Social Security in China

I grew up in Singapore, where the concept of social security is strongly tied to the Central Provident Fund. This is money set aside, about 20% from our salary, and 20% from the company, for us to draw out once we hit 55 years old, as our retirement fund. Yes, it does mean that a retiree can outlast his retirement funds.

Along the way though, the retirement age gets raised to 60. Then 62. I suspect by the time I get to draw from the fund, the retirement age would have already been 75.

Chinese social security consists of a basic set of social security system, with some provinces and municipalities having additional provisions. All Shanghainese workers, by law, has to be provided with 4 types of social security, termed the 四金 (Four Gold).

1. 养老金 Retirement Fund – 6% funded by the worker, and 25.5% funded by the company, this works similar to a social security tax, where the fund gives a stipend once the worker retires.


2. 失业保险金 Job Security Insurance – 1% funded by the worker and the company respectively, this works similar to a job security tax, where the fund gives a stipend if a worker is out of work.


3. 医疗保险金 Medical Insurance – 1% funded by the worker, and 5.5% funded by the company, this works exactly like a medical insurance, where the worker can claim for medical expenses, less a deductible.


4. 住房公积金 Housing Provident Fund – 7% funded by the worker, and 7% funded by the company, the existence of this fund enables the worker to get preferential mortgage rates, and to draw upon this fund to pay for housing. If I am not wrong, this fund is based on the Singapore model.

The other article I came across gives different information, typical of China, where one party will say something and the other will say something else. I would tend to believe this more, as it is a government website. Especially since it was updated in April 2009 (the previous figures are dated January 2009).

The data was so much that I decided to copy the table – only to encounter so many problems rendering the table properly in a blog. Readers who cannot read Chinese but want to know are free to get in touch with me.

One quickly notices that not only are the figures very different, but one of the “gold” is absent – the Housing Provident Fund. Apparently, that does not come under the basic social security system, and is run by yet another bureaucracy, the Shanghai Provident Fund.

It is interesting to note that the extra 37% the company has to pay each month is a cost to the company but few workers look beyond just their salary package.

Life is very interesting. As a school manager, HR handles all these sorts of things. If not for the issues faced by my Chinese teachers, I would not have become aware of such things. All these will make good research material for my MBA, and may be useful for my future in China as well.