China has taken major strides in terms of social security and protection. Policies have been built on a combination of social insurance, social assistance and welfare services. And of major importance is the nine-year free and compulsory education for all. Increasingly larger percentages of the population, including the most vulnerable groups, such as poor rural residents, the unemployed and－to a gradually larger extent－migrant workers, have been included in social policies. Minimum living standards schemes, as well as medical insurance and pension schemes have been introduced, although with a fragmented structure and variations in organization, scope of implementation, entitlements and benefit generosity based on people's hukou (household registration) status and other criteria. Therefore, benefits are for many very modest.
The welfare system is not uniform across the country, but there is at least a declared political aim of achieving universal coverage by 2020. Access to and standards of education and health have been greatly improved, although rural-urban and regional inequalities persist, as does the inequality of income distribution. Compared with developed (some would say "over-developed") European "welfare states", there are also some elements missing in the Chinese social policy development, such as family policy to facilitate reconciliation of childcare and work, and promotion of gender equality.
This policy area, in combination with the recent lifting of the one-child policy, can be crucial for achieving the politically desired increase of the fertility rate to a level that would help maintain a more balanced age composition of the population.
China's economic development makes room for expansion of social policy, but the development of social policy cannot be considered to have been a driver for economic development, as it has in other East Asian countries, and also historically in parts of Europe. For example, one of many motivations for Germany's first chancellor Otto von Bismarck to introduce the world's first large-scale social insurance program in the 1880s was to make Germany perform better in international economic competitions.
Public social spending as a proportion of GDP in China today is low compared to Japan and very low compared to developed market economies in the West. As such, social expenditures are very likely to increase, and this should not be seen as a brake on economic development, rather the contrary.
China as a middle-income country faces new challenges. Addressing issues of poverty, inequality, health and social security has been and will be at the core of the political agenda of the Communist Party of China and the government. Such priorities are good response to the popular demand for better social protection and improvement of services and income levels.
Social policies, broadly speaking, can also reduce a threat to social instability. So, how can social policies be further developed and people's expectations of improved standards of living and well-being be met during times of slower economic growth, growing financial burden of established healthcare and social security programs, and aging population? Will Chinese citizens be willing to pay more taxes in return for increased social spending?
In fact, many Chinese might be willing to pay higher taxes as long as the government increases its social spending. A pre-requisite for this willingness will be sufficient trust in government and the system of tax collection. And trust could be built and strengthened through curbing of corruption. Thus, a recipe for meeting the challenges of increasing financial burdens of healthcare, social security and popular demands for better welfare is first of all one of developing clean and good governance.
However, an important concern is that, increased taxes will hinder China's economic growth as the authorities resort to more proactive fiscal policies to boost the economy. That's why the authorities will need the art to deal with this dilemma.
The author, Stein Kuhnle, is a professor of comparative politics, University of Bergen, Norway, and professor emeritus, Hertie School of Governance, Berlin, Germany.
