Impact of the crisis on China
China is less affected by the financial crisis due to its more closed financial system. But the slowdown of the world economy and sinking demand for goods from many of its trading partners have a major negative effect on Chinese economic growth in general and on the export oriented industries in particular. (See more)
Crisis responses in general
The Chinese government believes that increasing government spending is the most active, direct and efficient way to expand domestic demand, and economists believe China's 2 trillion US$ foreign reserves current-account surplus and budget surplus offers the government lots of room to do so. In November 2008 a 4 trillion CNY (585.5 billion US$) stimulus package was announced. Additionally, the premier also proposed a budgeted fiscal deficit of 950 billion CNY (139 billion US$) for 2009, a record high in six decades and nearly three times over the last record of 319.8 billion CNY set in 2003. The deficit accounted for nearly 3 percent of the gross domestic product (GDP). (See more)
Social security and the crisis in China
China has established a social security system in the 1980s and gradually worked at its improvement. Although, coverage of the urban population has increased most of the rural and rural migrant workers are still not covered. The overall system is characterized by low benefits, a narrow scope of coverage, an urban-rural divide and the fragmentation of various schemes. At the same time the population is ageing rapidly, urbanization is accelerating, emplyoment is diversified and the distribution of income is uneven. Thus, there are number of challenges to the social security system of China even without the crisis. (See more)
- Pensions for the rural population
- Protection for rural migrant workers
- Anti-poverty programme enlarged
- Health care system reform
- Measures for the long-term sustainability of the social security fund
Conclusions
International experience shows that economic crises are the time to expand the coverage of social security, China is on the right track. Compared to 2008, the state budget allocated to social security increased by CNY 43.9 billion or more than 17 per cent. Given the urban-rural divide of the Chinese social security system, it should be seen as a step into the right direction that pensions are gradually extended to rural and to migrant workers who have not been sufficiently insured so far. Similarly, the extension of health coverage is positive development.
While numerous exemptions from social security contributions and taxes have been made for employers, it is especially crucial that China, takes measures that aim at the long-term sustainability of its social security fund. Social security system can be an important pillar to stabilise the society, to stimulate domestic demand and to promote economic growth, this may be proved again by the case of China in the current economic crisis.
Página actualizada 2010-01-15 por
