Insurance coverage reform to spice up public welfare - Opinion

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Ma Xuejing/China Each day

 

The State Council, China’s Cupboard, just lately determined to switch 10 p.c fairness shares of State-owned enterprises and monetary establishments to the Nationwide Council for Social Safety Fund. A pilot program for such transfers will likely be launched in some central SOEs by the tip of this 12 months, and steadily prolonged to different SOEs.

Beneath sure circumstances, the NCSSF might set up a pension fund administration firm to independently use the transferred property. The council can obtain solely equities and earn dividends on them however can not participate within the administration of the SOEs or monetary establishments involved.

That is the third spherical of reform aimed toward transferring SOEs’ property to the NCSSF since 2001, when the central authorities first determined to cut back its holdings in SOEs to lift funds for the NCSSF. The second spherical of reform was launched in 2009.

However the reform this time is greater, as a result of the primary two rounds of share transfers associated solely to partial IPO shares or extra shares.

The central authorities has transferred the shares of SOEs and monetary establishments to the NCSSF a number of instances to slim the widening hole between the social safety fund and growing monetary strain in recent times because of the growing older inhabitants. As an example, in 2014, the nationwide premium for city staff’ primary pension insurance coverage was 2.04 trillion yuan ($308.3 billion), whereas the old-age pension was 2.18 trillion yuan. In 2015, the annual total premium elevated to 2.3 trillion yuan, however the pension quantity elevated to 2.58 trillion yuan. And final 12 months, the annual total premium rose to 2.68 trillion yuan, however the pension quantity soared to three.19 trillion yuan.

Up to now three years, the expansion charges of nationwide pension insurance coverage premium had been a lot decrease than these of old-age pension, indicating an ever-increasing fiscal subsidy for pension.

Established in 1997, China’s primary pension insurance coverage system for city staff is totally different from that of Western international locations, which was carried out after World Struggle II, as a result of in China it’s used to pay old-age pension to retired staff, most of whom did not pay any pension insurance coverage premium earlier than. In some international locations, comparable to america and Canada, the essential old-age pension insurance coverage fund did not need to bear the historic burden like China does.

The latest doc issued by the State Council says the aim of transferring State-owned property on this spherical of reform is to bridge the hole in pension funds, with a purpose to guarantee equality between totally different generations of staff.

The switch of State-owned property to the NCSSF will assist scale back the monetary and premium burden on these paying pension insurance coverage premium at present. The present quantity of State-owned capital is 147 trillion yuan. If we deduct the property of some particular SOEs, State-owned establishments comparable to public welfare-oriented enterprises and noncommercial monetary establishments from the general State-owned property, the estimated State-owned property transferred to the NCSSF is prone to attain 10 trillion yuan. And the dividend large-scale State-owned shares earn can mainly offset the hole between annual pension insurance coverage premium and old-age pension expenditure.

The reform, nevertheless, faces many challenges. As an example, SOEs ought to take the asset switch into consideration earlier than making any vital adjustments comparable to these associated to shareholding, restructuring and itemizing available in the market.

Furthermore, it is very important set up an inexpensive dividend mechanism, and the shares transferred to the NCSSF ought to be managed independently, which requires particular regulation on State-owned asset administration and assortment. When the nationwide pension insurance coverage system is unified, the connection between the central and native governments by way of monetary and administrative powers ought to be additional coordinated and controlled.

Transferring State-owned shares to the NCSSF is a big a part of supply-side structural reform, which displays the brand new thought, new thought and new technique of the Communist Occasion of China Central Committee, with Xi Jinping because the core, for nationwide governance. It is going to profit the individuals and improve their sense of acquire, laying a strong social basis for selling socialism with Chinese language traits within the new period.

The writer is director of the Heart for Worldwide Social Safety Research, Chinese language Academy of Social Sciences.

 

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