The Economy of China
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The Economy of China

Linda Yueh

The emergence of China since 1979 has been a hallmark in the global economy, not only in the past but also in this century. This comprehensive book provides an analytical view of the remarkable economic development of the most exciting economy in the world.
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Chapter 9: Social Coverage: Education, Pensions, Health System and Poverty

Linda Yueh


* 1. INTRODUCTION One of the key challenges confronting China as it proceeds with marketoriented reform is how it addresses the issues surrounding social coverage. Central to this is the high savings rate as insecurity over health, pensions and education has stymied consumption, which has fallen from 50% of GDP in the late 1980s – close to the share found in market economies – to around 35% in the late 2000s. Social securities were provided as part of the employment package in state-owned enterprises (SOEs) and these have proved problematic to reform. With the dismantling of the previous system, social securities will need to be shifted from SOEs, which had the task of providing welfare on behalf of the state, to a direct system run by the state. By so doing, China will begin to remove the ‘multi-tasking’ role of SOEs that has impeded their reforms, as discussed in Chapter 3, as they have had not only to maximise profits but also to achieve other aims such as maintaining social security and employment (Bai et al. 2000). The maintenance of lifetime employment with such in-kind benefits generated the term ‘iron rice bowl’, to describe employment in urban China. The dismantling of this system, sometimes referred to as the cracking of the ‘iron rice bowl’, is essential to improving the competitiveness of enterprises, as China enters a more marketised era. The challenges in the labour market were discussed in Chapter 4. Finally, no assessment of China can overlook the remarkable reduction in poverty over...

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