Ge Yanfeng, Wang Xu & Tian Kai

Research Report No 140, 2002

Overall, China’s accession to the World Trade Organization is not only conducive to the long-term development of its economy but also to the acceleration of its social modernization. In the final analysis, however, WTO accession means fiercer competition and further major structural adjustment of China’s economy and society. For this reason, some of the existing social contradictions and problems may aggravate and some new problems may also emerge in the early years of WTO membership. The core issue that deserves greatest attention is that while progress in an overall sense is being made in economic and social development, the interests of some members of the society may be jeopardized in a relative or absolute term. In other words, a "Non-Pareto Improvement" may emerge and affect social stability and upcoming reform. This is something that we must spare no efforts to avoid. To ensure the basic interests of all classes and groups, especially those of vulnerable groups, should become a basic starting point of the Chinese government’s social policy in a period to come.

I. The Chinese government has done quite a lot in recent years to protect the vulnerable groups.

In light of some prominent contradictions and problems during economic transition and especially the issues concerning the employment, income and other basic rights and interests of vulnerable groups, the Chinese government has in recent years taken many proactive policy measures to maintain a basic stability of economic and social life. These measures are mainly as follows:

-- Integrated policy tools have been used to expand employment in an all-round way.

The main policy tools used in recent years focused on three areas. First, in light of inadequate domestic demand, proactive fiscal measures and prudent monetary policies were adopted to maintain steady economic growth and employment stability. Second, diverse tools were taken to encourage the small and medium-sized enterprises that could contribute more to employment expansion, while further reform measures were introduced to develop the non-public economies and new employment growth have taken shape sectors. Third, special employment protection policies were adopted for special groups. In particular, an active reemployment project was launched to ensure that a considerable number of the workers laid off by the state-owned enterprises could find jobs again and that most of them were guaranteed a basic income and life.

-- Employment shift was actively promoted to solve the prominent structural contradiction of employment

In light of the structural contradiction of employment between different ownerships, the most important policy measure was to comprehensively promote the reform of the social security system. In particular, the old-age insurance and medical insurance were expanded to the domain of non-public ownership so as to remove the fears of the workers in the state-owned sector when they were shifted to the non-state-owned sector. In the meantime, an active exploration was made on how to compensate the old workers for "contribution deduction" made by the state under the old system. In order to ease the structural contradiction between urban and rural employment, efforts were made to actively develop non-farm occupations and small towns so as to promote the shift of rural surplus labor without leaving native places. At the same time, the permanent residence registration system was also adjusted to lower the barrier to labor shift. As to some regions where employment pressure was too great, the central government introduced a fiscal transfer payment mechanism in a timely manner. To help the workers who were less competitive in job hunting, the government organized employment training programs and even financed employment assistance. In addition, the unemployment insurance system also developed fairly fast.

-- Policy measures were adopted to contain the widening of income gap.

First, market regulation mechanism was established and improved to minimize the irrationality in the area of primary distribution and in particular to fight against various forms of illegal income. Second, personal income tax and interest tax were introduced and tax collection and supervision were intensified step by step to regulate high incomes. Third, income distribution policies were constantly adjusted. They included promoting monetized housing distribution, and raising the wage levels of those working in administrative organs and public institutions and the pension levels of the retired people. Fourth, protection of low-income groups was intensified. In the urban areas, the minimum living guarantee system was widely implemented for urban residents and the guarantee standards wererepeatedly raised. In the rural areas, poverty reduction efforts were also intensified, and the minimum living guarantee system was established in some places where conditions permitted. Besides, some effective special measures were taken to protect the extremely difficult groups. For example, "two guarantees" were implemented in the urban areas and played an important role in ensuring the basic living conditions for the workers laid off by the state-owned enterprises and also for the retired people.

-- Actively harmonize labor management relations and strengthen the protection of employees’ interests

The policy measures mainly focused on two areas. One area is to strengthen labor legislation and supervision. Since the 1990s, China has promulgated a series of laws and regulations designed to protect the interests of employees. They included the "Labor Law of the People’s Republic of China", the "Regulations of the People’s Republic of China Concerning the Handling of Corporate Labor Disputes", the "Regulations on the Prohibition of Using Child Labor", the "Regulations on Collective Contracts, the Regulations on Minimum Wages", the "Decision of the State Council on the Amendment of the Regulations of the State Council Concerning the Working Hours of Staff and Workers", and other laws and regulations concerning old-age insurance, medical insurance, industrial injuries insurance and the protection of child-bearing woman workers. In the meantime, labor supervision has also been intensified. The other area is to further strengthen the building of trade unions and comprehensively promote the roles of trade unions in representing and safeguarding the rights and interests of the staff and workers and harmonizing labor relations. In this respect, China adopted the "Trade Union Law of the People’s Republic" in 1992, and adopted the "Articles of Association of the Chinese Trade Unions" in October 1998. The 24th session of the Standing Committee of the 9th National People’s Congress adopted the "Resolution on the Amendment of the Trade Union Law of the People’s Republic of China" to revise the original trade union law. The amendment further defines that safeguarding the legitimate rights and interests of staff and workers is the basic duty of the trade unions. This has made the law more relevant to the requirements of the new situation. At present, trade unions have been established in more and more non-state-owned enterprises in addition to state-owned ones.

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