Eva Cheng
Although only a small fraction of China's numerous protests in the last decade have been documented by media, from those reports we have, the willingness of aged pensioners to defend their rights stands out.
According to a 2002 China Quarterly survey, of the 62 workers' protests reported between 1996 and April 2001 in the People's Daily, Workers' Daily, the New York Times, the Washington Post and AP News Service, 42% related to pensioners' grievances.
On January 12, Radio Free Asia reported that more than 1000 retired workers from the state-owned China Petrochemical in southern China have protested repeatedly since December 2003 against attempts to cut 10% of their pension. The cut was contemplated despite the company's good financial shape.
Other pensioners in China have sustained much more severe attacks in recent years. On March 28, 2002, for example, the BBC reported that a Beijing car factory had failed to reimburse the medical bills of 100 of its retired workers for three years.
The Legal Daily reported on January 28, 2001, that pensioners in the north-west province of Ningxia received only 4.5 months of pension in 2000. The Social Welfare Bureau revealed in early 2001 that a third of the Ningxia firms that refused to pay their pensioners were actually capable of paying, at least in part.
Since collectivisation in the 1950s, most workers in urban areas were employed by state firms that paid them a token wage after provision in kind of essential needs such as housing, medical care, education, childcare and an age pension.
Privatisation impact
But with the so-called enterprise reform underway since the mid-1980s, most state firms were privatised or reoriented to profit-making. As a consequence, they have not been eager to honour pension obligations, and many are simply not able to do so, leaving the livelihood of millions of pensioners under constant attack.
Since the cash component of a worker's wage was minimal before the "enterprise reform", most workers don't have enough savings to plug the shortfall now in their age pension. China's pension is also weakly indexed to protect against inflation.
Meanwhile, labour contract were introduced in the mid 1980s and applied widely in the 1990s to engineer a whole new basis for employment, oriented towards maximising profit rather than meeting workers' needs. The provisions in kind were progressively withdrawn, theoretically compensated by a rising cash wage. The compensation, however, is never complete nor for long, and is vulnerable to inflation.
In September 2001, the Chinese Ministry of Finance's Zhai Fan and Deutsche Bank's Ma Jun gave a presentation on pension reform. According to this, since 1986, contractual workers in state firms have had to make individual contributions to their retirement schemes. "Pooling" of the schemes across different enterprises on a municipal level had been in place since 1986.
In 1991, Zhai and Ma explained, all workers had had to start contributing to their pension to add to the enterprise's contribution. In that year, Beijing also outlined a vision of a three-tier pension system: with mandatory, supplementary and optional components, funded by the workers and/or their employers.
In 1995, the State Council offered two pension scheme designs for the municipal and prefectural governments to choose from. However, preoccupied by the local authorities' desire to retain control of local pension resources, they produced hundreds of hybrid schemes, resulting in a fragmented and unsustainable pension regime.
This led to Beijing's 1997 effort to unify the pension system, prescribing a "dual pillar" approach to combine social pooling and individual accounts. The first pillar was to be financed entirely by enterprises, costing 13% of their wage bill. The other pillar was to be financed by contributions by individual workers and their enterprises, at 8% and 7% respectively of a worker's wage.
Money 'borrowed'
However, in Zhai and Ma's assessments, the 1997 scheme "largely failed" because money in the designated individual accounts was "borrowed" to fund ongoing pay-outs from the first pillar. According to the Ministry of Labour and Social Security (MLSS) estimate, 199 billion yuan (A$34.7 billion) was "borrowed" illegally in this manner in 2000. For all practical purposes, the accounts are emptied, undermining workers' confidence in the security of their contributions and eventual payout.
Enterprises have also failed to comply with their assigned pension contributions. Non-state firms are the worst offenders, although the problem is widespread. In Zhai and Ma's assessment, "many local pension pools are financially bankrupt".
To bail out these schemes, the government is piling more subsidies upon them. According to deputy minister of finance Lou Jiwei, quoted in the winter 2002 issue of Cato Journal, such fiscal subsidies doubled from 1997 to 10 billion in 1998, doubled yet again to 20 billion yuan in 1999 and over 40 billion yuan in 2000, before stabilising at more than 40 billion yuan in 2001.
In the name of finding new resources for pension and other social security expenditure, Beijing decreed in 2000 that companies raising funds from stock market listings must include the sale of "state-owned shares" equivalent to 10% of the proceeds from that listing. It also specified that the 10% revenue should be surrendered to a newly created National Social Security Fund (NSSF). Up until then, "state-owned shares" had to constitute at least two-thirds of all shares of listed companies in China and couldn't be sold.
The move certainly has the effect, and probably the intention, of reducing the popular resistance to the privatisation of more state firms.
In the name of enabling it to improve its investment return, the NSSF acquired the right to invest in the stock market in June 2001. Within a month, it invested in 300 million shares in the Sinopec state oil firm's stock market listing. But according to the July 7, 2003, People's Daily, the NSSF sustained "huge losses" from that investment.
China's pension crisis is very much a product of Beijing's pro-capitalist "reform". Workers' pension entitlements are deferred compensation for their contributions to production. It was on this basis that workers accepted a small cash wage. Any attempt to reduce, erode or forfeit that pension entitlement is nothing less than theft from those retirees.
The aging of China's population and the rising ratio of retirees to current workers puts pressure on pension resources, which will increase in the coming decades. However, the urban pension crisis so far has been caused more by the overhauling of China's state enterprises away from a needs-oriented remuneration approach in favour of maximising profits.
The number of China's state pensioners jumped sharply after 1978, when the eligibility requirement was halved to 10 years' of state employment. This move was to encourage early retirement in order to free up jobs for younger workers. State firms often allow their older workers to retire early in order to pass their job, or the promise of another job, onto their children. So the pension crisis is also partly a result of measures to mitigate China's growing unemployment problem.
The ratio of state and-urban-collective workers to pensioners deteriorated from 30:1 in 1978 to 13:1 in 1980. That ratio has not improved since and was made worse by another two waves of early retirement — in the early 1990s and after 1998. Both included attempts to broaden the pension pools. Yet pools covering younger workers are reluctant to join with pools that have more older workers.
As the Cato Journal article observed, "the unwillingness of municipal [pension] pools to merge with each other has strictly limited pooling at the provincial level", magnifying the problems of small pension pools that have a high proportion of older workers.
Rather than looking for a more socialised approach to resolve China's pension crisis, the World Bank has urged Beijing to squeeze workers harder.
In its 1997 series China 2020: Pension Reform in China, the World Bank argues that China's existing pension provision is too generous and advocates "all publicly supported benefits should be kept low enough to keep some pressure on the elderly to seek gainful employment after retirement, and some pressure on the extended family to provide economic ... support to the elderly".
From Green Left Weekly, August 18, 2004.
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