housing by solely relying on the market mechanism’ (China Daily Online, 2007). The first part of this chapter gives an account of the Chinese government’s efforts to privatise public housing, and the second part analyses the impact of market-oriented housing measures on the well-being of Chinese people.

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Housing policy before the economic reforms Before the economic reform era, housing in China was supplied by work units and local housing bureaux. This type of housing could be treated as ‘public housing’, because work units were state enterprises and the housing bureau was a department of the municipal government (Li, 2003, p 514). Central government and its various departments would provide ‘capital construction investment’ to work units for providing housing and other services. This production strategy could avoid delay because supportive services had already been included in the investment package (Wu, 1996).Also, specific funds for housing would sometimes be allocated to government agencies either through state or local budgets. Local authorities would allocate housing budgets to their housing bureaux in order to build housing for workers in small and street-level enterprises. Workers in SOEs would receive housing allocated by their work units for a relatively low rent. For example, the SC controlled the rent level of public housing at ¥0.12 per square metre, which actually covered only a third of the real cost (Bao, 2002). In the early 1980s, public housing rents were equivalent to only 1% of workers’ household income and were thus a nominal charge (Zhu, 2000, p 508; Bao, 2002, p 155).The government therefore needed to pay ¥5-¥6 billion to subsidise maintenance work (Wang and Murie, 1996, p 973). Bao (2002, p 155) concluded that since the establishment of the CCP, the level of rent was far below the production cost for most of this time, which ‘greatly deviates the demands of market commodity’. It was only because of low rents that the socialist regime could operate with such cheap labour costs. However, there were several serious problems relating to the pre-economic reform housing policy.The first criticism concerns the unfair allocation of housing. Housing distribution was mainly based on the status of a head of household and their seniority and job position in an SOE (Lee, 2000; Wang, 2006). Moreover, a ‘relationship with the gatekeeper is sometimes a deterministic factor in the process of housing distribution’ (Wu, 1996, p 1608). In other words, power rather than needs shaped the distribution of public housing before economic reform. In addition, overcrowding and inadequate housing supply were serious problems due to limited investment. The average living space per person was only 3.9m2 in 1980 (Chen, 1996). About half of the housing was in urgent need of maintenance, and many workers were forced to live with parents and relatives as a result of long housing waiting lists (Chu, 2005). In 1982, 47.6% of urban households in Shanghai encountered housing problems including dilapidated structures, a lack of amenities and overcrowding, and another 25.1% were homeless. Limited availability of housing led to the reappearance of urban slums. The official definition of homelessness was married couples who either did not have housing or were temporarily living in friends’ houses, hotels or offices. In 1980, 131 million households were homeless (Zhang, 1998).To cope with basic housing needs, some people built temporary and informal shelters. Limited government investment seemed to be at the root of China’s public housing problems. From 170

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1949 to 1978, average housing expenditure as a proportion of GDP was as low as 0.78% (Zhu, 2000). Preoccupied with the ideologies of reducing the state welfare burden and promoting market forces, central government implemented several initiatives in order to get rid of SOE-controlled housing, encouraging workers to meet their own needs through either an open or a subsidised property market.

Housing policy during the era of economic reform Urban housing As with other areas of welfare policy, the focus of housing reform was ‘privatisation’ and ‘localisation’. In April 1980 Deng Xiaoping laid the foundation of urban public housing reform: Urban residents can purchase housing or build their own houses. Not only old houses but also new houses can be sold. The housing cost can be paid in one or several instalments over 10 or 15 years. Rents need to be raised following the policy of house sales. Adjusting the sale prices and rents is necessary so that people think buying houses is desirable.Thus, rent needs to be increased gradually because people are unwilling to buy houses if the rent is too low … by increasing rent in the future, financial assistance should be provided for low-income workers. (Quoted in Bao, 2002, p 147) Deng’s statement paved the way for the subsequent housing reform measures. In particular, he announced the legitimacy of private property and the private market, which had been previously severely criticised as ‘a capitalist tendency’ (Wang and Murie, 1996, p 972).As the most powerful leader during the time, Deng’s remarks encouraged senior central and local government officials to introduce market principles into the Chinese housing system. At the same time, he also proposed privatisation strategies by increasing rent and selling public housing to create an initial housing market. Bao (2002, p 147) pointed out that Deng, therefore, was ‘the principal architect of China’s housing reform’. In 1983, the SC issued an Ordinance on managing urban private housing. This policy paper officially recognised the role of private housing in meeting people’s housing needs: ‘the state will protect citizens’ rights over their private housing. No units or persons can confiscate or destroy urban private housing’ (SC, 1983). After the Land Reform of the 1950s, urban land was owned by the state and rural land was owned collectively by rural communities, which were defined as communes before 1978 and villages since then. During the political turmoil of the Cultural Revolution, some personal belongings such as land were associated with capitalists, and these were sought and confiscated with little legal protection.The

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1983 directive provided legal protection for owners of private property and this helped enhance the confidence of the public in the idea of home ownership. Housing reform between 1979 and 1988 was in three phases. The early smallscale projects before 1982 selling new houses at construction costs foundered owing to wages being too low to afford house purchases. This led to various experiments between 1982 and 1985 in providing housing subsidies shared between work units and city governments in selected areas. The experiments, however, failed to increase incentives for home ownership because the purchasing prices were too high for most families. Also, while the financial subsidies offered by work units to these schemes were huge, the distribution of the subsidies was unfair (Zax, 2003). A scheme was initiated between 1986 and 1988 in Yantai City that combined economic rents and housing vouchers in order to encourage house sales. Based on the experience of Yantai, central government published the Implementation plan for a gradual housing scheme reform in cities and towns in order to provide a clearer direction for housing reform (SC, 1988). Focusing on the ‘marketisation’ of housing, this paper stressed that ‘one of the main objectives of housing reform is to push workers to buy housing’. This was because the housing market not only solved the housing problems of those with the greatest needs but could also enhance the development of the property sector and building industry (SC, 1988). The policy paper used several strategies to build a housing market: • The practice of allocating housing in the form of material distribution should be gradually replaced by monetary distribution. • Enterprises were told to increase the rents charged for staff accommodation. The standard rent should include the depreciated rate, maintenance fee, management fee, investment interest and property tax. In order to offset the rent increase, workers would receive housing vouchers, which could only be used for paying rents or buying houses. • Enterprises were urged to sell their housing first and renting should be the second option. The selling prices needed to be approved by the ‘Price and Property Department’ in each local authority. • The establishment of ‘housing funds’ was encouraged by involving local authorities, enterprises and individuals.The housing funds could only be used for property development, maintenance and home purchase. • While being told to follow central government’s guidelines on housing, local authorities could formulate detailed housing reform measures in their own areas. The government’s goal was to implement this housing reform scheme in 1989 in 150-200 cities as well as in 5,000-6,000 towns. It was hoped that less developed areas would also launch these measures in 1990. As a result of this new housing approach, the nature of housing in China would change from a social service to a

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valuable market commodity that, it was hoped, could promote national economic growth and address unemployment problems. The implementation of the 1988 housing reforms, however, slowed down due to rising inflation as well as the political instability caused by the Tiananmen Square incident in 1989 (Wang and Murie, 1999). As a result, few cities put reform plans into practice. There were also great variations among cities launching housing reform measures. Some cities followed the Yantai model by issuing vouchers to offset the increase in rent, whereas others did not provide vouchers for workers but slowly increased rents. Later, the SC (1991) published the Continuation of urban housing reform in a stable manner, reconfirming its commitment to the 1988 reforms and stressing that the long-term goal of housing reform was to increase the rents of public housing to reach market prices. It aimed to achieve this by the coordinated actions of government, collectives and individuals, including reduction in rent subsidies, the sale of new public housing and the introduction of home mortgages (SC, 1991). Similar to previous policy papers, central government’s housing objective was to push sitting tenants to be owner-occupiers through a subsidised property market. Subsequently, local authorities became actively engaged in housing reform. Much public housing was sold to sitting tenants. However, central government still needed to address several issues, including a large number of tenants who remained in public housing, limited development in the open property market (as employees mainly bought housing from work units), and the selling prices, which were in many cases set far too low (Wang and Murie, 1999). Due to these problems, local housing reform measures were suspended at the end of 1993. In 1994, central government issued the Decisions on deepening the urban housing reform with the following measures (SC, 1994): • Enterprises should allocate housing benefit in cash, not in kind. • Rent levels should be increased to 15% of the household income of a dualearner family by 2000. • The MCA would assess the needs of tenants who encountered financial difficulties as a result of rent increases. • Local authorities were advised to use rent exemptions, reductions and assistance to reduce the burden to families with the highest levels of need. • The establishment of an HPF to enhance the purchasing power of workers. Employers and employees would both contribute 5% of workers’ wages. The accumulated fund could only be used for buying housing or for property maintenance.Workers would receive all the contributions from both employers and employees when they retired. • The building of ECH for families with limited purchasing power. Buyers would only pay for the production costs of housing. It was estimated that around 20% of housing in a region would be ECH. • Local authorities and enterprises were urged to sell all their housing stock. There would be two types of prices: market price for higher income groups 173

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and ‘production price’ for low- and middle-income groups. Regions finding it difficult to sell housing at ‘production cost’ could sell it at ‘standard cost’, which was three times the annual income of a dual-earner household. • A purchaser buying housing at ‘production cost’ could only sell it on the open market after having owned it for five years. Also, any sale profits had to be shared with the person’s enterprise, based on the proportion of the property owned by each party (SC, 1994). This directive took a more realistic step towards the marketisation of housing. The launch of ECH, and the adoption of ‘production cost’ and ‘standard cost’ pricing could increase the purchasing power of higher income groups on the one hand, and meet the housing aspirations of low- and middle-income groups on the other. However, some deprived groups such as unemployed people, retired workers and low-income households would have difficulty bearing the increases in cost. Furthermore, although it urged local authorities to provide rent assistance for disadvantaged groups, this was hard to implement given the lack of financial support for local governments. In addition, the HPF provided limited help for low-income home buyers and comparatively better benefits for higher income groups, due to the fact that the latter received more financial assistance from employers than the former. Even after publishing the 1994 housing directive, the development of a proper housing market in China was still largely thwarted by the active involvement of work units and local government in housing. Basically, the housing market established since the 1980s was not open, free and competitive but was dominated by work units and had restricted consumption (Wu, 1996). By reducing its financial involvement in public housing, central government encouraged SOEs to invest in housing through profit retention and the use of ‘extra-budgetary funds’, that is, funds that were outside the planning control of the state and administered by work units themselves.Work units were also allowed to finance housing projects by collecting money from workers. Motivated by these incentives, SOEs made more effort to increase their extra-budgetary funds for improving the housing quality of their staff. In other words, SOEs’ involvement in housing changed from a central planning basis to an individual basis. The impact of central government housing policy on the amount of extra-budgetary funds is clearly revealed in Table 9.1. For example, the average size of extra-budgetary funds of SOEs increased rapidly from ¥24 billion in 1970-79 to ¥144.3 billion in 1980-89. In the year 1990/91, it even reached ¥297.6 billion. During this period, work units clearly played an active role in providing housing: in 1983, 57% of new housing investment funds were from work units, compared to 26% from the state and 17% from private individuals (Wu, 1996). Between 1981 and 1997, the state’s contributions to investment in fixed assets dropped dramatically from 28.1% to 2.8%, while the share from work units increased from 55.4% to 67.7% (Zhu, 2000). In Shanghai, work units’ funds as a proportion of total new capital investment increased from 70% in the mid-1980s to 86% 174

Housing policy Table 9.1: Growth of extra-budgetary funds (1952-91) Annual budgetary Annual extra-budgetary funds on average funds on average Period (billion ¥ ) (billion ¥) 1952-59 1960-69 1970-79 1980-89 1990-91

29.6 43.2 84.2 168.1 304.3

3.2 7.6 24.0 144.3 297.6

% of extra-budgetary funds controlled by enterprises 67.4 83.6 89.3 96.8 97.8

Source: Zhu (2000, p 512)

in 1990 (Logan et al, 1999). It was revealed that 85.4% of commercial housing (745,000m2) was purchased by state-owned work units. Wu (1996, p 1612) therefore argues that: The word ‘commercialisation’ is quite misleading. Although so-called ‘commercial housing’ has begun to be developed through market mechanisms, these apartments are not necessarily allocated to final users through the market way. Instead, the housing reform has driven work-units to be involved more deeply in public housing provision…. [China’s property market] is basically composed of the market production of housing and its non-market ways of consumption. Clearly, the housing market in the earlier stage of reform was dominated by work units, forming a heavily subsidised market. The marketisation of housing was manipulated for the interests of individual SOEs. As individual enterprises were the main decision-makers in buying and selling housing, the quality of living conditions among workers varied, shaped chiefly by the financial conditions of work units. In this way, housing inequality in China was accelerated by the government’s housing reform. Furthermore, the financial conditions of many SOEs deteriorated after they took up the duty of housing provision from the state. Work units used two strategies for obtaining housing units (Zhu, 2000).The first method was through joint development with private developers. Some SOEs could claim up to 70% of housing units from commercial developers by offering them free land, and the developers would be responsible for all building costs. As a consequence, the state suffered the loss of land revenues. The second method was to buy housing stock from the open market and then sell it to their staff at discounted prices. As a result of these unconstrained investments, the number of SOEs with losses increased from 10% to 34% between 1985 and 1994 and the asset dissipation of the state was estimated as being ¥500 billion between 1982 and 1992. As Zhu (2000, pp 51314) suggested, housing reforms ‘failed to carry out necessary tough measures of imposing hard budget constraints’ and also ‘did not weaken but strengthen the baggage of old institutions that made it more difficult to establish a fair and efficient 175

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housing market’. The obstacles to China’s marketisation of housing were mainly administrative; their elimination required ‘more sensible housing regulations, more reliable systems of property registration, more complete and trustworthy definitions of property rights, a more transparent regime for the allocation of land use rights, and more consistent enforcement’ (Zax, 2003, p 243). In order to urgently address the deep-rooted problems of the housing activities of work units, the Chinese Premier Zhu Rongji announced that the cut-off date for terminating the distribution of state-subsidised housing was 1 July 1998.After that, SOEs were not allowed to build housing and had to also gradually sell off their apartment blocks. Then, central government published A further step on deepening housing reform and accelerating housing construction in urban areas, which proclaimed that the guiding ideologies of housing reform were the commercialisation of housing, socialisation of housing and making ‘housing property a new pillar contributing to economic growth’ (SC, 1998). The most important measure proposed was to ‘stop allocating housing through kind and gradually to build a scheme to distribute housing through cash’ (SC, 1998).All enterprises and institutions therefore had to stop providing rental housing to staff by the end of 1998.All new ECH would only be sold to workers, who would be given financial assistance from their employers. To meet these changes, ECH became a focus of housing development based on the concept of a ‘secure housing project’. The prices of all ECH would be regulated by the ‘government’s guiding prices’. ECH profits would be controlled below 3%. To enhance the purchasing ability of workers, all commercial banks would be allowed to offer mortgages to buyers. The criteria for applying ECH were subsequently clarified further in the Measures for managing economic and comfortable housing (MC et al, 2004): • applicants must be registered urban households; • they must be either homeless or with living space below the county government’s housing line; • their income should not exceed the levels set by a county government. ECH units were to be built in two sizes: 80m2 and 60m2. Central government encouraged property developers to build ECH for rental and also allowed financially constrained SOEs to collect money from staff and build houses for them. Central government encouraged local authorities to use existing vacant housing stock or to build new LRH for households on low incomes who were classified as MSLS households (see Chapter Five). However, the provision of LRH was relatively slow. In February 2007, there were still four cities at the provincial level and 145 cities at county level that were not involved in any LRH projects. As many as 166 cities did not clearly show the ratio of their net revenues from land sales being used for LRH purposes. Some cities did not even have details on the eligibility of LRH applications and the application procedures. Local governments obviously had little motivation to meet the housing needs of poor citizens. 176

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Because of these problems, central government requested all local governments to build LRH by the end of 2007 (People’s Daily Online, 2007b). As this is only an administrative requirement from central government without a comprehensive policy package or the necessary financial subsidies, the willingness of local officials to follow this policy was questionable given their political careers were not based on their accountability to their constituencies. Overall, the above discussion shows that the Chinese government stripped SOEs of their traditional duty of providing social housing for their staff. Workers were encouraged to meet their own housing needs in the open market, assisted by the HPF. Also, building and allocating of new types of social housing in the forms of ECH and LRH was now the responsibility of local authorities, which were independent of SOEs. In short, the marketisation of housing and localisation of social housing were two key features of China’s housing reform. Rural housing Rural housing development before the era of economic reforms was restricted by strained financial resources, as well as ideological objections to the building of new houses. This was because during the Cultural Revolution, rural residents building new houses were perceived as capitalists seeking private property rights, something that was unacceptable to the CCP under Chairman Mao Zedong. As a result, poor housing was a common feature of rural China, something that was fully revealed by a central government report in 1980: At present, most village housing is still very poor. The scene of many villages was like traditional ones. Farmers are living in overcrowded housing. Some are packed with several generations in the same house. Some households even have to share living space with livestock. Even in more prosperous southern regions, a significant number of farmers are still living in straw-built houses which are dark and humid and have poor hygiene. The living conditions of people in ethnic minority regions and near borders are even worse. (National Building Committee et al, 1980) Since the late 1970s, farmers’ incomes increased rapidly following the implementation of the Household Responsibility System. Some built new houses to improve their quality of living. From 1978 to 1979, 0.4 billion square metres of housing was built nationally. However, the rush of rural residents to build houses disrupted rural planning as well as reducing the land available for agricultural purposes. It was against this background that the SC intervened to guide rural construction in a planned and systematic way (SC, 1982), as follows: • The building of new socialist rural areas would be based mainly on the resources of farmers, actively supported by production brigades and rural communities. 177

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• Central government reconfirmed that all rural land belonged to collectives, represented by village committees. According to legislation, shelters on the land belonged to farmers, who were granted power to use them, pass them on to their children, or rent them to others. • All construction work should match a village’s development and be approved by local administrative units. • Villagers were advised to build houses in a concentrated pattern that could save more land. This type of living pattern also gave residents easy access to education, commercial, medical and transportation facilities. • More legislation was urgently required to monitor rural construction work. By clarifying the legal basis of rural housing, the document broke the ideological barrier to property development. By stressing the importance of rural planning, the government also expected rural housing to be built in a regulated manner. However, the property market in rural areas was limited by the collective ownership of land, represented by village committees rather than individual households. The implementation of the Household Responsibility System and the rapid development of rural industries increased the incomes of rural residents.As a result, rural areas experienced a housing boom. About 1,500 million square metres of housing was built from 1978 to 1981, which was more than the total amount built between 1949 and 1977. The housing boom continued in the countryside until 1990. The years between 1980 and 1985 saw 3,300 million square metres of housing and another 500 million square metres of public building constructed (Wang and Murie, 1999). In this period, the quality of new houses was also improved: for example, houses with brick and timber structures increased from 56.6% to 87%. People also had more living space – the average living space of housing in 1989 was 80m2, in contrast to 74.9m2 in 1983 (see Table 9.2). However, many new rural buildings were characterised by ‘poor design, poor building skills and inappropriate planning controls and regulated street patterns’ (Wang and Murie, 1999, p 217). Figures from the MC in 1988 showed that 70% of the 1,764 building projects in nine provinces failed to reach the standard set (Wang and Murie, 1999). Much poor quality rural housing was unable to withstand bad weather and natural disasters. For example, 34,300 houses inYunnan Province were destroyed and another 140,000 damaged in an earthquake in 2007. A senior government official from the Construction Department of Yunnan pointed out that many of these houses did not have a framework, and the walls were also very thin (Xinhua News Agency, 2007). Apart from private building projects, some township governments/village committees have recently attempted to build housing for rural residents. The objectives of the Peasant Housing Projects (PHPs) were to move farmers to new housing with better amenities and to minimise land use by either building multistorey housing or designing new forms of village. For example, Tang Sha Town in Guangdong Province started its project in 2003 with a long-term objective of introducing PHP to 60% of its villages. Heilongjiang Provincial Government 178

Housing policy Table 9.2: Rural house building (1978-89) Floor space built (million m2) Number of house- % of houses holds building As % Of which, with a brick Average a new house of total over one and timber house Year (millions) households Total storey structure size (m2) 1978 1979 1980 1981 1982 1983 8.92 5.0 1984 9.93 5.3 1985 9.82 5.4 1986 9.49 4.8 1987 8.88 4.3 1988 7.89 3.7 1989 6.58 3.0

200 200 500 600 600 668 671 150 56.6 718 187 61.2 710 190 81.8 695 219 84.2 623 224 85.5 526 197 87.0

74.9 67.6 73.1 74.8 78.0 80.0 80.0

Source: Wang and Murie (1999, p 219)

linked the design of villages and towns with its economic development plans including an infrastructure for improving education, technologies and hygiene (Construction Office of Heilongjiang Province, 2006). The Shanghai and Dong Huan Municipal Governments also published integrated PHP design plans (Bian, 2006). Several problems have emerged, however, as a result of the lack of any comprehensive and clear nationwide legislation on PHPs. Some township governments used PHPs as an excuse to confiscate farmers’ land to develop commercially oriented projects; some fixed high housing prices that many farmers found difficult to afford; and some even forced farmers to live in a new type of housing that was incompatible with their agricultural activities (Bian, 2006).

Land-losing farmers The issue of land-losing farmers has affected the livelihoods of hundreds of thousands of rural residents and threatened China’s stability. As land ownership is the prerogative of village collectives rather than individual households, this has provided more opportunities for local officials to abuse their power. Between 1999 and 2006 the government acquired 6.7 million hectares of farmland for economic and urban development (China Internet Information Centre, 2007). Nationally, total farmland was reduced from 130 million hectares in 1996 to 122 million hectares in 2005. Due to the rapid acquisition of land, per capita arable land in China was only 0.093 hectares, which is just one third of the world average (China Daily Online, 2006a).

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More than 40 million farmers have lost their land over the past two-and-a-half decades, and another 15 million are expected to have their land acquired over the next five years (China Daily Online, 2006b).Very often, the local authorities poorly compensated the farmers (see ‘A just polity’ section later for details). The loss of land among farmers has become the most formidable threat to the political stability of China, as revealed from numerous complaints and protests. To many farmers, ‘land was not only a means of livelihood, but also a form of security’ (Guo, 2001, p 430). Also, illegal land expropriation and low levels of compensation have driven farmers into direct conflicts with the authorities. Most of the 5,407 complaints received by the Complaint Reception Bureau of the NPC Standing Committee were related to illegal confiscation and occupation of farmlands, and unreasonable compensation to farmers (People’s Daily Online, 2005c). Chen Xiwen, director of an official leading group on rural work, warned that if governments could not effectively address the requests of farmers, ‘a single petition could lead to a mass incident involving public protests or even a riot’ (People’s Daily Online, 2007a). To reduce conflicts between government officials and farmers, central government passed the Property Law of the PRC in March 2007. It stated: ‘the property of the state, the collective, the individual and others is protected by law, and no units or individuals may infringe upon it’ (People’s Daily Online, 2007e). In case of expropriation of agricultural land, farmers were entitled to land compensation fees, settlement allowances and social security assistance.Thus, the law provided farmers with formal legal protection over land confiscation. More importantly, the status of private property has now been recognised by the PRC and written into its constitution. The adoption of the Property Law means that the PRC has officially scrapped its nationalisation of land policy and accepted the existence of private property. The Chinese government hopes that the Property Law can ‘provide farmers with a powerful lever to safeguard their rights and interests when they have to give up their land’ (People’s Daily Online, 2007c). The above discussions reveal that housing development in China, in a similar vein to other key welfare policies, focused on marketisation and localisation. Housing was treated as a pillar of China’s economic growth, and an individual’s housing quality was therefore chiefly shaped by their economic position. Unfortunately, several deprived groups were neglected in this new housing regime, and this will be explored in the following sections.

Housing policy and well-being Physical well-being It should be acknowledged that housing quality in China has improved since the economic reforms began (Chen, 2004). The per capita living space in urban areas increased from 6.1m2 to 26m2 between 1978 and 2005 (Gao, 2006). Also, more people could access basic public utilities. For example, the number of urban 180

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households with running water increased from 47.4% to 88.8% between 1989 and 2004. During this period, the ratio of people using gas jumped from 17.8% to 81.5% (Photius Coutsoukis and Information Technology Associates, 2006a). In rural areas the per capita living space from 1990 to 2004 rose from 17.8m2 to 27.9m2 (Photius Coutsoukis and Information Technology Associates, 2006b), which was three times more than 1978 (8.1m2) (Gao, 2006). In this period, rural housing with a reinforced concrete structure also increased from 1.2m2 per person to 9.2m2 (see Table 9.3). Table 9.3:The housing conditions of rural households (1990-2004) Item

1990

1995

2003

2004

Per capita floor space of houses 17.8 21.0 24.8 27.2 Value of houses (yuan/m2) 44.6 101.6 187.4 217.1 Structure of houses (m2/person) Reinforced concrete structure 1.2 3.1 6.2 8.5 Brick and wood structure 9.8 11.9 13.6 14.1

27.9 226.1

(m2/person)

2000

9.2 14.1

Source: Photius Coutsoukis and Information Technology Associates (2006b)

Despite the general improvement in housing conditions, some deprived groups such as unemployed people, low-income households, older people and migrant workers were still living in extremely poor housing. According to Wang (2004), there were several areas where residents still lacked basic facilities, suffered overcrowding and poor building structure: Traditional old housing areas: these are old houses remaining in cities. For example, Jiaochangkou and Shibanpo of Chongqing are located on steep slopes with narrow minor streets that create difficulties for moving large items of furniture. The main construction material of the houses is timber, with wooden stairs and floorboards that have not been properly maintained for years. Most families do not have indoor kitchens or toilets, so food needs to be prepared outdoors. Some families still live in houses classified as ‘dangerous’ by the local authority. Poor state enterprise housing estates: these housing estates were originally owned by SOEs that found it difficult to finance their management and maintenance. For example, Gongrencum in Shenyang was built in the early 1950s with 72 threestorey tenements of two- or three-room flats. Some flats do not have heating and running water. Urban villages: these villages were established as a result of urban expansion. Located in suburban areas, these houses are still classified as rural settlements, managed by rural management organisations. Zhejiangcun in Beijing is a typical village. Many roads there are unpaved and become muddy in the rain. Many migrant workers living there have to share rooms to reduce their rent burden. Some married people even share living space with single men or other families. 181

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Construction site dormitories: dormitories are mainly occupied by migrant workers. In Beijing, about 20% of migrant workers live rent-free on construction sites, sleeping on wooden boards in the part-built buildings. Clearly, housing development has been uneven. In a study of 1,120 households in Shenyang and Chongqing,Wang (2004) reported that a significant number of respondents lacked essential facilities. For example, an overwhelming proportion of households did not have a shower (83%) or a bath (97%). Moreover, 62% lacked a toilet and 18% had to share toilets with other families. In addition, 18% did not have a kitchen and another 12% needed to share with others.Wang (2004, p 105) concluded that housing development over the past 20 years was very uneven: ‘for the majority of low-income households living in traditional areas, housing conditions remain poor and basic’. Lee (2000) identified similar housing problems in other cities. In Shanghai, poor people lived in the old inner city with rooms as small as 2.2m2. This kind of housing, known as ‘Lilong houses’, was built about 50-80 years ago with narrow lanes in between rows of terrace housing. In 1996, about a third of the housing stock in the centre of Shanghai City was this type of housing. Half of the population in Nanking lived in dwellings of only 4m2-10m2 (Lee, 2000). Thus, the housing scene for poor people was still ‘a picture of chaos, extreme scarcity and unfair distribution’ (Lee, 2000, p 74). Social integration The social integration of Chinese citizens was weakened by unequal treatment of migrant workers and the marketisation of housing. With low wages and no public housing rights, migrant workers had no choice but to live in poor housing and regions with limited basic facilities (see Tables 9.4 and 9.5), in particular in suburban areas where migrant populations outnumbered the locals. Although they could get social support, this type of settlement created a social gap between migrants and local residents. As Wu (2002, p 115) emphasised, the practice of ‘linking household registration and the provision of urban amenities may not be conducive to the accommodation and adaptation of migrants in cities’. By promoting housing as a commodity, central government deepened housing segregation between social classes. For example, Lee (2000) noted that rich people and professionals in Shanghai lived in the western part of the city close to the airport and also in the city centre at Pudong. In Guangzhou, the higher social classes were concentrated in Tienho District to the west of the city centre. Housing stratification is particularly obvious in Beijing. According to Peng (2006), middle-class people in Beijing mainly lived in ‘circle three’ where the housing was built in the mid-1980s. ‘Circle four’ was occupied by some ‘special’ groups such as famous actors and actresses as well as high-income earners working in the technology industry and property development. Low-income people did not have any choice but to live in areas that were outside ‘circle five’ where the 182

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housing prices were relatively low. Being ineligible for housing benefits, migrant workers were forced to live on the border with the countryside or on construction sites.Wang (2006) also observed that migrant workers were renting the houses of rural residents or living in illegal and simply-built shelters. Because some of this housing was classified as an ‘informal residence’, migrant workers were not able to access basic facilities and also faced a higher crime rate (Wang, 2006, p 129). Peng (2006) further pointed out that there was a communication barrier among residents in mixed housing areas. As a result, people could not get sufficient social support and felt insecure. Similarly, Wang (2006) noticed that special areas called ‘villages inside a city’ could be found in many of China’s cities. As a result of rapid urban expansion, some rural villages were surrounded by newly built housing where city residents settled.There are several reasons explaining this phenomenon, including the lack of urban planning, the need for more time for rural residents to complete land acquisitions or the slow pace of rural redevelopment. Because of educational differences and the lack of communication between rural residents and their urban counterparts, ‘villages inside a city’ became relatively isolated communities (Wang, 2006). Tian and Meng (2005) found that only 8.8% of migrant workers in Wu Han City would talk about their feelings to nearby urban people. Thus, factors such as rapid urban expansion, income inequality and the HRS therefore created a communication gap between rural residents and urban dwellers and widened the social gap between migrant workers and local people, as well as the divide between the rich and the poor. Equal value Migrant workers had a limited choice of housing in urban areas. It was difficult for them to rent public housing that was originally provided for SOE workers. They were also unable to buy ECH and obtain housing assistance in the form of LRH, which were only for local residents.The private property market was a less unrealistic option for them, but most migrant workers could only rent, rather than buy, private housing because of low incomes. Furthermore, they had difficulty in obtaining mortgages, which were mainly offered to local residents. In recent years, some local authorities have taken initiatives to build villages for migrant workers; for example, Taopu Township in Shanghai reused vacant housing from relocated local residents for migrant workers (Wu, 2002). As there was no compulsory national policy framework, the provision of public housing for migrant housing completely depended on the goodwill of local officials. Migrant households mainly lived in private rental housing or dormitories provided by their employers (Wu, 2002). As revealed in Table 9.4, nearly half of temporary migrants in Shanghai and one third in Beijing lived in private rented housing. The proportions living in a dorm/work shed were over a quarter and two fifths, respectively. Less than 1% of the 1,789 temporary migrants in Shanghai and Beijing could afford commercial housing. 183

Social policy in China Table 9.4: Housing choices of temporary and permanent migrants and local residents (%)

Renting private housing Renting public housing Dorm/work shed Staying with local residents Private owner-occupied housing Commercial housing Othera Combined

Shanghai

Beijing

Temporary Permanent Local Temporary Permanent Local migrants migrants residents migrants migrants residents (n=1,789) (n=80) (n=137) (n=927) (n=145) (n=154)

49.0 11.6 28.8

2.5 33.8 3.8

3.6 43.8 0.0

31.9 18.7 41.6

7.6 26.9 11.0

2.6 24.7 1.3

4.6

1.3

2.9

3.9

1.4

0.0

0.0 0.7 5.4 100.0

51.3 5.0 2.5 100.0

39.4 10.2 0.0 100.0

0.0 0.4 3.3 100.0

32.4 1.4 19.3 100.0

42.9 2.6 26.0 100.0

Note: a Other housing choices include shed, boat, hotel/inn, living on the street or in a hallway, and staying in hostel rooms for temporary migrants; they also include relocation housing and housing sold by work units for permanent migrants and local residents. Source: Wu (2002, p 101)

The study conducted in Shenyang and Chongqing mentioned above also reveals that the living conditions of migrant workers were appalling. Only 4% had their own shower and bath; the majority needed to share a toilet with other families; 28% did not have a kitchen; and 8% were even without a water tap. Although their housing conditions were very poor, 80% of them spent more than 10% of their income on housing, in contrast to 80% of local residents who paid less than 5% of their incomes in housing costs (Wang, 2004, p 113). Similarly, Wu (2002, p 107) identified clear housing differences between local residents and migrant workers in Shanghai and Beijing (see Table 9.5). The per capita living space of migrant workers in Shanghai was 9m2 and in Beijing 7.5m2, compared with local residents’ 18.7m2 and 18.4m2 in the two cities. Moreover, 63.8% of migrant workers in Shanghai and 63.5% in Beijing did not have gas or propane, in contrast to only 8.7% and 19.7% of permanent residents respectively. Table 9.5: Differences in housing conditions between temporary migrants and local residents in Shanghai and Beijing Per capita No No gas/ No No useable area (m2) water propane kitchen bathroom Shanghai Temporary migrants Local residents Beijing Temporary migrants Local residents

9.0 4.4 63.8 68.8 18.7 1.1 8.7 34.1 7.5 18.4 63.5 74.1 18.4 1.9 19.7 13.0

Source: Derived from Wu (2002, p 107)

184

66.5 48.8 89.1 34.6

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Wu (2002, p 105) also highlighted that ‘it is not unusual to see a family of three sharing a single rental room with no facilities and using a corner to set up a small cooking area with either kerosene burner or propane stove’. About 3-4% of migrant workers in the two cities encountered ‘the worst housing conditions for prolonged periods of time’ by sleeping on hospital benches or under staircases in multi-storey apartments (Wu, 2002, p 105). Many migrant workers were therefore deeply frustrated with their poor housing conditions. Wang (2004, p 112) stated that only 12% were satisfied with their ‘internal facilities’, 18% with their ‘house and home structure’, and 31% with the ‘housing floor space available’. Again, the HRS was used to exclude China’s migrant workers in cities from mainstream housing rights; this was the major cause of housing poverty and inequality among the urban population. In short, the achievements of housing reform in China over the past two decades have been overshadowed by the housing disadvantages of poor migrant families. The privatisation of public housing in the 1980s and 1990s also reinforced organisational inequalities between different public sector institutions (Chen, 1996;Wu, 1996; Logan et al, 1999).As a result of central government’s retreat from providing public housing, SOEs and local authorities, as illustrated above, became key players in the subsidised housing market. Consequently, the old barriers to equality such as a person’s authority and position, membership of the CCP and relationship with leaders, were maintained. Under this type of privatisation, power holders were the main beneficiaries of new policies and ‘inequalities in space and facilities were untouched’ (Logan et al, 1999, p 23).This issue was also confirmed by Pan, who found that CCP members had a larger housing size and a higher housing quality index than other social groups (Pan, 2004). In addition, there were variations in the prices of discounted public housing between work units. Without a strong mechanism for monitoring the sale prices set by enterprises and city housing bureaux, ‘different localities and work-units set preferential prices according to their financial capabilities’ (Chen, 1996, p 1082). Logan et al (1999) noted that large work units provided bigger, betterequipped housing than their smaller counterparts. Housing disparities could also exist within the same institution: Lee (2000) reported that social sciences staff of Beijing University lived in small 10m2-20m2 studio rooms with no private toilets and kitchen facilities, while their counterparts in the business school stayed in a purpose-built staff quarter with modern facilities. In short, the decentralisation of public housing gave a green light for work units to actively pursue their housing interests at the expense of public assets. Housing inequality in China was partly caused by the operation of a free housing market, and partly by the domination of work units in the subsidised housing market. Self-determination To regulate the activities of property developers and agents, central government established a Credit Scheme for Property Enterprises and Agents in 2002. The objective of the scheme was to ‘name and shame’ and take legal action against 185

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property enterprises suspected of malpractice (MC, 2002). According to the scheme, the property departments of local authorities would examine the business practices of property developers in their regions. The public could also make complaints to local governments that would ask for explanations from involved companies and agents. Property developers engaged in illegal practices would be put on an official property website (www.realestate.gov.cn) operated by the MC. On the other hand, property developers with good practices would also be named on the website. The use of a ‘name and shame’ policy could, to a certain extent, improve the practices of some companies. However, the system was likely to be weakened by the fact that the head of the property department of a local government was not required to be accountable to the public, and the names of enterprises on the list could not be subject to public inquiry.The participation of citizens in housing reform was also limited.The cases of urban redevelopment and land acquisitions discussed above showed that local governments did not follow compensation regulations and that affected families had difficulty in challenging the decisions of officials without recourse to an independent legal system. As for the PHP, farmers whose land was confiscated by a township government of Dong Huan Municipality were urged to live in a new type of housing that was not suitable for raising livestock such as chickens and ducks, nor for storing agricultural tools (Bian, 2006). A just polity Rising housing prices were a major concern among Chinese people (Song et al, 2004). For example, the average housing price increased by 14.4% between 2003 and 2004 (People’s Daily Online, 2005a). In the same period, however, the proportion of affordable housing reduced from 6.1% to 4.6% (People’s Daily Online, 2005b). In response to public concerns over housing, central government took several steps to curb housing prices. In 2005, the MC urged local authorities to encourage developers to build small and medium-sized housing for citizens, to provide more ECH and to develop detailed plans for LRH (MC, 2005). Also, property developers who had not started construction projects within one year of purchasing had to pay ‘an idle land fee’. Further, a ‘business tax’ would be imposed on house owners who sold their units within less than two years of purchasing them. In addition, all commodity housing transactions needed to be put on the internet.Thus, the Chinese government attempted to regulate the housing market, making housing prices more affordable to the public. However, central government’s efforts to curb housing prices were always blocked by local governments. Fundamentally, local authorities played a contradictory role in the property market. On the one hand, they relied on land sale and land acquisitions for financing local expenditures. On the other hand, they were pressed by the central government to provide public housing as well as to regulate the property market for the benefit of the general public. Against the conflict of interests, local authorities could fail to fulfil their role in monitoring the 186

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housing market (Ng, 2006). Chinese Premier Wen Jiabao responded to the inaction of local officials by insisting that ‘Local governments must assume their full share of responsibility for the regulation and oversight of local property markets’ (People’s Daily Online, 2007c).The Vice-Minister of Land and Resources also stressed that ‘Local government should not defy orders given by the central government which aim to stabilise housing prices’ (People’s Daily Online, 2006a). Housing reform in China over the past two decades has revealed the fundamental weaknesses of the existing political structure that created ‘great opportunities for corruption and mismanagement’ (Lee, 2000, p 62). Evidence showed that the existing political system failed to effectively monitor government officials on land acquisitions. In rural areas, many local leaders abused their power by seizing public land for building luxurious private houses, as well as allowing illegal land occupation by accepting bribes (Wang and Murie, 1999). After examining land use in 15 cities between October 2003 and September 2004, the MLR reported that 53% of land acquisitions were actually illegal (China Internet Information Centre, 2006). Also, local authorities failed to provide proper compensations that threatened the livelihood of affected farmers. According to the Auditor-General of the National Audit Office, officials of Wu Han City only offered ¥4,800 per mu (0.067 hectares) to land-losing farmers who should be entitled to receive ¥189,000 per mu (China Daily Online, 2006b). Another example was the building of the ‘Three Gorges Project’, the world’s largest dam-related resettlement, affecting thousands of people in two provinces and 21 counties (Wei, 1999). As a result of the project, about 100,000 urban residents were put out of work and one million underemployed farmers became surplus labour. People were moved onto higher ground in the reservoir area or to remote places ‘regardless of how they felt about that or what happened to them after resettlement’ (Chen, 2006). According to Wei (1999), the new settlement for affected farmers was on barren hillside with poor soil and little water. The government used only ¥400-¥1,200 per mu for enriching and fertilising this land, which was far below the required ¥2,000-¥4,000 per mu. Also, the monthly payment of ¥70 per person as compensation was ‘not enough to cover basic expenses’ (Wei, 1999). To tackle the issue of land acquisitions, the Chinese government appointed nine inspection bureaux to monitor the activities of local governments. More importantly, the Property Law of the PRC required local authorities to pay sufficient compensation to affected families so that ‘the living standard of farmers will not get worse and their long term living will be protected’ (People’s Daily Online, 2006b). Nevertheless, housing issues in the economic reform period clearly revealed that central government was too slow to protect the basic livelihood of land-losing families and the existing polity was obviously too weak to put local officials under account.

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Conclusion At the beginning of the 21st century, the Chinese government carried out housing reforms focused on the decentralisation of housing provision and the privatisation of public housing. Since withdrawing from its welfare role in the housing system, central government now mainly provides policy guidelines, while local authorities work out practical measures according to local circumstances (SC, 1998). This approach, however, gives opportunities for work units to pursue their own interests, at the expense of public housing stock and land assets.The privatisation of housing has therefore actually increased the housing activities of SOEs and local governments at organisational and local levels. After realising the abuse of power by work units, central government stopped SOEs from allocating public housing. Instead, the role of work units in the housing system was transformed from allocating housing for their workers to providing them with financial subsidies. Furthermore, ECH was built and HPF set up to enhance the purchasing power of low- and middle-income buyers. However, the housing needs of poor households and migrant families have long been neglected in the process of housing reform. Many families are still living in overcrowded housing without basic amenities, and the housing needs of migrant workers have been suppressed by the HRS. Thus, the ‘inequality in housing allocation still widely exists and has not yet been seriously addressed’ (Lee, 2000, p 62). Although some sections of the population enjoy a high quality of housing, most of the urban poor and some rural residents still cannot access decent accommodation. Housing reform in China over the past two-and-a-half decades has therefore widened the housing gap between the rich and poor and between migrant workers and local residents. References Bao, Z.H. (2002) Residential housing and property, Beijing: China Building Industry Press. Bian, J. (2006) ‘The Peasant Housing Project – warning on using “new village construction” for making money’, China Real Estate Market, vol 15, pp 14-19. Chen, A. (1996) ‘China’s urban housing reform: price–rent ratio and market equilibrium’, Urban Studies, vol 33, no 7, pp 1077-92. Chen, A. (2004) ‘China’s urban housing: privatisation and market integration’, in A. Chen, G. Liu and K. Zhang (eds) Urbanisation and social welfare in China, Aldershot: Ashgate, pp 63-86. Chen, G. (2006) Rethinking resettlement, 20 September, Toronto: Probe International (http://www.probeinternational.org/catalog/content_fullstory. php?contentId=2902). China Daily Online (2006a) ‘Ministry vows to curb loss of farmland’, 24 June (www.chinadaily.com.cn/china/2006-06/24/content_625068.htm). China Daily Online (2006b) ‘15m Chinese farmers to lose their land’, 25 July (www.chinadaily.com.cn/bizchina/2006-07/25/content_648626_2.htm). 188

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China Daily Online (2007) ‘Ensure affordable housing, officials told’, 24 January (www.chinadaily.com.cn/china/2007-01/24/content_790810.htm). China Internet Information Centre (2006) ‘Stop illegal land use’, 8 June (www.china. org.cn/english/GS-e/170761.htm). China Internet Information Centre (2007) ‘China grapples with thorny issue of rural land rights’, 31 August (http://en.chinagate.com.cn/english/choice/48618. htm). Chu, C.F. (2005) Researching the patterns of housing protection in urban areas, Beijing: Economic Science Press. Construction Office of Heilongjiang Province (2006) Main points on the construction work in Heilongjiang in 2006 (www.hljjs.gov.cn/shownews1. aspx?NewsID=3612). Gao, S.Q. (2006) Deepening reform is China’s only option, Beijing: China Elections and Governance (www.chinaelections.org/NewsInfo.asp?NewsID=95165). Guo, X. (2001) ‘Land expropriation and rural conflicts in China’, The China Quarterly, vol 166, pp 422-40. Lee, J. (2000) ‘From welfare housing to home ownership: the dilemma of China’s housing reform’, Housing Studies, vol 15, no 1, pp 61-76. Li, S.M. (2003) ‘Housing tenure and residential mobility in urban China: a study of commodity housing development in Beijing and Guangzhou’, Urban Affairs Review, vol 38, no 4, pp 510-34. Logan, J.R., Bian, Y. and Bian, F. (1999) ‘Housing inequality in urban China in the 1990s’, International Journal of Urban and Regional Research, vol 23, no 1, pp 7-25. MC (Ministry of Construction) (2002) Issues concerning the establishment of a credit scheme for property enterprises and agents, 20 August, document no 2002/192, Beijing: MC (www.cin.gov.cn/fdc/file/2002082301.htm). MC (2005) Notification on implementing the State Council’s message to the Ministry of Construction and relevant departments about tasks for stabilising housing, Beijing: MC (www.cin.gov.cn/fdc/file/20050522703.htm). MC, State Development and Reform Commission, MLR (Ministry of Land and Resources) and Bank of China (2004) Measures for managing Economic and Comfortable Housing, Document no 2004/77, 13 May, Beijing: MC. National Building Committee, National Agriculture Committee, Ministry of Agriculture, Ministry of Building Materials and Industry, National Bureau of Construction (1980) Report on the national meeting on the construction of rural housing, 14 March, Beijing: State Council. Ng, L.F. (2006) ‘Local governments’ conflicting role leads to their failure in performing monitoring duties’, China Real Estate Business, 17 July. Pan, Z. (2004) ‘Housing quality of Communist Party members in urban China: a comparative study’, Housing Studies, vol 19, no 2, pp 193-205. Peng, J.P. (2006) ‘Housing stratification in Beijing and conflicts in new city’, China Real Estate Business, 17 July.

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People’s Daily Online (2005a) ‘China continues efforts to control soaring housing prices’, 12 May (http://english.peopledaily.com.cn/200505/12/eng20050512_ 184626.html). People’s Daily Online (2005b) ‘China’s new policy doesn’t mean housing price slump: official’, 8 June (http://english.peopledaily.com.cn/200506/08/ eng20050608_189159.html). People’s Daily Online (2005c) ‘40 million Chinese farmers lose land: NPC report’, 27 October (http://english.people.com.cn/200510/27/eng20051027_217043. html). People’s Daily Online (2006a) ‘Senior official urges local government adopt property market controls’, 29 September (http://english.people.com.cn/200609/29/ eng20060929_307611.html). People’s Daily Online (2006b) ‘Ministry of Land and Resources’, 27 December (http://nc.people.com.cn/GB/61154/5221764.html). People’s Daily Online (2007a) ‘Land confiscation, top reason for Chinese farmers’ petitions’, 30 January (http://english.people.com.cn/200701/30/eng20070130_ 346052.html). People’s Daily Online (2007b) ‘Ministry of Construction: need to establish “Local Rental Housing by the end of this year”’, 14 February (http://finance.people. com.cn/GB/1037/5401127.html). People’s Daily Online (2007c) ‘China to rein in soaring housing price: Premier’, 5 March (http://english.peopledaily.com.cn/200703/05/eng20070305_354291. html). People’s Daily Online (2007d) ‘Property law may serve as umbrella to farmers’ land: Chinese lawmaker’, 8 March (http://english.peopledaily.com.cn/200703/08/ eng20070308_355663.html). People’s Daily Online (2007e) ‘China’s top legislature adopts landmark property law’, 16 March (http://english.people.com.cn/200703/16/eng20070316_358242. html). Photius Coutsoukis and Information Technology Associates (2006a) ‘People’s life’, 26 April, NewYork, NY: Information Technology Associates (www.allcountries. org/china_statistics/10_1_people_s_life.html). Photius Coutsoukis and Information Technology Associates (2006b) ‘Housing conditions of rural households’, 26 April, NewYork, NY: Information Technology Associates (www.allcountries.org/china_statistics/10_33_housing_conditions_ of_rural_households.html). SC (State Council) (1982) Key points of the second national meeting on rural housing construction, 7 January, Beijing: SC. SC (1983) Ordinance on managing urban private housing, 17 December, Beijing: SC. SC (1988) Implementation plan for a gradual housing scheme reform in cities and towns, Beijing: SC. SC (1991) Continuation of urban housing reform in a stable manner, 7 June, Beijing: SC. 190

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SC (1994) Decision on deepening the urban housing reform, Document no 1994/43, Beijing: SC. SC (1998) A further step on deepening housing reform and accelerating housing construction in urban areas, 3 July, Beijing: SC. Song, S., Chiu, G. and Chen, X. (2004) ‘Housing investment and consumption in urban China’, in A. Chen, G. Liu and K. Zhang (eds) Urbanisation and social welfare in China, Aldershot: Ashgate, pp 87-106. Tian, G.H. and Meng, C.H. (2005) ‘A study of social interaction of migrant workers in Wu Han City’, Statistics and Observation, vol 183, no 2, pp 66-7. Wang, Y.P. (2003) ‘Progress and problems of urban housing reform’. in C. Jones Finer, Social policy reform in China:Views from home and abroad, Aldershot: Ashgate, pp 169-90. Wang, Y.P. (2004) Urban poverty, housing and social change in China, Oxford: Routledge. Wang,Y.P. (2006) Urban social stratification and residential segregation, Shanghai:Tong Ji University Press. Wang, Y.P. and Murie, A. (1996) ‘The process of commercialisation of urban housing in China’, Urban Studies, vol 33, no 6, pp 971-89. Wang,Y.P. and Murie, A. (1999) Housing policy and practice in China, Basingstoke: Macmillan Press Ltd. Wei, Y. (1999) Major problems and hidden troubles in relocation of Three Gorges, Toronto: Three Gorges Probe (www.threegorgesprobe.org/tgp/print. cfm?ContentID=1057). Wu, F. (1996) ‘Changes in the structure of public housing provision in urban China’, Urban Studies, vol 33, no 9, pp 1601-27. Wu, W. (2002) ‘Migrant housing in urban China: choices and constraints’, Urban Affairs Review, vol 38, no 1, pp 90-111. Xinhua News Agency (2007) ‘Quake raises concerns for safety of rural housing in SW China’, 13 June (http://news.xinhuanet.com/english/2007-06/06/ content_6207826.htm). Zax, J. (2003) ‘Housing reform in urban China’, in N. Hope, D.Y. Tao and M.Y. Li (eds) How far across the river: Chinese policy reform at the millennium, Stanford, CA: Stanford University Press, pp 233-73. Zhang, X.Q. (1998) Privatisation: A study of housing policy in urban China, New York, NY: Nova Science Publishers, Inc. Zhu, J. (2000) ‘The changing mode of housing provision in transitional China’, Urban Affairs Review, vol 35, no 4, pp 502-19.

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Part 3 Conclusion

Welfare reforms and well-being

ten

Welfare reforms and well-being Key issues China has achieved remarkable economic successes since 1978. Its economic reforms, however, rapidly destroyed its socialist welfare system centred on the principles of equality and human needs. By reforming its welfare policies based on marketisation and decentralisation, the Chinese government has created a divisive and discriminatory welfare system, leaving a lot of disadvantaged groups unprotected. This concluding chapter reports on the extent of people’s wellbeing in China’s modern welfare system. It also draws conclusions on the key features of the Chinese welfare system, including: • minimal levels of assistance; • urban- and labour market-oriented welfare provision; • collective surveillance and social segregation, leading to a cycle of deprivation among poor families; • gradually introducing laid-off workers to the open employment market; • administrative absorption of welfare dissatisfaction; and • a gap in welfare implementation.

Introduction This book has attempted to tackle two core issues: the development of China’s social policy since the beginning of the economic reforms, and the impact of welfare changes on the well-being of Chinese people. Chapters Five to Nine looked at five key welfare policy areas in the context of these economic reforms: social security, labour, health, education and housing. Economic reforms brought about tremendous changes to the lives of thousands of Chinese people, and their achievements could be measured by completely different approaches that lead to various conclusions. In return, these conclusions can affect the welfare approach of a country. For example, the Hong Kong government always boasts that it is the most free economy in the world based on an ‘index of economic freedom’ (The Heritage Foundation, 2007). Free market organisations and academics always react fiercely to any changes to free market principles, condemning the Hong Kong government’s violation of the ‘principle of non-intervention’. Against the criteria of the free market, fiscal and welfare measures such as low taxation, a minimal level of social security, the lack of a minimum wage, widespread use of means-tested benefits and minimal restrictions to working hours are believed to 195

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be logical and reasonable. Thus, the selection of an assessment tool is a serious topic because it helps justify certain types of welfare practices that directly affect people’s life chances and their quality of life. Instead of using the free market model, this book adopted a human dignity framework for assessing the well-being of Chinese people in the context of economic transition (see Chapter Two). This is because human beings are more than economic beings and are social, economic and political agents whose quality of life must be maintained through various types of welfare services. Thus, the contents of social welfare directly affect human well-being. Based on the findings from Chapters Five to Nine, this final concluding chapter examines the key features of China’s welfare system and its impact on the well-being of Chinese people.

Well-being during welfare reforms As illustrated in Chapter Three, since 1978 China has experienced dramatic economic changes.The introduction of the Household Responsibility System and the reconstruction of SOEs shook the social and financial bases of China’s socialist welfare state. As a result, the Chinese government launched a series of reforms in order to establish a new welfare system that was compatible with its socialist market economy. Examining welfare development in five key areas has clearly revealed that the present Chinese welfare system does not match the features of a socialist welfare state. Instead, China’s welfare system has been moving towards a more socially divided and market-oriented welfare model.The following sections analyse the extent of well-being among Chinese people in the first decade of the new millennium, after nearly three decades of economic reforms. Physical needs: minimal assistance The Chinese government achieved internationally recognised accomplishments in tackling poverty (see Chapter One). It introduced various welfare initiatives to improve the quality of life of Chinese citizens.The number of health professionals increased and more people were living in better housing (see Table 10.1). Several social security initiatives were established to meet the financial needs of poor families, including the MSLS for the poor, the basic living allowance for laid-off workers, unemployment benefits and an old age pension scheme for urban workers. Also, the Chinese government changed its role within the national welfare system. Based on the concepts of decentralisation and localisation, central government has promoted multiple pillars for providing social welfare; local governments, families, individuals, enterprises and charitable organisations are expected to make major contributions to public services. In many public services, central government has rolled back its involvement through the promotion of a mixed welfare model. One of the most obvious weaknesses of the existing Chinese welfare system, however, is that it provides low levels of assistance with limited coverage. As illustrated in Table 10.1, there is a lack of a national scientific formula for calculating 196

There is no national formula to calculate the amount of MSLS; local governments set the levels according to the levels of the minimum wage, unemployment benefits, the welfare perceptions of senior officials and the financial conditions of their regions. Research studies show that the existing levels of MSLS are too low to meet basic daily needs (Cook and Jolly, 2000; Mei and Liu, 2005; Zhang and Tang, 2005). Recipients of the Five Guarantees cannot have an average living standard as promised in the official documents. Rather, many local governments do not have sufficient resources to meet the daily needs of the Five Guarantees households (Hong et al, 2004). Laid-off workers can receive a living allowance from their work units or the RSCs. However, the level of support is too low for them to lead a decent life. Many workers live on meagre living allowances of between 40-60% of their previous salaries. As neither the levels of unemployment benefit nor a living allowance for laid-off workers could meet basic needs, 10% of the urban population experienced economic hardship (Wong and Ngok, 1997). The health conditions of Chinese people have improved on indicators such as infant mortality rate, under-fives mortality rate and maternity mortality. Thus, the health of Chinese people has reached ‘a comparatively high level among developing countries’ (Mao, 2007, p 5). However, the Chinese government reduced its healthcare subsidies (Liu and Yi, 2004) so that hospitals and clinics had to sell drugs and charge treatment fees to raise revenues. Only 50% of urban residents and 20% of rural inhabitants were covered by health insurance schemes (OECD, 2005). The existing urban insurance scheme only provides little protection for participants (Liu, 2002, p 146). A national health survey (MH, 2004) reported that among those who were sick in 2003, 57% in urban areas and 45.8% in the countryside did not seek medical consultation. Also, for those who rejected hospitalisation, 70% claimed financial difficulties as the main reason (MH, 2004). By addressing the existing health problems, central government in recent years has promoted community health services in order to provide cheaper, preventive and convenient medical treatment for the general public (Xinhua News Agency, 2007a). It is also launching a pilot health insurance programme targeting deprived groups and people who are not in employment (People’s Daily Online, 2007c). Limited data available. Overall, the housing conditions of Chinese people have improved. In urban areas, the per capita living space jumped from 6m2 to 26m2 between 1978 and 2005 (Gao, 2006). In rural areas, the per capita living space increased from 18m2 to 28m2 between 1989 and 2004 (Photius Coutsoukis and Information Technology Associates, 2006a). More Chinese people can access a better quality of housing with better amenities. In cities, the ratio of residents having ‘tap water’, for example, increased from 47% to 89% between 1989 and 2004 (Photius Coutsoukis and Information Technology Associates, 2006a). In this period, rural housing with a reinforced concrete structure was up from 1.2m2 per person to 9.2m2 (Photius Coutsoukis and Information Technology Associates (2006b). However, some people still live in overcrowded and unsafe buildings, lacking basic amenities such as running water, heating and toilets (Wang, 2004). Some rural residents are still living in houses that cannot withstand bad weather and also lack basic amenities (Xinhua News Agency, 2007b). Some urban residents are unable to afford high house prices, and the building of LRH has been relatively slow. For example, four cities at provincial level and 145 cities at county level were still not involved in any LRH projects. Some cities even did not have details the application for low-cost housing (People’s Daily Online, 2007a).

Social security

Note: Detailed evidence can be found from Chapters Five to Nine.

Education Housing

Health

Labour

Meeting physical needs

Policy areas

Table 10.1:The extent to which physical needs are met by state welfare

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the amount of financial assistance according to basic human needs. The basic approach to the levels of financial assistance is to sustain the work ethic rather than to tackle poverty and inequality. This ideology has been clearly spelt out by the SC (1999). Accordingly, the differences in the amounts of financial assistance between the different social security provisions have been deliberately maintained: the level of MSLS should be below the level of unemployment benefit, which should be lower than the minimum wage. In practice, the amount of MSLS is too low to meet basic daily necessities (see Table 10.1). Despite being urged by central government to take items such as basic education and housing costs into account, most local authorities set the level of MSLS in the light of the attitudes of officials and their perception of local financial conditions, rather than on any scientific calculation. As a result, there are big variations in the levels of MSLS between local governments. The concept of minimal assistance has also been applied to the provision of public housing. MC et al (2003) stated that the living space in public housing should be below 60% of the average per capita living space of a region (see Chapter Five). Thus, welfare recipients are expected to receive only poor quality public welfare. The application procedures for social security are bureaucratic and cumbersome rather than client-centred. At present, neither welfare professionals nor a single social security department provide detailed and comprehensive assessments of the needs of poorer people. Welfare recipients have to complete different types of application forms, assessed by various government departments and NGOs.They have to go through complicated application procedures, waiting for the decisions of various government bodies. So two key features of China’s social security system are low levels of assistance and fragmented welfare administration. By not linking the level of public assistance to a scientific formula based on human needs, the existing MSLS cannot guarantee basic necessities for recipients. Thus, the MSLS largely seems to be a symbolic mechanism, providing meagre support for poor people while giving psychological comfort to Chinese leaders by fulfilling their welfare obligations to the population. Equal value: urban- and labour market-oriented welfare provision After analysing access to welfare, it is clear that the greatest barriers to achieving common well-being in today’s China are the segregation of urban and rural welfare systems, the regional variations on welfare and the exclusion of nonlabour market participants. Strictly speaking, China is one country with two welfare systems that serve two distinctive groups of citizens – there is a clear division of social welfare between urban and rural residents.Welfare programmes such as the old age insurance pension scheme, the medical insurance scheme and unemployment insurance are compulsory for urban workers, and the low rental public housing schemes are exclusively for permanent urban residents. On the other hand, the rural old age pension schemes, the rural CMS and the Medical

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Assistance Fund are voluntary programmes catering only for some sections of the rural population. As illustrated in Chapter Five, there is a big pension gap between the cities and the countryside. Among older people who did not work, 56% of those living in cities received old age pensions compared with only 8% of their counterparts in rural areas (Wang, D.W., 2005). Also, data in Chapter Seven show that health insurance schemes covered 21% of rural residents in contrast to 55% of their urban counterparts. At the beginning of the new millennium, rural residents privately financed 90% of their healthcare, compared with a 40% contribution by urban residents (OECD, 2005).This partly explains why the rural population suffer higher rates of malnourishment, infant mortality and maternal mortality than their urban counterparts (see Table 10.2). Furthermore, rural schools educate more pupils but receive less than 40% of basic education funding. This is a barrier to rural young people achieving social mobility through education. The operation of the HRS, which denies migrant workers the same rights as permanent urban dwellers, has turned China into two welfare regimes that unequally distribute life chances to the rural and urban populations. Another extremely important issue is the welfare exclusion of rural migrant residents in cities. Migrant workers in cities take up low-paid jobs, working in extremely poor environments (see Chapter Six). Due to their rural residency, migrant workers in cities are still treated as foreign workers as well as second-class Chinese citizens, being unable to access urban social services such as the MSLS, LRH and the urban medical assistance scheme. It was not until 2006 that the children of migrant workers could access basic urban education.We need to wait to see the actual impact of this legislation because, as can be seen below, there is a policy implementation gap in China. Being excluded from urban healthcare services, some migrant women gave birth at home to reduce medical costs; some workers with industrial injuries are forced to go back to the countryside for medical assistance; and children of migrant workers cannot access essential vaccinations (see Table 10.2). Accessing social welfare in today’s China is therefore based not on ‘citizenship’ but on the ‘place of household registration’.Accordingly, urban children are born with more rights and opportunities than their rural counterparts. In this way, inequality is passed from generation to generation. It is not possible to escape unequal treatment simply by changing living place from the countryside to the city or changing career from farmer to urban worker. Thus, rural poverty cannot be effectively tackled, nor can inequality be solved, without dismantling the HRS. The breakdown of institutional welfare in China has been replaced by a market-oriented welfare system. For example, access to old age protection and medical insurance depends on status as a worker instead of as a citizen. Although non-contributory maternity assistance provides some type of compensation for female workers, female citizens who are out of the labour market find it difficult to cope with medical costs or to lead a decent life in retirement. This is because

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There are two types of social security schemes in China: one for urban residents and another for rural residents. All permanent urban residents can live on the MSLS. Before 2007, rural MSLS was still a voluntary programme. Although central government announced the implementation of the MSLS in rural areas in 2007, rural people need to wait and see the actual benefits because many local governments are having financial difficulties in launching this scheme. There are regional variations in the levels of the MSLS. For example, the monthly assistance rates of the MSLS in Guangzhou and Beijing were ¥330 and ¥290 per person respectively, in contrast to only ¥161 in Urumqi and ¥165 in Xining (Secretary of China Social Security Forum, 2006). Urban workers are required to join an old age pension scheme, while the old age pension scheme in rural areas is still a voluntary programme. Over half of urban retired workers receive old age pensions in contrast to less than 10% of older people in the countryside (Wang, D.W., 2005). Urban migrant workers were excluded from receiving the MSLS. Before 2006, only some local authorities provided free education for the children of migrant workers (China Daily Online, 2004). Old age protection is based on employment contributions – this excludes homemakers, mainly women, from old age protection (Saunders and Sun, 2006).

The HRS is the key factor excluding migrant workers from having equal employment rights such as old age and medical insurance. Job discrimination based on gender, age and disability is a serious problem. The MLSS and China Human Resources Development reported that among 73,176 respondents, as many as two thirds suffered employment discrimination (China Daily Online, 2006a). The government encourages local authorities to help groups with employment difficulties, for example, community beneficial jobs for those with special difficulties in obtaining jobs; the 40-50 Project for unemployed women aged over 40 and men aged over 50 (Chan and Bowpitt, 2005). To tackle job discrimination, central government adopted the Employment Promotion Law on 30 August 2007 (Xinhua News Agency, 2007c). The law prohibits discrimination against job-seekers on the basis of their ethnicity, ‘race’, gender, religious belief, age or physical disability.

The distribution of health expenditure is biased in favour of urban areas – 15% of China’s population living in cities and industrial districts attracted about 60% of public health spending (Beach, 2001). In 2004, per capita health expenditure in cities was ¥1,261.9 compared with just ¥301.6 in rural areas (MH, 2006a). Only urban workers receive compulsory medical insurance, rural residents are forced to rely on their own means. Nearly 90% of rural households paid for medical treatments by their own means instead of through insurance schemes (Liu and Yi, 2004). Children of rural families suffer higher rates of malnourishment, infant mortality and maternal mortality. For example, the maternal mortality rate in rural areas was 0.6% in contrast to just 0.3% in cities (China Development Research Foundation, 2005). There are variations in healthcare between different local authorities as well as between different areas of the same local authority. For example, the infant mortality rates in Beijing and Shanghai (rich regions) were below 9 per 1,000 births in contrast to 30-40 per 1,000 in Qinghai, Guizhou and Gansu (poor regions) (Meng, 2006). Being excluded from urban medical benefits, migrant workers and their children suffer more health problems. The incidence of measles and of encephalitis among migrant workers in Beijing are 9 times and 15 times more than local urban residents respectively (China Daily Online, 2003). Because of higher medical fees, 20% of migrant women in Haidian District of Beijing even gave birth at home (Dong, 2001).

Social security

Labour

Health

(continued)

Equal value

Policy areas

Table 10.2:The extent of the achievement of equal value for China’s citizens

Social policy in China

Before 2006, local governments were asked to finance education: primary schools are sponsored by villages, junior high schools by towns/townships, and senior high schools by counties. Localisation of education leads to education disparity between regions or within a region (for example, between rural and urban parts of a region) (Mok, 2001). Lower levels of government charge school fees that exclude poor families from accessing basic education. The drop-out rate for junior secondary schools reached 2.6% in 2005 (ME, 2006). A total of 65% of China’s population lives in rural areas, but rural education attracts less than 40% of the government’s education budget (Robertson, 2006). Women still suffer from low education attainment. The percentage of women in rural areas with ‘primary education or under’ was 58.8% in contrast to 36.9% of men (Wei, 2002). Among 80 million of the illiterate population in 2000, 72.7% were women (China Daily Online, 2007e). There have been some improvements after the passing of a revised Compulsory Education Law in 2006. Central government and local authorities jointly bear the expenditure of compulsory education. By the end of 2004, more than 6.4 million rural children of compulsory education age were living with their parents in cities. However, 9.3% of them were out of school and only 31.5% of migrant youth aged 13 were still receiving education (People’s Daily Online, 2006d). It was only in 2006 that migrant children’s education rights were legally confirmed. In 2007, central government provided more investment to tackle education inequalities, increasing education expenditure by 42%. Furthermore, tuition fees and other sub-charges in rural schools will be scrapped (Wen, 2007). Starting from 2004, the State Studentship Scheme provides financial support for 5% of the students of each university. Subsequently central government gave an extra 99 billion yuan to fund scholarship and assistance schemes for university students (Wen, 2007). The impact of housing reform on different social groups varies. Some SOE workers got better and cheap housing as a result of the active participation of the SOEs in the property market (Wu, 1996; Zhu, 2000). However, retired and unemployed workers who have limited resources have to live in poor housing. To address the housing needs of the low- to middle-income group, central government launched the ECH, exempting purchasers from taxes. Migrant workers who are not urban permanent residents have been excluded from all types of urban housing benefits. As a consequence, they are forced to live in extremely poor housing lacking basic amenities (Wu, 2002; Wang, 2004).

Education

Note: Detailed evidence can be found in Chapters Five to Nine.

Housing

Equal value

Policy areas

Table 10.2:The extent of the achievement of equal value for China’s citizens (continued)

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only the working population who make contributions to economic development can enjoy retirement and medical benefits. Regional disparity is another indicator of unequal welfare provision among Chinese citizens.There are variations both within and between regions in welfare provisions due to central government’s decentralisation of social policy. The differences in the salary replacement rates of old age pensions between regions range from 40% to 80% (Wang, X.J., 2005).There is also a big gap in the amount of MSLS assistance between economically developed and less developed cities. In 2005, the level of the MSLS in Guangzhou was ¥330 in contrast to just ¥161 in Urumqi (Secretary of China Social Security Forum, 2006). Moreover, regional differences led to health inequalities between rich and poor areas. For example, the infant mortality rates in poor regions such as Qinghai, Guizhou and Gansu were three to four times higher than those in rich regions such as Beijing and Shanghai (Table 10.2). In terms of housing, some local authorities were more active in building LRH and also providing accommodation for migrant workers. In contrast, four cities at the provincial level and 145 cities at county level were not involved in any LRH projects at all (People’s Daily Online, 2007a). Disparities of financial power between and within regions could therefore shape the welfare opportunities of recipients in different localities. Welfare inequality in China is rooted in several institutional factors such as the HRS, the lack of accountability in bureaucracy and ineffective administrative and financial arrangements. As discussed in Chapter Four, the Chinese government implemented the tax-sharing system in 1994, defining the allocation of revenue and expenditure responsibilities between central government and local authorities. As a result of this new tax arrangement, central government’s share in total revenue collection rapidly jumped from 22% in 1993 to 57% in 1997 (Zhang, 1999).This means that during this period, local governments’ share in the revenue collection dramatically decreased by 35%. These changes brought tremendous financial pressures on lower levels of administrative units because there were no clear rules about the duties of each level of local government, nor was there a formula to regulate transfer payments from higher levels of government to lower ones. As a result, lower level governments have been assigned public work and social welfare duties without receiving sufficient funding – for example, benefits for laid-off workers of SOEs, compulsory education and family planning. To increase revenues, lower level governments levy different types of surcharges on social service users: for example, 70% of school daily running costs in rural areas of Gansu Province were financed by student fees and revenues generated by schools (Adams and Hannum, 2005). Many poor families found it difficult to pay for extra school charges, but the tax-sharing system ‘decentralised’ welfare responsibilities to lower level governments and ‘increased costs to individuals’ (Adams and Hannum, 2005, p 100). An OECD (2005) report stressed that the Chinese government needed to design a better system so that adequate resources could reach relevant administrations that provided public services.

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It should be noted that central government attempted to use a transfer payment scheme as a redistribution device for financing local public services, especially by providing extra financial assistance for poor counties (Zhang, 1999). For example, poor regions received additional financial support from central government to implement the MSLS, compulsory education and the NRCMS. From 1994 to 2003, central government transfers to local authorities increased from 2.3% to 4.8% of GDP (OECD, 2005). However, the existing transfer payment is still not strong enough to tackle geographical disparities (PTDRC, 2005, p 67). It was estimated that the year after the implementation of the tax-sharing system, transfer payments only accounted for 0.5% of central government’s budgetary revenue (Zhang, 1999). Due to low transfer payments, local governments in poor regions do not have sufficient resources to meet the welfare needs of their residents. Regional welfare disparities have therefore been partly caused by ineffective transfer payments from central government and partly by different economic development between local authorities. Psychological and social needs: collective surveillance and social segregation ‘Public naming and shaming’ is the most controversial issue in China’s social security system. During the time of the English Poor Law, workhouse residents were required to wear uniforms as a sign of living on state benefits. At present the British government is using a ‘name and shame’ strategy through AntiSocial Behaviour Orders (ASBOs), where offenders’ names and photographs are sometimes publicly displayed. Similarly, welfare recipients in today’s China are required to have their names, even photographs in some areas, posted in public places.As illustrated in Chapter Five, applicants for the MSLS, Five Guarantees and LRH were required to have their names and family details put on public notice boards. Moreover, their neighbours and friends were encouraged to comment on the eligibility of applicants. Apart from home visits, frontline workers could contact applicants’ employers to collect further information.These requirements were defended as an unavoidable step in China, given limited existing records of applicants’ financial details.Thus, the idea of ‘public notice’ has become a collective welfare surveillance action, preventing recipients from abusing public benefits. In order to avoid social stigma, many MSLS applicants in a region withdrew their applications after knowing their photographs would be put on public notice boards (Xinhua News Agency, 2006a). Such practices allowed the state to intrude into the privacy of individuals purely because they were living on public benefits. Furthermore, collective surveillance shamed poor people in public and it is likely that this discouraged some needy people from seeking official support. In particular, parents often feared that their children would be subject to discrimination if their family claimed MSLS (People’s Daily, 2002;Tang, 2002).‘Public notice’ is therefore a great barrier to poor people getting their welfare rights. Unfortunately, this practice has become a common procedure in China’s welfare administration. Its implementation reveals that the 203

Social policy in China

traditional authority of the CCP has been integrated into the operation of a new welfare regime in a mixed economy. The integration of traditional social control agents into China’s new welfare system is also evident from the use of village committees, SOs and RAs as frontline administration units for handling social security applications. All social security applications need to be submitted to these organisations where welfare staff, mostly volunteers, determine the eligibility of applicants.This suggests that social security management has been treated as a simply administrative task that can be handled by non-professionals. However, these volunteers often consider social security as charity, not as a welfare right of citizens (see Table 10.3). With their limited training and sometimes uncharitable views on public assistance, the effectiveness of the existing welfare staff in providing sufficient and correct information for applicants should be questioned. On the other hand, the use of these traditional organisations could be seen as the Chinese government’s quick solution to set up a low-cost public assistance scheme for tackling urban poverty. As for social integration, Chinese government policies have had mixed effects. The marketisation of housing segregated the rich from the poor and migrant workers from permanent urban residents. Low-income workers, unemployed people and migrant workers were forced to live in poor housing estates with few basic amenities (see Table 10.2). On the other hand, professionals, senior SOE workers and the rich could live in more comfortable housing. Social integration in cities was thwarted by the separation of housing settlements between various social groups (see Chapter Nine). Rich families were able to send their children to public schools with good reputations or to private schools. Poor families had limited choice over their children’s schooling. This segregated poor from rich children (see Chapter Eight). In the labour market, migrant workers were working in low-paid jobs and in dangerous environments, while permanent urban residents were able to get higher paid jobs in better working environments, creating employment segregation in cities (see Table 10.4).The marketisation of housing, the privatisation of education and the social exclusion of migrant workers therefore created various dimensions of inequality and segregation between different social groups within the population. Fulfilling caring duties: a cycle of deprivation Welfare arrangements in China only provide limited support for poor parents to meet the basic needs of their children.Although central government stressed in its circular that the MSLS should cover the fees for basic education for children, the existing low level of assistance means that poor families can hardly afford children’s basic education.After examining the quality of life of 2,354 poor people in five big cities,Tang (2003) reported that 77.4% of them were unable to pay for children’s education expenses. Similarly, among 565 MSLS families in 10 of China’s cities, only 7.6% were receiving educational subsidies from the government (Sun, 2005). In particular, children in rural areas or whose parents were low-income migrant 204

SOs and RAs are responsible for checking MSLS applications and providing advice for applicants. However, most staff of these two organisations were volunteers who received little training on social work and counselling (Tang, 2005). They also considered the MSLS as charity rather than the responsibility of the government. Those who applied for MSLS, Five Guarantees and LRH were required to have their names and family details put on public notice boards. Neighbours were encouraged to make comments on applicants for welfare benefits. This practice discouraged needy people from seeking public assistance (People’s Daily, 2002; Xinhua News Agency, 2006a).

SOs have established social security workstations in more than 95% of urban communities to provide services for unemployed workers. The RSCs provided a two- to three-year transitional period for laid-off workers to receive training before re-entering the open labour market. At the end of 2000, some 6 million workers were laid off from SOEs; 93.5% had entered an RSC, with 97.3% of them drawing a basic living allowance. As a result of services provided by the RSCs and other agencies, 4.4 million laid-off workers were re-employed in 2003 (Information Office of the SC, 2004). Thus, RSCs provided SOE workers with a much-needed opportunity for cognitive and psychological reorientation.

Mental health has long been a neglected area in China. Although psychiatric ailments accounted for around 20% of the burden of public health, the Chinese government only spent 2% of its medical budget on mental health services (Newsweek International Edition, 2006). There is only one psychiatric bed per 10,000 people and less than one psychiatric worker per 100,000 people (Chang and Kleinman, 2002). Because of high medical costs, about 70% of those with mental health problems do not seek treatment (Interfax Information Service, 2006).

There is a heavy emphasis on examination-oriented education in which school pupils face tremendous learning pressures. Some pupils who are unable to cope with the pressures have suicidal thoughts (Robertson, 2006). Central government proposed ‘education for quality’ in order to promote the holistic development of students. However, the examinationoriented culture is difficult to change (CCPCC and SC, 1999). Poorer university students are worried about tuition fees and rising living costs.

Limited data.

Social security

Labour

Health

Education

Housing

Note: Detailed evidence can be found in Chapters Five to Nine.

Psychological needs

Policy areas

Table 10.3:The extent to which welfare policies meet psychological needs

Welfare reforms and well-being

205

206

Because of low levels of assistance, social security recipients were unable to lead a normal social life, including fulfilling expected social customs. For example, 39% of poor respondents did not visit friends and relatives for the Chinese New Year and other festivals (Tang, 2003). Poor unemployed workers tried to avoid social interactions such as weddings and New Year engagements (Cook and Jolly, 2000, p 35). The practice of public notices stigmatises welfare applicants, widening the gap between the poor and the general public. Central government encourages officials to visit poorer people and give them gifts, especially during traditional Chinese festivals (SC, 1997; Information Office of the SC, 2004; Sun, 2005). The HRS forms a barrier to the integration of migrant workers into urban employment. There are three segregated labour markets in China: rural, urban and for migrant workers. Socially, migrant workers have been treated as second-class citizens. They retain their personal status as peasants according to their original household registration, no matter how long they live in the city (Wang, 1994). The government promised to provide farmers with vocational training and public employment services to help them to adapt better to the competitive market environment (SC, 2006b). As a result of the marketisation of health services, there is social division and segregation of healthcare. While poor people cannot access basic healthcare, the rich urban elite have their treatment at hospitals with better facilities (Blumenthal and Hsiao, 2005; see also the ‘Equal value’ section for details). Better-off families can send their children to good public schools by paying a one-off ‘golden handshake’ or to private and international schools. Children from poorer families, however, have limited choice but to go to poorer schools. Before 2003, most children of migrant workers were excluded from the mainstream public education system so that they could only attend privately run schools for migrant workers’ children. It was not until 2006 that they were given the same education rights as the children of permanent residents under the revised Compulsory Education Law (People’s Daily Online, 2006a). In Beijing, state schools will be given a ¥80 bonus for each migrant child they accept, and qualifying migrant schools have been given government subsidies (Beijing Review, 2006). Teachers in urban schools are required to spend a period working in rural schools to compensate for the inadequate rural education resources. In September 2006, for example, the Zhengzhou Education Bureau in central China began a one-year teacher exchange programme in which 646 rural and urban teachers swapped positions (Beijing Review, 2006). Housing stratification has been exacerbated by the marketisation of public housing, unequal distribution of housing benefits based on power and status of SOE workers and the exclusion of migrant families from accessing public housing. Housing segregation is common in big cities (Lee, 2000; Peng, 2006). For example, the middle classes in Beijing live in ‘circle three’; some special groups (famous actors and actresses and other high-income earners) in ‘circle four’; and low-income people outside the city in ‘circle five’ where housing prices are relatively low (Peng, 2006). Beijing residents who live in mixed housing areas lack communication and social support and feel isolated and insecure (Peng, 2006). In Wu Han City, only 9% of migrant workers would share their feelings with nearby urban people (Tian and Meng, 2005).

Note: Detailed evidence can be found in Chapters Five to Nine.

Housing

Education

Health

Labour

Social security

Policy area Social integration

Table 10.4:The extent to which the welfare system achieves social integration

Social policy in China

Welfare reforms and well-being

workers were excluded from formal education.The drop-out rate in rural junior high schools was nearly 40% (Xinhua News Agency, 2005). As a result of the marketisation of healthcare, social security recipients were too poor to pay for children’s treatment (Shanghai Star, 2004). As many as 44% of Le’s (2005) 1,085 rural respondents were worried about future personal or family illnesses and 22% worried about difficulties in paying children’s tuition fees. While struggling to meet survival needs, many poor families find it impossible to pay for children’s social activities. Only 6% of children living on the MSLS had pocket money (Sun, 2005). Existing welfare provisions therefore fail to address the needs of poor children in respect of education and medical treatment (see Table 10.5). Adams and Hannum (2005, p 119) found that poor children had ‘substantially lower chances of having health insurance, being enrolled [at school] and being in an age-appropriate grade than their wealthier counterparts’.This is because only 10% of poor children were insured for healthcare, in contrast to 30% of rich children. There were major gaps in school enrolment and grade-for-age between poor children and those from wealthier families (Adams and Hannum, 2005). It should be stressed that the return for investment in children’s education in China is big.The return for an additional year of education is 12% of income in the urban labour market (OECD, 2005).This implies that many poor children have been kept in a cycle of deprivation because of barriers to receiving compulsory and higher education. In recent years, central government has launched medical and education assistance schemes for helping poor children. A medical insurance scheme covering poor children and other deprived groups is being piloted.The scheme aims at providing financial support for poor families tackling serious illnesses. Chinese Premier Wen Jiabao (2007, p 20) announced in his 2007 government report:‘we will completely stop collecting tuition and miscellaneous fees from all rural students receiving compulsory education’. Also, central government agreed to invest ¥29.5 billion for a system of national scholarships and tuition assistance for university students between 2007 and 2008 (Wen, 2007, p 21).The same amount of money is expected to be contributed by local governments. These policies are a good starting point for addressing the key concerns of poor families, even though their effectiveness in breaking the cycle of poverty needs to be assessed in the future. Learning and development: a gradual accommodation of labour One of the special features of China’s enterprise reform is the establishment of RSCs. As discussed in Chapter Three, central government aimed to transform SOEs into autonomous economic entities. As a consequence, a large number of workers were made redundant. To provide a bridge between open employment and the skill deficiencies of laid-off workers, central government set up RSCs, giving a three-year transitional period for workers (see Chapter Five).Also, a wide range of training courses was offered for laid-off and unemployed workers in order to enhance their employability (see Table 10.6). Thus, the three-year grace 207

208

As Table 10.1 illustrates, unemployment benefits and the living allowance of the RSCs were too low. Therefore, unemployed parents had difficulty in meeting the social and educational needs of their children.

As illustrated in Tables 10.1 and 10.2, poor families found it difficult to afford medical treatment for their children as a result of the marketisation of health services. As a result of privatisation, 20 million children were unable to attend schools and half of the population, including many children, could not get medical care (Chan, 2003). It was reported that 70% of the 850,000 children dying annually in China suffered from respiratory infections and infectious and parasitic diseases, which were preventable and treatable (UN Health Partners Group in China, 2005). Migrant workers’ families were unable to access urban medical services, even some basic vaccinations (Biao, 2004).

Labour

Health

Poor families found it difficult to access LRH as some cities were not involved in this housing project. Also, many cities did not have detailed application criteria and procedures (see Table 10.1). Migrant workers’ families were excluded from all types of housing benefits so that they had to live in cheap and overcrowded housing lacking basic amenities such as toilets, kitchens and even tap water (see Table 10.2).

Note: Detailed evidence can be found in Chapters Five to Nine.

Housing

Education Prior to 2006, children from migrant families could not access local public education (see Table 10.2). All levels of local government use fee charges to increase education revenues. For example, the national average tuition fee of universities in 2005 was ¥5,000-¥6,000 a year, which was nearly equal to per capita annual income (¥6,200) (Southern Weekly, 2006). About 20% of students in colleges and universities had economic difficulties and 5-10% of them extremely serious financial problems (Ding, 1999). In 2007, the government promised to eliminate tuition and other fees for all rural pupils, easing the financial burden on 150 million rural households (Wen, 2007). According to the State Studentship Scheme in 2004, 5% of eligible students with special financial difficulties in every university could get ¥150 per month for 10 months per year (China Education Yearbook Editorial Committee, 2005). The government decided to set aside ¥9.5 billion in 2007 and ¥20 billion in 2008 to fund scholarship and assistance schemes for university students (Wen, 2007).

Recipients of the MSLS find it difficult to fulfil their caring duties. Sun (2005) found only 8% of poor families received education subsidies from the government. Also, Tang (2003) reported that 77.4% of poor respondents were unable to pay for school expenses; 18.4% even said that they would have to stop children’s studies because of financial difficulties. Many parents are forced to delay obtaining medical treatment for sick children or even to give up altogether due to poverty (Shanghai Star, 2004). The level of MSLS is too low to meet the social needs of poor children (Sun, 2005).

Social security

Policy area Fulfilling caring duties for children

Table 10.5: Fulfilling caring duties for children

Social policy in China

As illustrated in Table 10.5 and Chapter Seven, unemployed and low-income families found it difficult to afford their children’s education and social activities. In recent years, central government has aimed to provide free primary and secondary education for children of families living on Five Guarantees in rural areas and the ‘three-no’s’ in urban areas. The RSCs provide occupational training for laid-off workers. The Chinese government launched the ‘active employment policy’ to enhance the employability of unemployed workers. Government departments also provide training programmes, tax exemptions, commercial administrative fees and assistance with loans to help unemployed workers to set up businesses (Chan and Bowpitt, 2005). Special training programmes were implemented to help unemployed young people, especially secondary school leavers and fresh university graduates. To enhance the skills of workers, the Employment Promotion Law required governments above county level to support vocational training and employers to provide ‘pre-employment training, on-the-job training and reemployment training’ (Xinhua, News Agency, 2007c). In addition, government-run employment service agencies had to provide free services for job-seekers. Since the privatisation of healthcare and the government’s reduction of subsidies, hospitals and clinics tried to increase revenues by focusing on treatment-oriented and hospital-based services. Consequently, they paid limited attention to community-based services and health education. Very few village and township clinics or community health centres undertook health education (Cheng et al, 2005;Yu, 2005). The Chinese government ‘has not yet invested in public education regarding personal hygiene and public health practices’ (Blumenthal and Hsiao, 2005). The ‘two basics’ education plan launched in the 1990s effectively increased the number of people in education and reduced the number of illiterate people (ME, 2006). The number of illiterate people aged 15-50 reduced from 62 million in 1990 to 20 million in 2001. Overall, the illiteracy rate for those over the age of 15 decreased from 15.9% in 1990 to 6.7% in 2000 (Wei, 2002). From 1980 to 2005, the enrolment rate of primary school children increased from 93% to 99%. The enrolment rate of primary school children was 99% in 2005 compared with 83% in 1980 (China Education Yearbook Editorial Committee, 2005). Also, 95% of primary school graduates were able to study at junior higher schools (ME, 2006). The SC promoted vocational education. As a result, 45 new institutes were established to accommodate an extra 200,000 students (Bai, 2006). From 1990 to 2005, the total number of students enrolled in higher education dramatically jumped from 1,206,300 to 15,617,800 (ME, 2005). However, in recent years China has suffered a setback in illiteracy eradication. From 2000 to 2005 the number of illiterate Chinese people increased by 30 million and China’s share of the world’s illiterate population rose from 11.3% to 15.01% (China Daily Online, 2007a). There are as many as 200 counties in China who ‘haven’t popularised primary school education’ (China Internet Information Centre, 2007). Without continuing education, some regions suffered a re-illiteracy rate of 8% (Zhang, 2005). Limited data.

Note: Detailed evidence and sources can be found in Chapters Five to Nine.

Housing

Education

Health

Labour

Social security

Policy area Learning and development

Table 10.6:The extent of achieving learning and development

Welfare reforms and well-being

209

Social policy in China

period provided opportunities for workers to acquire new skills, helping them to be gradually accommodated into a competitive labour market. In addition, government departments launched measures to help unemployed workers to set up businesses such as training programmes, exemption from paying tax, commercial administrative fees and assistance with loans (see Chapter Five for details). However, poor families with limited resources, as revealed from the high drop-out rate of rural junior secondary schools, were denied full access to basic education (Cheng et al, 2004; see also Table 10.5). Also, health institutions put more emphasis on treatment than on health education and prevention.There were few full-time staff providing health education, and hospitals and clinics seldom set up a special budget for health education purposes (see Chapter Seven). Thus, human learning about health education and prevention was limited. Participation: the administrative absorption of dissatisfaction As all political power in China is in the hands of civil servants, members of the public in general and welfare recipients in particular have few opportunities to influence social policy. There are two common modes of participation, however: public hearings and administrative complaints.The government invites representatives to sit on some public meetings, seeking their views on public policies. For example, the Beijing Municipal Government held a public hearing about the proposed rise of natural gas prices in 2006 (Xinhua News Agency, 2006c). Also, welfare recipients are encouraged to voice their complaints to higher levels of administration (see Table 10.7). In particular, the public can make complaints about the malpractice of property developers and agents (MC, 2002). These methods of participation do not change the structure of power distribution in the Chinese system, however. Government officials can choose welfare issues for discussion and selectively listen to recommendations from public hearings. Without an effective accountability system, participants cannot force policy makers to change welfare measures. Also, administrative complaints do not guarantee fair judgements, due to the lack of independent committees for checking the standards of civil servants. In short, the present participation structure is only an administrative absorptive mechanism that allows the public to express dissatisfactions in a secure environment without challenging the government’s power base. Against this background, the effectiveness of public complaints in changing government policies was ‘open to the gravest doubt’ (Dicks, 1989, p 568). The lack of public participation has created considerable grievances among welfare recipients, and this has become a source of conflict between government and the public. In particular, many competing interests are involved in the process of land acquisition and redevelopment. Very often, farmers affected by land acquisitions have little opportunity for any influence on compensation and resettlement. As a result, many of them have been forced to accept unreasonable compensation levels, being resettled in a new environment where they found it 210

The levels of MSLS were completely decided by senior officials of the local governments. Social security recipients had little control over application procedures. Their names, family details and even photographs were posted on public notice boards (Xinhua News Agency, 2006a). Local administrative units even required applicants to attend public hearings in order to decide their eligibility for assistance (Xinhua News Agency, 2006b). In recent years, the Chinese government attempted to use administrative arrangements to encourage some degree of public participation. Firstly, local governments were asked to provide social security information to the public about such things as the levels of benefits, application procedures and feedback channels, and details of the relevant legislation. Secondly, applicants could express their views through administrative complaints. However, the results of complaints were handled by senior officials without being monitored by any independent bodies. Thus, applicants’ welfare rights were actually not institutionally safeguarded.

Workers had limited opportunities to shape government policies. The official labour organisation, the ACFTU, was caught between supporting central government’s reform on SOEs and safeguarding the rights of workers in enterprise transition. To some extent, the ACFTU acted in the interests of workers, being involved in labour legislation such as the minimum wage law, legislation on acceptable working hours and the Trade Union Law and the Labour Law (Ngok, 2000). Some degree of policy debate was encouraged by central government. For example, in 2006 a draft of the Labour Contract Law was released for public discussion.

In 2006, guidelines were published in order to ‘enhance communication between patients and medical professionals and establish a harmonious relationship between these two parties’ (MH, 2006b). The policy set a goal of implementing transparency in all medical institutions by the end of 2008. As a result, many hospitals published their medical charges and set up ‘suggestion boxes’ to collect patients’ feedback. Basically, health policies were mainly decided by officials of both central and local governments and senior managers of hospitals; patients had limited opportunities to directly shape health services through themselves or their representatives.

The government controls all education policies with limited participation opportunities for students, parents and education professionals. There was no public debate before the implementation of a policy that aimed at building world-class universities (The 985 Project). Although, in theory, legislation gives universities the autonomy to organise their own employment, teaching and research policies, in practice they are still controlled by government’s strict administrative regulations.

In 2002 central government set up a scheme through which the public could make complaints about the malpractice of property developers and agents (MC, 2002). Local governments provided few opportunities for families affected by urban redevelopment and rural land acquisitions to express their concerns. As a result of the construction work of the ‘Three Gorges Project’, 100,000 urban residents were put out of work and one million farmers became surplus labour. People were moved onto higher ground in the reservoir area or to remote places ‘regardless of how they felt about that or what happened to them after resettlement’ (Chen, 2006). Being excluded from the process of building the PHP, farmers were offered housing that was not suitable for raising livestock and storing agricultural tools (Bian, 2006). The Property Law of the PRC was passed in March 2007, which required local governments to pay for appropriate compensations, arrange settlements and provide social security benefits for families affected by land acquisitions (People’s Daily Online, 2007b).

Social security

Labour

Health

Education

Housing

Note: Detailed evidence can be found in Chapters Five to Nine.

Self-determination

Policy area

Table 10.7:The extent to which the welfare system enables self-determination

Welfare reforms and well-being

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difficult to restart a new life. It should be noted that the ACFTU, an official labour organisation, was able to express workers’ concerns and also to make suggestions on labour legislation (Ngok, 2000). However, as a government-funded organisation, the ACFTU found it difficult to tackle controversial issues such as reducing surplus workers and supporting the government’s enterprise reform. In particular, leaders of the ACFTU are not elected by workers and that poses a serious question about their accountability to the people whom they theoretically serve. Although central government attempted to make public services more transparent, as revealed from the publication of the Guidelines on implementing the transparency of all hospitals’ management in 2006 (MH, 2006b; see also Table 10.7 and Chapter Seven), the participation of welfare recipients in welfare policy was mainly limited to administrative complaints and public hearings.Tang (2001) found that only 37% of the 1,830 respondents believed that members of the public could affect government decision making.With little political power, welfare recipients had difficulty in making welfare administrators and decision makers accountable to the public and responsive to their demands. A just polity: the implementation gap The gap between policy objectives and policy implementation is the weakest part of China’s welfare administration. Some policies had very sound goals. For example, the original aim of the MSLS was to meet nearly all aspects of daily needs including food, clothing, housing and education for children (SC, 1999). In practice, the actual level was too low even to maintain physical functioning. The objective of the Five Guarantees has been set even higher, which was to provide recipients with a normal standard of living (SC, 2006a). In reality, only a minimal living standard was provided for recipients of the Five Guarantees, and some local governments deliberately did not release the real figures of eligible Five Guarantees households in order to reduce their social security expenditure (see Chapter Five). There is also a serious problem of non-compliance among local authorities regarding central government welfare policies (see Table 10.8). For example, the SC urged the pooling level of the old age pension scheme to be transferred from the city/county level to the provincial level (SC, 1998) and also required all urban employees and self-employed people to join the scheme. Unfortunately, a large number of workers still fell outside of social security protection. Due to the lack of coordinated mechanisms, workers found it difficult to transfer their contributions from one province to another province or even from one county to another county of the same province. As a consequence, migrant workers had to cancel their accounts so that they were unable to accumulate employers’ contributions. Politically, the existing mechanism cannot effectively monitor the welfare duties of officials: for example, the provision of mental health services at provincial level depends on ‘the enthusiasm and quality of the people involved’ because ‘Beijing 212

As workers have little political power, local governments follow a pro-capital principle and fail to effectively supervise employers. Thus, it is common for them not to follow labour laws and policies. The number of labour dispute cases increased from 19,098 in 1994 to 226,000 in 2003 (Qiao and Jiang, 2005). Also, industrial incidents have been a great concern in recent years. Local governments do not take effective actions against illegal and unsafe small coal mining operators. With limited supervision, China has a relatively high number of coal mine incidents. The State Administration of Coal Mine Safety reported that there were 1,066 coal mine accidents for the first half of 2007 in which 1,792 miners were killed (China Labour Bulletin, 2007). In recent years, the government has tightened up its inspection and supervision of labour relations. For example, 95% of local authorities in 2005 established special agencies for labour issues such as wage payment, child labour, labour contracts and social insurance payments.

More medical professionals have been trained, and registration ordinances have been passed to monitor the performance of doctors and nurses. The government has set a ratio of nurses to hospital beds in general wards of 0.4:1 and in intensive care wards of 2.5-3:1 (MH, 2005). The qualifications held by doctors are still low: only 14% received five years’ medical training and 26.7% completed 2-3 years’ medical education (Liu and Yi, 2004). Healthcare policies are made by fragmented authorities of different ministries of central government (Liu, 2006). There is little control over the practice of private healthcare. Hospitals abuse medical charges, asking patients to pay extra costs.

Educational malpractice and unauthorised fee collection are common practice. In 2002, the ME, in collaboration with local education authorities, organised 170,000 investigation groups that checked 145,000 primary schools and 41,000 junior secondary schools, discovering ¥420 million of unauthorised fees, of which ¥350 million had been returned (Liu, 2004). Some HEIs’ tuition fees exceeded the price ceiling set by the provincial governments (Bai, 2006). Some universities charge students for different items such as retaking courses, examinations and job introductions. The Chinese government has tried to improve the quality of teachers. Teachers in primary and junior high schools are required to upgrade their educational level to diploma and degree, while teachers and principals in senior high schools should have master’s degrees by 2010.

In the earlier period of housing reform, managers of SOEs abused their power by selling cheap housing for workers. Illegal land acquisitions and unreasonable compensation payments created numerous conflicts between local governments and the public. After examining land use in 15 cities between October 2003 and September 2004, the MLR reported that 53% of land acquisitions were actually illegal (China Internet Information Centre, 2006b). To tackle the problem of land acquisitions, central government passed the Property Law of the PRC to protects the rights of farmers (see Table 10.7). Since the late 1990s, central government has used various macroeconomic strategies to regulate housing prices. Moreover, local authorities were urged to encourage developers to build small and medium-sized housing for citizens, providing more ECH and LRH. Although central government adopted various administrative and financial initiatives to regulate housing prices, ‘local governments did not strictly follow the regulations due to various considerations concerning local interests’ (China Internet Information Centre, 2006a; see also Ng, 2006). Some local governments do not even have details on application for public rental housing (see Table 10.1).

Labour

Health

Education

Housing

Note: Detailed evidence can be found in Chapters Five to Nine.

Non-professionals and volunteers were working for village committees, SOs and RAs, handling social security applications (Tang, 2002; Qingdao Public Administration Institute Research Team, 2003). China still lacks comprehensive social security legislation to safeguard the rights of recipients. Welfare protection for the general public through circulars and directives issued by central and local governments is relatively weak. Non-compliance with central government policies is a major concern; many migrant workers were excluded from the old age pension insurance scheme.

Social security

Policy area A just polity

Table 10.8: Evidence on the degree of a just polity

Welfare reforms and well-being

213

Social policy in China

[the central government] has little leverage in ensuring that the provinces carry out national policy’ (Pearson, 1995, p 70). Also, a large number of local governments still failed to get involved in the provision of housing for poor people (see Chapter Nine). In addition, the widespread illegal land use meant that ‘local officials have plainly ignored the central authorities’ instructions’ (China Internet Information Centre, 2006b). Another problem was the abuse of power by senior government officials at the expense of the welfare of citizens.This included illegal land acquisitions affecting the livelihoods of farmers, and the inappropriate transfer of social security funds from local government accounts to personal accounts. It was estimated that at least ¥16 billion of social security funds have been misused since 1998 (People’s Daily Online, 2006c). Also, corruption in China has intensified, involving more senior CCP cadres (Wedeman, 2004).Although the Ministry of Supervision from central government and the provincial supervisory bureaux are responsible for monitoring the activities of civil servants, only 6% of guilty cases were handled by the legal system (Wedeman, 2004). Many cases were subject to mainly administrative punishments.Therefore, the effectiveness of the existing mechanism in regulating the power of civil servants is questionable. The existence of both the implementation gap and non-compliance is rooted in the structural problems of China’s polity and local administration.Very often, the lowest administrative units of local authorities had limited financial resources but were asked to bear numerous social, economic and welfare duties. Many township and village governments were in deficit, meaning that the provision of new welfare services was actually beyond their financial capacities (see Chapter Five). This partly explains the under-reporting of the number of eligible households for the Five Guarantees. Added to this, the operation of the legal system was not independent and was regulated by central government. Without an effective monitoring mechanism, it is difficult to challenge the welfare decisions of senior civil servants. Furthermore, there is a lack of comprehensive welfare legislation to defend the welfare rights of citizens or to hold local government officials to account. The existing welfare arrangements were established mainly through numerous administrative directives and circulars, and this type of legal base was too weak to support an effective and fair welfare system. Another important issue is that welfare staff only had limited knowledge and skills in relation to the implementation of welfare reforms. In the case of social security, frontline welfare administrators were mainly volunteers from neighbourhood organisations and representatives of rural committees (see Chapter Five).Also, the length of training for some medical professionals was inadequate to reach the standard common to developed countries. Only about 14% of medical practitioners completed a five-year course, and one quarter received only 2-3 years’ training (Table 10.8). Central government set up registration systems for nurses and doctors in 1995 and 1999 respectively. The efforts of central government and some local authorities to improve the quality of welfare professionals should be recognised. For example, the Shanghai 214

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Municipal Government recognised the status of the social work profession in 2003 (People’s Daily Online, 2003). Social work practitioners were also required to pass a professional test. The government has therefore been improving the training and qualifications of welfare workers, and more time is required to build a framework of high-quality welfare professionals in China, given the country’s long-term socioeconomic and political constraints. Scientific development, harmonious society and China’s social policy Data presented in Chapters Five to Nine reveal that the impact of economic reforms on the well-being of Chinese people is mixed. Because of higher government investment, more people now receive education, higher education in particular. Also, due to industrialisation and the introduction of the market economy, some categories of urban and rural residents are able to live in housing with better amenities. More importantly, the focus of both central and local governments since 1978 has been on developing the economy rather than on organising mass political movements. As individuals are allowed to choose occupations and participate in their own economic activities, they can use available opportunities to realise their potential and available resources to pursue a satisfactory life. On the other hand, the marketisation of healthcare and housing has enlarged the gap between the rich and the poor. Many poor Chinese citizens have lost any access to medical treatment, and have been forced to live in appalling accommodation, especially migrant workers in cities. Fundamentally, after the scrapping of communes and making SOEs independent entities, China’s new welfare system under ‘socialism with Chinese characteristics’ has been unable to meet the welfare needs of poor people. More importantly, the preservation of the HRS and central government’s preferential treatment of city residents have widened the welfare gap between urban and rural areas as well as between urban residents and migrant workers. In short, the marketisation of social welfare, combined with central government’s discrimination against rural residents, has made China a divided, highly exploitative and unequal society. Such a society became a breeding ground for the outbreak of the Tiananmen Square incident in 1989 as well as numerous other protests and demonstrations involving workers and farmers – groups who used to see the CCP as their protector. By maintaining social stability and re-establishing national consensus, the CCP, led by Chairman Hu Jintao, has recently strongly promoted scientific development and a socialist harmonious society (China Daily Online, 2007c). According to Hu, the concept of scientific development is ‘a people-oriented, overall coordinated and sustainable development’ (China Daily Online, 2007b). It seems that the Chinese government is attempting to correct its previous mistake of emphasising economic growth too much, which was expressed in terms of maximising GDP while neglecting the harmful effects of economic development on the working conditions of workers and the physical environment. In changing this trend, the Chinese government has studied the use of Green GDP to assess 215

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its real socioeconomic development. The National Bureau of Statistics and the State Environmental Protection Administration recently produced a report on China’s Green GDP (China Daily Online, 2007d).According to the report, China’s economy was hit by various types of pollution. For example, water pollution cost ¥286.3 billion, air pollution ¥219.8 billion and solid waste pollution and pollution accidents ¥5.7 billion (China Daily Online, 2006b). According to Hu, a harmonious society is ‘a democratic society under the rule of law, a society based on equity and justice, an honest and caring society and a stable, vigorous and orderly society in which humans live in harmony with nature’ (People’s Daily Online, 2006b). Obviously, a stable political environment is essential to China’s economic development and the continuation of the CCP’s administration. Thus, Chinese leaders understand that they need to address the concerns of the general public. As Chinese Premier Wen Jiabao (2007, p 10) pointed out: We need to pay closer attention to promoting social development and improving the people’s well-being.We must put people first, promote faster progress in social programmes, work energetically to solve the most practical problems that are of greatest concern to the people and most directly affect their interests, safeguard social fairness and justice, and ensure that all of the people share in the fruits of reform and development. The Chinese government understands the urgency of tackling social problems, rebuilding the trust of the general public. It also presents the public with a vision of ‘an overall well-off society’ (China Daily Online, 2007b). However, an unresolved issue is whether the existing polity dominated by the CCP can effectively launch welfare reforms for the benefits of the poor. Unlike western welfare states where conflicting interests between social classes have been settled through a democratic process, the Chinese government argues that China’s social development can be achieved under ‘socialist democracy’ (China Daily Online, 2007c).This means that the Chinese government, as pointed out by Chairman Hu, would ‘expand political participation channels for ordinary people, enrich the forms of participation and promote a scientific and democratic decision-making process’ (China Daily Online, 2007c). As the CCP always stresses that China should be under its administration, China’s socialist democracy would not comprise mass participation similar to that of western societies, but a manageable and restricted participation.This means that welfare progress in China will be relatively slow and the scale of improvement will be shaped largely by the wills of Chinese leaders as well as the balance of power among some privileged groups. This type of polity will also restrict China’s welfare to gradual improvements instead of rapid changes. In addition, welfare decisions are not necessarily based on the substantive results of pilot schemes but on their effects on the ruling groups. The impact of China’s polity on its social development has been revealed from 216

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the study of Green GDP. It was believed that ‘some local government and vested interested groups remain major roadblocks for implementing the [Green GDP’s] pilot system, which China needs urgently’ (China Daily Online, 2007d). It was reported that the National Bureau of Statistics had urged the State Environmental Protection Administration not to publicise the 2004 Green GDP report. This was because the findings of the report would be ‘a measuring stick to determine officials’ achievements’ that may threaten the career prospects of some local officials (China Daily Online, 2007d).Thus, the long-term development of China’s welfare system is unclear although there have been some signs of improvement under the administration of Chairman Wu and Premier Wen.

Conclusion China’s economic achievements since the economic reforms of 1978 should not be devalued or underestimated. In particular, the reforms were implemented against a context of chaotic social and economic conditions following the tragedy of the 10-year Cultural Revolution. On the other hand, after examining the extent of well-being in five key welfare areas, this book has, however, shown that China’s welfare reforms focused on the privatisation of public welfare and the localisation of welfare provisions that accelerated social divisions of welfare, threatening the equal value of citizens. Thus, the development of social policy over the past three decades, revealed from market-oriented welfare provisions, the exclusion of migrant workers from basic needs, and the welfare gap between men and women, shows that China’s traditional socialist welfare values centred on equality and human needs have been severely suppressed. There is an increasing dissatisfaction among Chinese citizens in such a divisive society. For example,Tang (2001, p 899), after analysing the attitudes of 1,820 respondents towards social issues in cities such as Shanghai, Guangzhou, Wu Han, Chongqing, Xian and Shenyuang, concluded that ‘satisfaction declined and reform opposition was on the rise.The hardest hit groups were manual workers, the unemployed and those in cities that did not receive preferential treatment from the central government’. As illustrated from Chapters Five to Nine of this book, poorer families, especially those in rural areas, as well as migrant workers, received inadequate support with public assistance, housing, education and health. On the other hand, urban workers received a wide range of social protections including old age insurance, medical insurance and discounts on the sale of public housing. It is evident that the HRS has helped maintain the urban–rural divide, protecting the privileges of permanent city dwellers. Also, regional disparities are rooted in unclear financial transfers and the poorly constructed division of welfare duties between higher and lower levels of government. It is therefore clear that without the dismantling of these institutional barriers, social segregation and inequalities will continue to prevail within China’s climate of economic reforms.

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Fundamentally, a more participatory polity and democratic governance are therefore required to distribute public goods in an open and fair manner. As a former senior cadre of the CCP pointed out: Political system reform must therefore be initiated, carrying forward democracy, implementing the rule of law, respecting the various rights enjoyed by the people, and guaranteeing that the masses can equitably enjoy the outcomes of economic restructuring. (Du, 2006, p 12) However, China’s democracy in the foreseeable future can only be developed under the concept of ‘socialist democracy’, led by the CCP. Thus, it is not impossible, but it will be a long way to go to see if China establishes itself to be a more democratic, open government, and build a welfare system that promotes common well-being in a relatively prosperous modern China. In other words, poor and disadvantaged Chinese people have had to endure a longer period of suffering because of this political reality. This is the human cost that should not be forgotten and that needs to be taken into account while assessing China’s economic achievements over the past three decades. References Adams, J. and Hannum, E. (2005) ‘Children’s social welfare in China, 19891997: access to health insurance and education’, The China Quarterly, vol 181, pp 100-21. Bai, L.M. (2006) ‘Graduate unemployment: dilemmas and challenges in China’s move to mass higher education’, The China Quarterly, vol 185, pp 128-44. Beach, M. (2001) ‘China’s rural health care gradually worsens’, The Lancet, vol 358, issue 9281 (http://social.no-ip.org/china/beijing%20China’s%20rural %20health%20care%20gradually%20worsens.pdf). Beijing Review (2006) ‘Educational reform aims to reduce urban and rural inequality’, 20 December (www.womenofchina.cn/focus/education/12242. jsp). Bian, J. (2006) ‘The Peasant Housing Project – warning on using “new village construction” for making money’, China Real Estate Market, vol 15, pp 14-19. Biao, X. (2004) Migration and health in China: Problems, obstacles and solutions, Singapore: Asian MetaCentre of Population and Sustainable Development Analysis, National University of Singapore. Blumenthal, D. and Hsiao, W. (2005) ‘Privatisation and its discontents – the evolving Chinese health care system’, The New England Journal of Medicine, vol 353 (http://content.nejm.org/cgi/content/full/353/11/1165). CCPCC (Chinese Communist Party Central Committee) and the SC (State Council) (1999) Decision on deepening the educational reform and promoting the education for quality, Beijing: CCPCC and SC.

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225

Index

Index ‘3-3-3’ system 104 ‘40-50 Project’ 107 ‘100-Firm Corporation Experiment’ 34 ‘The 985 Project’ 163

A active employment policy 101-2 Adams, J. 207 administrative complaints 210, 212 administrative regulations 49-50, 85 All-China Federation of Trade Unions (ACFTU) 52, 53, 54, 109, 110, 212 All-China Women’s Federation (ACWF) 52, 53-4 American International Assurance Company 133 Amnesty International 137-8 Anhui Province 29, 74, 84 Anielski, M. 16 Anti-Social Behaviour Orders (ASBOs) 203 Aristotle 20, 21, 23-4 autonomous regions 6, 7

B Bai, L.M. 164 Bankruptcy Law (1986) 32, 41 banks 108, 162 Basic Urban Resident Medical Insurance Scheme (BURMI) 125 Beck, W. 18 Beijing education 158, 160, 161, 164 healthcare 122, 124, 137, 138, 202 housing 182-3, 184-5 public hearings 210 urban villages 181 Beijing University 185 Bennett, F. 21 Bhutan 16 Biao, X. 138 big rice pot 94, 95, 97 Bloom, G. 10, 122 Blumenthal, D. 136 Bowpitt, G. 21-4, 107

C Central Commission for Discipline Inspection 47 Central Committee 46 central government 6, 7, 8, 9-10

tax-sharing scheme 55-6, 202-3 see also Chinese Communist Party; ministries; National People’s Congress; State Council Central Military Committee 46-7 Central Secretariat 47 Chan, A. 110 Chan, C.K. 21-4, 107 Chan, K.W. 9 Chang, D.F. 135, 139 ‘cheap treatment hospitals’ 123-4 Chen, A. 185 Chen, G. 187 Chen Xiwen 180 Cheng,Y.L. 136 Chengping Tian 79 children healthcare 130, 131, 207 migrant 138 social security 77-8 see also education policy; fulfilling caring duties China 6, 7 central and local government 6-7, 8 Chinese Communist Party (CCP) 6, 28, 45-6, 215, 216, 218 economic reforms 3-5, 30, 34-5 equality 82 labour policy 109 members’ housing 185 organisation 46-7 policy making 45, 47 ‘Three Representatives’ 37 Chongqing 181, 184 Chow, G.C. 35, 41 civil society 53 Cobb, C. 16 collectives 36 communes 28, 29, 41, 62 community health services 124, 136 community services 51 Company Law (1993) 97 Compulsory Education Law (2006) 33, 161-2 concentrated care 71 Confucius 21, 23-4 construction site dormitories 182 Contract Responsibility System (CRS) 31 Cook, S. 72, 75-6 Cooperative Medical Scheme (CMS) 116, 126-7, 131 corruption 83, 140, 163-4, 214 Credit Scheme for Property Enterprises and Agents 185-6 Cultural Revolution 3, 17, 135, 149, 171, 177 227

Social policy in China

D danwei see work units decentralisation 55, 196 education 149, 150, 151, 157, 165 healthcare 119 housing 185, 188 labour policy 111 regional disparities 202 Deng Xiaoping 3, 4, 27, 30, 34, 171 Dicks, A. 210 Diener, E. 17 discrimination 108-9 dispersed care 71 doctors 129 Dong, W. 133 Dong Huan 179, 186 Doyal, L. 20-1 Du, R. 218

E economic and comfortable housing (ECH) 39, 173, 174, 176, 177, 186, 188 economic reforms 27, 37, 41, 195, 217 1978-92 30-2 after 1993 34-7 background and ideologies 3-5 environmental effects 215-16 pre-reform economic system 28-9 social policy responses 32-3, 37-40 and welfare changes 29-30 and well-being 5-6 education policy 147, 165, 215 All-China Women’s Federation 53-4 before economic reforms 148-9 in economic reform era 33, 39, 149-56 and equal value 159-62, 199, 201 financial assistance 68-9 and fulfilling caring duties 204, 207, 208 government departments 52 and just polity 163-4, 213 and learning and development 158-9, 209, 210 migrant children 80-1 and physical well-being 197 poor children 77-8 and psychological well-being 156-7, 205 and self-determination 162-3, 211 and social integration 157-8, 204, 206 ‘education for quality’ 156-7 efficiency 150 employment see labour policy employment discrimination 108-9 Employment Promotion Law (2007) 109 employment service policy 102, 103-4 enterprise groups 36 equal value 22, 24, 217 228

education 159-62 healthcare 136-8 housing 183-5 labour policy 108-9 social security 78-82 and welfare reforms 198-203 ethnic groups 6 expenditure education 159, 162 healthcare 119, 120, 131, 132 housing 170-1

F false consciousness 17 farmers 179-80, 187, 210, 212 farming 5, 28, 29 Five Guarantees 62, 68, 86 healthcare 116 implementation gap 212 and just polity 83, 84 and physical well-being 74 in rural areas 70-1 and self-determination 82-3 foreign-invested enterprises 36 free market model 195-6 fulfilling caring duties 22, 24 social security 77-8 and welfare reforms 204, 207, 208 see also children

G Gang, F. 31 Gang of Four 3 Gansu Province 137, 202 Gao Qiang 123 Gasper, D. 15 GDP (Gross Domestic Product) 5 and well-being 15-16, 20 gender inequality 217 education 161 employment 109 old age pensions 79-80 General Secretary 47 Genuine Progress Indicator (GPI) 16 Gini coefficient 6 Gongrencum, Shenyang 181 Gough, I. 20-1 Government Health Scheme 116 Great Leap Forward 135, 149 Green GDP 216, 217 ‘grip the large and let go of the small’ 100 Gross National Happiness (GNH) 16 Gu, J.P. 100 Guangdong Province 124, 138, 151, 178 Guangzhou 124, 151, 182, 202

Index Guiyang City 75 Guizhou Province 137, 202 Guo, X. 180

H Hall, C. 21 Han Chinese 6 Hannum, E. 207 harmonious society 215, 216 health professionals 129-30, 137, 214 healthcare 115, 141, 215 after economic reforms 33, 39, 117-30 before economic reforms 115-17 and equal value 136-8, 199, 200 financial assistance 69 and fulfilling caring duties 207, 208 government departments 10, 51 and just polity 139-40, 212, 213, 214 and learning and development 135-6, 209, 210 and physical well-being 130-4, 197 poor children 78 and psychological well-being 134-5, 205 and self-determination 138-9, 211 and social integration 206 Hebei Province 122 Heilongjiang Province 106, 178-9 Henan Province 6, 125, 139 higher education 39, 159 before economic reforms 148 in economic reform era 152-4 financial assistance 68-9, 162 and psychological well-being 157 and self-determination 163 tuition fees 153, 164 work placement scheme 108 Higher Education Law (1998) 163 Hillier, S. 119 Hong, D.Y. 74 Hong Kong 7, 35, 195 ‘Hope Schools’ 53-4 hospitals 141 after economic reforms 117-21 before economic reforms 116, 117 ‘cheap treatment hospitals’ 123-4 discounted items for poor patients 133-4 and self-determination 138-9 Household Registration System (HRS) 8-9, 199, 215, 217 employment discrimination 109 and healthcare 141 and housing 185, 188 Household Responsibility System 29, 41 and housing 177, 178 ‘Households with Five Guarantees’ see Five Guarantees

housing policy 169, 188, 215 before economic reforms 170-1 during economic reform era 33, 39, 171-9 and equal value 183-5, 201 financial assistance 69-70 and fulfilling caring duties 208 government departments 10, 52 and just polity 186-7, 213, 214 and physical well-being 180-2, 197, 198 and self-determination 185-6, 211 and social integration 182-3, 204, 206 Housing Provident Fund (HPF) 39, 69, 173, 174, 177, 188 Hsiao, W. 136 Hu Jintao 215, 216 Hubei Province 84, 131 Hukou System see Household Registration System Human Development Index (HDI) 16-17, 20 human dignity framework 20-4, 196 human learning and development see learning and development

I illiteracy 158-9 immunisation 117, 121, 130, 138, 141 infant mortality 130, 137, 202 International Labour Office 65, 84, 85 iron rice bowl 94, 95, 97

J James, E. 74 Jiang Qing 3 Jiang Zemin 35, 37, 163 Jiangsu Province 125, 160 Jiaochangkou, Chongquing 181 Jilin Province 125 job creation 38, 112 job tenure 94, 95, 97 ‘jobs beneficial to the community’ 107-8 joint stock cooperative system 121 Jolly, S. 72, 75-6 just polity 23-4 education 163-4 healthcare 139-40 housing 186-7 labour policy 110-11 social security 83-5 and welfare reforms 212-15

K key schools 160-1 Kleinman, A. 135, 139

229

Social policy in China

L Labour Contract Law (2007) 54-5, 110, 111 labour contract system 96-7 labour disputes 111 Labour Health Insurance Scheme 116 Labour Law (1994) 38, 97-8 labour policy 93, 111-12 after economic reforms 31-2, 37-8, 95-7 All-China Federation of Trade Unions 53 anti-unemployment policies 101-4 before economic reforms 93-5 and equal value 108-9, 200 and fulfilling caring duties 208 government departments 50 and just polity 110-11, 213 Labour Contract Law 54-5 and learning and development 107-8, 207, 209, 210 market transition and unemployment 97-100 and physical well-being 104-5, 197 and psychological well-being 105-6, 205 and self-determination 109-10, 211 and social integration 106-7, 204, 206 surplus rural workers 100-1 laid-off workers 9, 99-100, 102, 104, 105 land reform 171, 179-80, 187 law 48, 49-50, 85 learning and development 22, 24 education 158-9 healthcare 135-6 labour policy 107-8 and welfare reforms 207, 209-10 Lee, J. 182, 185, 187, 188 Leisering, L. 63, 66 Leung, J. 29 Lianyu Chen 83 Liaoning Province 106, 138 life expectancy 130 lifelong employment 94, 95, 97 Lilong houses 182 limited liability firms 36 Lin Biao 3 listed companies 36 Liu, J. 31 Liu, X. 69, 116, 121, 122, 132, 136-7, 140, 141 Liu,Y. 119, 139, 140 loans 108 local government 6-7, 8, 10 education 150 healthcare 117, 118, 119, 120, 126-7, 128 housing 173, 186-7, 188 just polity 214 labour policy 111 MSLS 72 non-compliance 84, 212 tax-sharing scheme 55-6, 202-3 230

localisation 33, 55-6, 196 education 154, 157, 160 Five Guarantees 71 healthcare 118, 126 housing 171, 176-7 Logan, J.R. 185 Low Rental Housing (LRH) 39, 69-70, 74, 176-7, 186 regional disparity 202 and self-determination 83 Lu, X. 95 Luo Yang City 139

M Macao 7 Mao, Z. 131 Mao Zedong 3, 28, 148-9 marketisation 40, 55, 217 education 149-50, 163, 165 healthcare 119-20, 215 housing 169, 171, 172, 175-6, 177, 215 labour policy 97-100, 109 welfare system 199, 202 maternal mortality 130, 137 Megone, C. 21 Meng, C.H. 183 Meng, Q. 69, 119, 120, 121, 122, 129, 131, 133-4, 138 mental health services 135, 212, 213 migrant workers 5-6, 8-9, 78-9 construction 52 education 157-8 healthcare 137-8 housing 181-2, 183-5, 188 labour policy 106-7, 111 social security 79, 80-1 welfare exclusion 199, 204, 217 minban education 154 Minimum Standard of Living Scheme (MSLS) 38, 67-8, 85-6, 102, 198 implementation gap 212 and just polity 83, 84-5 and physical well-being 72-3 and psychological well-being 75 public notices 203 regional disparities 81, 202 in rural areas 70, 81 and self-determination 82 mining accidents 111 ministries 48-9 Ministry of Civil Affairs (MCA) 10, 50-1, 173 Ministry of Construction (MC) 10, 52, 176, 186, 198 Ministry of Defence 139 Ministry of Education (ME) 52, 163, 164 Ministry of Finance (MF) 10, 49

Index Ministry of Health (MH) 10, 51, 116, 117 health professionals 129, 130 psychological distress 134-5 rural medical care 126 and self-determination 138, 212 Ministry of Labour and Social Security (MLSS) 10, 50, 51, 52 Labour Contract Law 54 labour policy 109 old age pensions 81 welfare administration 85 Ministry of Land and Resources (MLR) 10 Ministry of Mining 139 Ministry of Railways 139 Ministry of Supervision 214 monetary policy 101 Moreton, M. 118 municipalities 6, 7 Murie, A. 178, 179 mutuality 21, 22

N Nann, R. 29 National Building Committee 177 National Bureau of Statistics 216, 217 National Congress 46-7 National People’s Congress (NPC) 9, 45, 47-8 community health services 124 HRS 8 labour policy 109 policy making 47-8 National Social Security Fund 10 New Rural Cooperative Medical Scheme (NRCMS) 39, 127-9, 141 non-compliance 84, 212, 214 non-state education 154-5 nurses 129

O occupational inheritance 94 OECD 202 old age pensions 32, 85 and equal value 199 government departments 51 malpractice 83 migrant workers 79, 80-1 non-compliance 212 regional disparity 202 rural areas 64, 66-7, 78 urban areas 62-4, 65, 73-4, 78, 86 women 79-80 organised dependence 95, 105

P Pan, Z. 185 participation see self-determination ‘Patriotic Health Campaign’ 117 Pearson,V. 212, 214 Peasant Housing Projects (PHPs) 178-9, 186 peasant workers see migrant workers Peking University 163 Peng, J.P. 183 pensions see old age pensions People’s Republic of China (PRC) 6, 7 Perry, E. 95 Phillips, D. 19-20 Photius Coutsoukis and Information Technology Associates 181 physical well-being 22, 24 healthcare 130-4 housing 180-2 labour policy 104-5 social security 72-4 and welfare reforms 196-8 Pingan Insurance Company 133 policy making 45, 56 Chinese Communist Party 47 government departments 50-2 Labour Contract Law 54-5 labour policy 109 National People’s Congress 47-8 other actors 52-4 State Council 49-50 Politburo 47 Politburo Standing Committee 47 pollution 216 poverty 51, 67, 86 preventive care 116-17, 130, 131 primary education 150-1, 159 private enterprises 31, 36, 40 private property 5, 28, 171-2, 177, 180 privatisation 10, 33 education 155 healthcare 118, 121, 122-3, 126, 131, 140 housing 171, 185, 188 Property Law (2007) 37, 180, 187 psychological well-being 22, 24 education 156-7 healthcare 134-5 labour policy 105-6 social security 75-6 and welfare reforms 203-4, 205 public hearings 210, 212 public notices 68, 70, 71, 75, 76, 203-4

Q Qi, H. 28 Qian,Y. 33

231

Social policy in China Qinghai Province 137, 202 quality of life see well-being

R rationality 21 Re-employment Service Centres (RSCs) 9, 38, 102, 103-4, 105, 207 regional disparities 81, 202, 217 Regulation on Unemployment Scheme 38 Republic of China (ROC) 7 Resident Associations (RAs) 68, 75, 84, 204 rural areas 215, 217 economic reforms 29 education 148-9, 157, 159-60 healthcare 33, 116, 117, 118, 119, 121, 126-7 housing 177-9 HRS 8-9 labour policy 106 land-losing farmers 179-80 New Rural Cooperative Medical Scheme (NRCMS) 39, 127-9 old age pensions 64, 66-7, 74 pre-reform economic system 28, 29 social security 62, 70-1, 78, 81, 86 surplus workers 32, 98-9, 100-1 welfare provision 6, 10, 29, 40, 41, 198-9

S Saunders, P. 79, 80 SC see State Council scientific development 215-16 secondary education 150, 151-2, 159 self-determination 22, 24 education 162-3 healthcare 138-9 housing 185-6 labour policy 109-10 social security 82-3 and welfare reforms 210-12 self-employment 108 Shandong Province 84-5, 121 Shanghai community health services 124 education 160 hospitals 140 housing 170, 174-5, 179, 182 infant mortality 137, 202 labour policy 107-8 maternal mortality 137 medical costs 69 migrant worker housing 183, 184-5 MSLS 51, 67 pregnant migrant women 138 RSC 103 self-determination 82

232

social workers 214-15 welfare administration 85 shareholding enterprises 36 Shen, J. 119 Shenyang 181, 184 Shi, G.Q. 75 Shi, S.H. 67 Shi, Z.X. 85 Shibanpo, Chongquing 181 Sichuan Province 6, 76, 106, 160 small-scale loan policy 108 sociability 21 social cohesion 19 social empowerment 19 social inclusion 19 social integration 22, 24 education 157-8 housing 182-3 labour policy 106-7 social security 76-7 and welfare reforms 204, 206 social pooling 122, 123 social quality 18-19, 20 social security 11, 40, 61, 85-6 administration 204, 214 after economic reforms 38, 62-71, 97, 102 before economic reforms 62, 95 and equal value 78-82, 200 and fulfilling caring duties 77-8, 208 and just polity 83-5, 212, 213 and learning and development 209 and physical well-being 72-5, 196-8 and psychological well-being 75-6, 205 and self-determination 82-3, 211 and social integration 76-7, 206 socialisation of social welfare 10-11 see also privatisation socialism 4, 40 education 148 healthcare 117, 119 labour policy 93-4, 95 socialist democracy 216, 218 socialist market economy 4, 34, 35 socioeconomic security 18 Solinger, D. 99 Soviet Union 149 special administrative regions (SARs) 6, 7 ‘Spring Bud’ 53-4 Standing Committee of the NPC 45, 47-8, 54, 109, 110 State Bureau of Taxation 10 State Council 6, 45, 48 education 158 healthcare 39, 122, 126, 127-8 housing 39, 170, 171-2, 173-4, 176, 177-8 labour policy 96-7, 109 migrant workers 107

Index old age pensions 32, 62, 63, 64, 212 organisation 48-9 and policy making 49-50 private enterprises 31 and social integration 76-7 social security 40, 61, 68, 71, 82-3, 86, 198 tax-sharing scheme 137 unemployment insurance 32, 102 State Environmental Protection Administration 216, 217 state-owned enterprises (SOEs) 5, 28, 36, 40, 41, 95 economic reforms 29-32, 34-7, 96-7 healthcare 33, 116, 122, 141 housing 170, 174-6, 177, 188 laid-off workers 9, 99-100 pensions 32, 62-3, 64 RSCs 38 social security 32, 62 Street Offices (SOs) 68, 70, 75, 107, 204 subjective well-being 17-18, 20 suicide 134-5, 156, 157 Sun, L. 79, 80 Sun,Y. 72, 77, 78

T Taiwan 6, 7 Tang, J. 70, 76, 77 Tang, S. 10 Tang, W. 212, 217 Tang Sha Town 178 Taopu Township, Shanghai 183 tax-sharing scheme 55-6, 137, 202-3 teacher training 155-6 ‘Ten Million in Three Years’ 38 ‘Three Gorges Project’ 187 ‘three-in-one’ 96 ‘three-no’s’ 68, 70-1 ‘Three Representatives’ 37 ‘Three Security Lines’ 38, 102 Tian, G.H. 183 Tian, X.B. 103 Tibet 137 townships 7 trade unions 53 see also All-China Federation of Trade Unions (ACFTU) Trow, M. 153 Tsinghua University 163 tuition fees 153, 163, 164, 207 ‘two education systems’ 148

U UNDP 9, 16-17 unemployment 32, 37-8, 93, 95-6, 97-9, 112

laid-off workers 99-100 policies 101-4 surplus rural workers 100-1 ‘Three Security Lines’ 38 welfare and training 107-8 unemployment insurance 32, 102-3, 105 universities see higher education urban areas 215, 217 Basic Urban Resident Medical Insurance Scheme 125 education 148-9, 157, 159-60 healthcare 115-16, 117-19, 122-3 housing 171-7 labour policy 106 MSLS 67-8 old age pensions 62-4, 65, 73-4 pre-reform economic system 28-9 social security 86 welfare provision 6, 10, 29, 41, 198-9 urban villages 181 Urumqi 202

V van Berkel, R. 21 Veenhoven, R. 17, 18 village committees 71, 178, 204 vocational education 152

W wage system 94, 95, 97 ‘waiting for employment’ 32, 97 see also unemployment Walder, A.G. 95, 105 Walker, A. 18 Wang, D.W. 73 Wang Guangtao 169 Wang Hongwen 3 Wang,Y.P. 178, 179, 181, 182, 183, 184 Wang,Y.Z. 100 Wedeman, A. 34, 36 Wei, M.H. 158-9 Wei,Y. 187 well-being 15 during welfare reforms 196-217 and economic reforms 5-6 education 156-64 GDP and alternative measurements 15-16 healthcare 130-40 housing 180-7 Human Development Index 16-17 human dignity framework 20-4 and labour policy 104-11 Phillips’ quality of life approach 19-20 social quality 18-19 and social security 71-85

233

Social policy in China subjective 17-18 Wen Jiabao 187, 207, 216, 217 White,Y. 9, 66 women All-China Women’s Federation 53-4 education 161 employment discrimination 109 migrant 138 old age pensions 79-80 Wong, L. 4, 10, 11, 55 work placement scheme 108 work units 28-9, 94-5, 97 healthcare 116 housing 170, 174-6, 185, 188 social security 62 World Bank 9, 19, 66, 74, 116, 141 World Health Organisation 117, 136, 139 Wu, F. 170, 175 Wu, J. 33 Wu, L. 75 Wu, W. 182, 184-5 Wu Yi 124 Wu Han City 72-3, 183, 187 Wu-Hen Administration 106-7

X Xiagang 9, 99-100, 102, 104, 105 Xiang, H. 74 Xinjiang Province 123

Y Yantai City 172 Yao Wenyuan 3 Yi,Y. 69, 116, 121, 122, 132, 136-7, 140, 141 Yu, G.Q. 136 Yunnan Province 178

Z Zax, J. 176 Zhang Chunqiao 3 Zhejiang Province 125 Zhejiangcun, Beijing 181 Zheng Han 82 Zhiyuan, C. 9, 34 Zhong,Y. 7 Zhou, J. 154 Zhu, J. 175-6 Zhu Rongji 99-100, 176

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