At a July 10 meeting, the State Council – China’s cabinet – decided that it will implement nationwide the policy to transfer 10 percent of a State-owned stake in State-owned enterprises (SOE) and State-controlled enterprises and financial institutions to the national social security fund and related local recipients. They enjoy, among other rights, returns on the investment.
China has since last year taken steady steps to lower the social security contribution burden on companies. Yet as its population keeps ageing and its social security payment is bound to rise, the public has grown concerned about how to guarantee balanced social security income and spending, and a steady increase in social security level, Yu Ping, a commentator, wrote for
The Paper.
It is imperative for it to open more sources funding social security, he suggested. While the government needs to increase its input and expand social security’s share in fiscal expenditure, transferring State-owned capital is another important and feasible policy, he noted.
The capital is owned by all citizens and SOEs have also used many of the resources that should have been owned by the society at large in their development, so letting all nationals share their fruits is justified. In addition, Chinese SOEs have, because of their preferential policies, reaped high profits, and during the reform of SOEs in the 1990s, many of them shed a lot of workers – along with it the obligations to provide for them in their old age, Yu said.
But to actually implement it is extremely difficult, he warned. Two decades ago, a discussion on the topic had already begun, but progress has been slow since. An official once admitted that the discussion on what was to be transferred and how to transfer it was not complete. A recent report on the results of the policy’s trial by the State Auditing Administration showed that by March 2019, 113.2 billion yuan (US$16.5 billion) in State-owned assets in 23 central SOEs was transferred, less than the planned 10 percent.
The State Council’s latest statement injected a strong impetus to the process, he noted. This will not only alleviate pressure on social security payments, but also improve the shareholding structure of SOEs, providing a chance to reform their governance.
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