Pensions Under Pressure: China’s Social Security Crossroads

As of September 1, 2023, all employers in China are required to contribute to social insurance for their employees, covering pensions, medical care, paid maternity leave, and other benefits. While this policy appears to strengthen workers’ rights, it has triggered widespread concern. The worries stem not only from fears of worsening financial strain on individuals and companies, but also from long-standing dissatisfaction with China’s social security system.

Why now?

In explaining the timing of the nationwide enforcement of mandatory social insurance, Chinese state media have framed the policy as a safeguard of “workers’ basic rights” and a “national institutional benefit,” highlighting the inclusion of “flexible employment groups” such as food-delivery riders, ride-hailing drivers, and couriers - often described as the “final gap” in social protection. This narrative presents the policy as an act of care for vulnerable groups and a sign of social progress.

Yet fiscal and demographic realities tell a different story. One immediate reason for the current push toward universal coverage is that the pension fund is nearing a critical threshold. A 2019 actuarial report from the Chinese Academy of Social Sciences warned that, without structural reform, the Urban Employee Basic Pension Fund would be depleted by 2035. Subsequent adjustments have extended this projection to 2044, but the fundamental conclusion - unsustainability - remains unchanged.