Creating an effective social welfare safety net in an era of rapid economic, social and demographic change has proved to be one of the biggest challenges for the Chinese government over the last three decades. The new Social Insurance Law, which went into effect in 2011, was supposed to address these issues by establishing a comprehensive social security framework but many problems with enforcement, transferability and fraud remain.

A new study by China Labour Bulletin provides a detailed introduction to the Social Insurance Law and analyses how effective it has been in practice.  The study focuses in particular on migrant workers and the difficulties they face in transferring their pension and medical insurance between different regions of China. Despite attempts by the central government to facilitate the transfer of social insurance benefits, many local bureaucracies remain intransigent.

Only a fraction of migrant workers have all the social security benefits they are entitled to and local labour departments have been unable or unwilling to force employers to comply with their legal obligations. And even those workers that do have insurance often discover that restrictions on medical and unemployment benefits, in particular, make those polices next to useless.

There is, in addition, a significant problem with the embezzlement or misuse of social security funds by local governments, further fueling workers' mistrust in the system. And a direct consequence of that mistrust is that workers are still reluctant to spend their salaries on goods and services, preferring instead to save as much as possible in order to shield themselves and their families from adversity in the future.

Unless the Chinese government can create a truly comprehensive social security system that provides tangible benefits to its citizens, China's households will continue to maintain a disproportionally high savings rate, making it very difficult for the government to achieve its often stated goal of boosting domestic consumption and lessening the country's current reliance on the export market.

This introduction to China's social security system is the latest addition to CLB's Resource Centre, a section of the website designed to provide those relatively new to China with an overview of the key labour issues facing the country today. Other topics include China's labour dispute resolution system, Migrant workers, Wages and the Reform of state-owned enterprises.