The China Society Yearbook, Volume 3 : Analysis and Forecast of China's Social Development (2008) [1 ed.] 9789047426967, 9789004173507

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The China Society Yearbook, Volume 3

The Chinese Academy of Social Sciences Yearbooks: Society International Advisory Board

Yanjie Bian, University of Minnesota Nan Lin, Duke University Xueguang Zhou, Stanford University

Volume 3

beijing 2009

The China Society Yearbook, Volume 3 Analysis and Forecast of China’s Social Development (2008)

Chief Editors

Ru Xin, Lu Xueyi, Li Peilin

Deputy Chief Editors

Chen Guangjin, Li Wei, Xu Xinxin

Leiden  •  boston 2009

This yearbook is the result of a co-publication agreement between Social Sciences Academic Press and Koninklijke Brill NV. These articles were translated into English from the original《社会蓝皮书 2008 年：中国社会形势分析与预测》( Shehui lan pi shu 2008 nian: Zhongguo shehui xingshi fenxi yu yuce) with financial support from China Book International, supported by the General Administration of Press and Publication and the Information Office of the State Council of China. This book is printed on acid-free paper.

ISSN  1872-7239 ISBN  978 90 04 17350 7 Copyright 2009 by Koninklijke Brill NV, Leiden, The Netherlands, and by Social Sciences Academic Press, Beijing, China. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishing, IDC Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. printed in the netherlands

Contents List of Figures  . ............................................................................

vii

List of Tables  ...............................................................................

ix

Preface  . ........................................................................................

xi

Acknowledgments  ........................................................................

xv

List of Contributors  .................................................................... xvii Introduction  .................................................................................

xxi

General Report 1. The Development of a Social Infrastructure that Prioritizes an Improvement of the People’s Livelihood— 2007–2008 General Report: Analysis and Forecast of China’s Social Development Research Group on “Analysis and Forecast of China’s Social Development,” Chinese Academy of Social Sciences  ...................................................................................... Li Peilin and Chen Guangjin 2. Income and Consumption Levels of Urban and Rural Residents in China  ....................................................... Lü Qingzhe 3. Employment in 2007: Innovative System Reform  ................ Mo Rong 4. Report on Social Security Development in China in 2007  . ....................................................................... Wang Fayun and Wang Xiaoming 5. Advancements in the National Health Insurance Program  ...... Gu Xin

1

23 43

63 79

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  6. The Security of Chinese Society in 2007  ........................... Song Erdong and Sun Huilin

97

  7. Prevention and Punishment of Corruption in 2007  ........... 109 Wen Shengtang and Li Yuanze   8. Investigation of the Quality of Life in China in 2007  ....... 125 Yuan Yue and Zhang Hui   9. The Beijing Public’s Perceptions of Food Safety Risks  ....... 143 Zhao Yandong, Zhang Wenxia and Ma Ying 10. 2007–2008 Distribution of Income in China New Movements, New Tendencies, and New Approaches  . ... 167 Yang Yiyong and Gu Yan 11. An Analysis of Public Opinion Regarding the Chinese Internet in 2007  . .................................................................. 185 Zhu Huaxin, Hu Jiangchun and Sun Wentao 12. 2007: A “Legislation Year for Labor Security”  ................... 209 Qiao Jian 13. The Private Business Sector in China: Political Participation in the Development Process  ........................... 225 Zhang Houyi 14. Primary Security Risks Associated with the 2008 Beijing Olympic Games  ....................................................... 243 Li Peilin and Wang Junxiu Index  ............................................................................................ 257

List of Figures Figure 3.1: Rate of Demand According to Industry  ................. Figure 5.1: Rate of Insured Peoples and Percentage of Coverage under the Basic Medical Insurance Program for Urban Employees (1993–2006)  ......................................... Figure 5.2: Income and Expenses of the Basic Medical Insurance Fund for Urban Employees (1993–2006)  .............. Figure 8.1: Fluctuations in Urban and Rural Residents’ Overall Living Satisfaction in 2000–2007  .............................. Figure 8.2: Primary Indicators Affecting Urban Residents’ Overall Living Satisfaction in 2007 and their Level of Influence  .................................................................................. Figure 8.3: Urban and Rural Residents’ Sense of Security Regarding Society in 2002–2007  ............................................ Figure 8.4: Urban and Rural Residents’ Evaluation of Police Services in 2007  ............................................................ Figure 8.5: Security of Urban and Rural Residents’ Quality of Life in 2007  ........................................................... Figure 8.6: Urban and Rural Residents’ Possible Future Old-Age Care Methods  . ......................................................... Figure 8.7: Urban Resident Confidence Regarding Government Management from 2001–2007  .......................... Figure 9.1: Information Channels Used by the Beijing Public to Access Information Concerning Food Safety  . ................... Figure 9.2: Attention, Understanding, and Awareness of Food Safety Information Among the Beijing Public  .......................

45 84 86 126 130 134 135 137 140 141 160 162

List of Tables Table 2.1: Average Consumption of Urban and Rural Residents  . .................................................................................... Table 3.1: Structural Changes in the Unemployment Demographic  ........................................................................... Table 5.1: Basic Medical Insurance Payment Levels for Urban Employees (1993–2006)  ............................................... Table 8.1: Primary Indicators Affecting Urban and Rural Residents’ Overall Living Satisfaction in 2006 and 2007  . ....................................................................... Table 8.2: Primary Indicators Affecting Urban and Rural Residents’ Overall Living Satisfaction in 2006 and 2007  . ....................................................................... Table 8.3: Urban Residents’ Evaluation of the Usage Charges and Content Quality of Cultural, Sporting, and Amusement Institutions  . .................................................. Table 8.4: Town Residents’ Evaluation of Commodity Prices in 2007  .......................................................................... Table 8.5: Level of Residents’ Attention to Commodity Prices  ..... Table 8.6: Social Problems of Concern to Urban and Rural Residents in 2007  .......................................................... Table 9.1: Beijing Public Opinion Regarding Food Safety  . ...... Table 9.2: Public Opinion Rankings of Disaster Probabilities  .... Table 9.3: Public Perception of the Various Dimensions of Different Food Risks  ................................................................ Table 9.4: Food Safety Awareness According to Age and Educational Level  .................................................................... Table 9.5: Pearson’s Correlation Coefficients Regarding Degrees of Attention, Understanding, and Awareness Regarding Food Risk Perceptions  ........................................... Table 9.6: Correlation between Food Safety Problems, Monthly Family Expenditures Per Person, and Subjective Social Strata Identification  ...................................................... Table 10.1: Urban-Rural Income Differentials and Their Rates of Expansion (2001–2006)  ......................................................

33 48 86 127 129 131 132 133 136 145 147 152 157 163 165 176



list of tables

Table 10.2: The Development of Regional Income Differentials (2001–2006)  ......................................................... Table 10.3: The Development of an Internal Income Differential between Urban and Rural Residents (2001–2006)  ............................................................................. Table 11.1: Twenty Events of Most Concern to Internet Users in 2007  . ......................................................................... Table 13.1: The Development of National Private Businesses from 2002–2006  ...................................................................... Table 13.2: Vocations and Educational Levels of Private Businessmen before Establishing their Businesses  .................. Table 14.1: Funds and Personnel Involved in the Maintenance of Safety and Security of the Past Three Olympic Games  . ... Table 14.2: Beijing’s Air Pollution in Recent Years  ................... Table 14.3: Population Increases during Recent Olympic Games  ......................................................................................

177 179 190 226 228 245 250 254

Preface This volume is a translation of the 16th annual “blue book” of social analysis compiled in Chinese by the research group on the “Analysis and Forecast of China’s Social Development,” of the Chinese Academy of Social Sciences. In the compilation of this volume, the adoption of scientific and precise methods for conducting scholarly research, the observation of practical and realistic writing principles, and the promotion of social responsibility in our experts and scholars have been, and continue to be, our unchanging principles. In compiling this yearly blue book, we discovered that the following characteristics were exhibited by Chinese society in 2007–2008: 1. China entered a new stage in its scientific development and in the promotion of a harmonious society. On October, 2007, the Seventeenth National Congress of the Communist Party of China convened in Beijing, an important event in the economic, political and social life of China. The congressional report, “Hold High the Great Banner of Socialism with Chinese Characteristics and Strive for New Victories in Building a Moderately Prosperous Society in All Respects” (高举中国特色社 会主义伟大旗帜为夺取全面建设小康社会新胜利而奋斗), comprehensively promoted and developed a theory of socialism with Chinese characteristics. This report promoted the development of science and the development of a harmonious society as important guidelines for the future economic social development of China. It also furthered reform, coordinated development, emphasized the livelihood of the people, and emphasized fairness in current social development. The Seventeenth National Congress of the Communist Party of China will have profound influence on China’s future development trends. 2. Economic and social development enters a crucial phase. 2007 marked the fifth year of the third high-speed economic growth cycle since China’s reform and increased international involvement, which began in 2003. Since that point, China has maintained a GDP growth rate of 10% and above, has avoided violent-ups-and-downs, experienced high economic growth and low inflation and has formed a new growth cycle; a cycle not only unprecedented since the reform and increased international involvement, but also unprecedented in the history of the establishment of the People’s Republic of China. However, the rise of the price index

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in 2007 surpassed regulative goals, and the economy exhibited signs of overheating, a situation which could possibly be exacerbated by China’s hosting of the Olympic Games in 2008. As a result, the prevention of violent economic ups and downs and the maintenance of steady economic growth have become focal issues. Meanwhile, the possibility of a decline in economic growth following the Beijing Olympic Games as well as the possibility of the withdrawal of international money and the withdrawal of international hot money (热钱) will influence the stability of the Chinese economy on a macroscopic level. Judging from current development, overall in 2008, China will continue the trend of an economic growth rate of 10% and above which has lasted for the past five years. Additionally, China’s huge economic system will increase the influence of the 2008 Olympic Games and the decreases in the Chinese economy will be less than predicted. 2008 is a key year for China, and it will have great influence on the future development of the country’s economic and social situations. In many aspects, 2008 will be a year of landmark significance to China in its social development history, because, not only does 2008 mark the 30th anniversary of China’s reform and increased international involvement, it is also the year China will host the Olympic Games for the first time. Additionally, 2008 is the preparatory year for the celebration of the 60th anniversary of the People’s Republic of China, which will mark the first anniversary in the new century of the establishment of the People’s Republic of China. In 2008, China’s GDP will surpass Germany’s to be the third highest in the world, and the country’s international economic and social development standing will be further promoted. 3. The improvement of the people’s livelihood became a public focal point. In 2007, China enlarged its financial investments in education, employment, medical services, housing, social security, and environmental protection etc., of which the rural minimum subsistence guarantee program (农村最低生活保障) and the new rural cooperative medical services experienced unprecedented development. Compulsory education also achieved a more balanced development. The issue of employment tension in the primary labor market was further alleviated, and disputes concerning labor relations were dropped, with complaint letters and visits and related community events experiencing a decline after their initial rise. However, the tendency towards increasing income differentials continued to grow and was not yet curtailed. The price of food and housing also continued to increase, which had an increasing



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influence on a large portion of middle and low-income residents’ living and consumption patterns; a phenomenon which drew great attention across society. Environmental pollution, especially the safety of urban drinking water, was also increasingly becoming an important and influential factor in economic and social development. 4. The 2008 Beijing Olympic Games will be an international focus. The 29th Olympic Games will be held in Beijing, the capital city of China, in 2008. A new world economic power will rise at this point, and China’s development will have profound influence on the fluctuations of world economics and politics. Therefore in direct response to reader interest, this book specially increases the number of articles regarding the preparatory work for the Olympic Games. The contributors to this volume hail from various professional research and investigative institutions, including colleges and universities as well as related government research departments. Excepting the general report, any writer’s viewpoint expresses only his or her own thoughts, and it is not indicative of the beliefs of the research group as a whole, nor the unit in which the writer works. A great deal of statistics and investigation data covered in this book may vary due to different sources, requirements, investigation times and places; please carefully check sources before citing. The research undertaken this subject was given critical support by the Chinese Academy of Social Sciences. The organizing and coordination of this research, as well as the composition of the general report, was managed by the Institute of Sociology at the Chinese Academy of Social Sciences. The Editors

Acknowledgments This book is a translation of a yearly report of the Chinese Academy of Social Sciences on “Analysis and Forecast of China’s Social Development,” part of a yearly series of reports issued over the last 16 years. The experts who have participated in the composition of this book hail from the Chinese Academy of Social Sciences, the National Ministries and commissions concerned, and a number of universities and colleges, and they have carefully analyzed the present situation of Chinese society and the problems concerning the people’s lives, population, employment, social security, the distribution of income, education, medical services, social order, and the environment and so on. This book has been widely viewed by academics in China as being an authoritative text because of the extensive amount of information contained and the widespread influence of the expert opinions in each volume. We sincerely appreciate the support given in the publication of this book in Chinese and throughout the process of publishing the English version, The China Society Yearbook, Volume 3. First, the organization and coordination of this book as well as the composition of the general report were managed by the Institute of Social Science at the Chinese Academy of Social Sciences. The division of labor was as follows: Li Peilin, Chen Guangjin, Li Wei, and Xu Xinxin managed the revisions of the entire book; Ru Xin and Lu Xueyi examined and approved the general report; Hu Gang managed the coordination of the project as well as the compilation of subject data. The publication of this book is a result of their hard work and support. Next, we sincerely appreciate the input of Social Sciences Academic Press’s president Xie Shouguang and editors Deng Yonghong, Cui Yan, Wang Yumin, and Guo Rongrong; they have done much work in arranging the preparation of the English version. We also sincerely appreciate the hard work of translators Liu Maomin and Chloe Garcia-Roberts, as well as the final reader and editor, Merritt Wilson. Without their diligent work this English version would not exist. Finally, we especially appreciate the guidance and support of China Book International for its support in the publication of this book.

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We would also like to extend a thank you to our innumerable friends across the globe who actively supported the publication of this book and who are concerned with and interested in the social development of China. The Editors February, 2009

List of Contributors Throughout this volume, Chinese names are always ordered according to standard practice in China, with surnames preceding given names. To clarify this ordering, surnames are in small capital letters in the following list of contributors. Yanjie Bian is professor of sociology at the University of Minnesota. He has published books and articles on post-Mao Chinese society, with a focus on social stratification, occupational mobility, and interpersonal networks. Since 2003, he has led a group of social scientists to conduct the Chinese General Social Survey. Chen Guangjin (1962–) is a researcher and deputy director of the Institute of Sociology of the Chinese Academy of Social Sciences. His main areas of research are rural sociology, social development, and private enterprises. Gu Xin is a professor at the school of government at Peking University. Gu Yan is a doctoral student at the school of economics, Renmin University of China. He is in the national economic management department. Hu Jiangchun is an editor at the Chinese News Online Co., Ltd. of the People’s Daily News Agency in Beijing. Li Peilin (1955–) is a senior researcher and director of the Institute of Sociology at the Chinese Academy of Social Sciences. His major academic research interests are social development and industrial organizations. Li Wei (1960–) is assistant researcher and director of the social development office at the Institute of Sociology, Chinese Academic of Social Sciences. His main research areas are developmental sociology, social research methods, and social stratification.

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Lu Xueyi (1933–) is a professor and researcher at the Chinese Academic of Social Sciences and former dean of the Institute of Sociology. His main research fields are rural economics and society. Li Yuanze is a cadre for the Supreme People’s Procuratorate and a postgraduate student of law. He primarily studies juristic theory and comparative law. Nan Lin is Oscar L. Tang Family Professor of Sociology at Duke University. His research interests are in social networks and social capital, the life stress process (especially social support as resources), social stratification and mobility, and Chinese societies. Lü Qingzhe, is the director of the Institute of Statistical Science’s research room at the National Bureau of Statistics of China, where he is also a senior statistician. He is primarily engaged in the research of social economic statistics and their overall evaluation. Ma Ying, M.A., is an assistant researcher in the social development division at the Research Centre for the Promotion of China’s Science and Technology. Mo Rong is researcher and assistant chief of the Institute of Labor Science at the Ministry of Labor and Social Security. Qiao Jian is an associate professor and dean of the industrial relations department at the China Institute of Industrial Relations. He is primarily engaged in the research of industrial relations, employee working conditions, and trade unions. Ru Xin (1931–) is a professor at the Institute of Philosophy Chinese Academy of Social Science, and former dean and Vice President of the Chinese Academy of Social Sciences. Song Erdong is the deputy director general of the Census and Statistics Department at the general office of the Ministry of Public Security, and the director of the National Statistical Society of China. Sun Huilin is a staff member of the Census and Statistics Department at the general office of the Ministry of Public Security.



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Sun Wentao is an editor of the Chinese News Online Co., Ltd. of the People’s Daily News Agency in Beijing. Wang Fayun is a researcher for the Social Security Administration at the Ministry of Labor and Social Security. Wang Junxiu is an assistant researcher at the Institute of Sociology, Chinese Academy of Social Sciences. Wang Xiaoming is an associate professor at China University of Political Science and Law’s business school. Wen Shengtang is a senior prosecutor for the Supreme People’s Procuratorate and a leader in national procuratorial theoretical research. He primarily researches prosecutorial science, the science of criminal law, and the sociology of law. Xiaogang Wu is Associate Professor of Social Science in the Hong Kong University of Science and Technology (HKUST). His research interests include social stratification and mobility, labor markets and economic sociology, and statistical methods. Xu Xinxin is assistant researcher at the Institute of Sociology, Chinese Academy of Social Sciences. Her research interests are social structure and change, rural sociology, and social stratification and mobility. Yang Yiyong has an economics doctorate, a post-doctorate in sociology, and is assistant chief researcher at the Institute of Economic Social Development for the National Development and Reform Commission. His research interests include employment, income distribution and social policy. Yuan Yue is the chairman of Horizon Research Group, Inc. He holds a master’s in Public Administration from Harvard University and a doctorate in sociology from Peking University. In 2007, he was a world scholar at Yale. Currently he is the vice-president and the Chinese representative for the Association of Management Consulting Firms (AMCF), as well as the vice-chairman of China Marketing Research Association, and the Chinese representative of ESOMAR.

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Zhang Hui is the research manager for Horizon Research Group, Inc. She holds a doctorate in psychology from the Chinese Academy of Social Sciences and is mainly engaged in research concerning publicopinion polls, community culture, government community service, and resident quality of life. Zhang Houyi is a researcher at the Institute of Sociology, Chinese Academy of Social Sciences. Zhang Wenxia is a researcher at the Research Centre for the Promotion of China’s Science and Technology. Zhao Yandong is the associate research fellow and undersecretary of the social development division at the Research Centre for the Promotion of China’s Science and Technology. Xueguang Zhou is senior fellow at the Freeman Spongli Institute for International Studies and professor of sociology and at Stanford University. His main area of research is institutional changes in contemporary Chinese society, focusing on Chinese organizations and management, social inequality, and state-society relationships. Zhu Huaxin is the editor-in-chief and head reporter of the Chinese News Online Co., Ltd. of the People’s Daily News Agency in Beijing.

Introduction This volume is an English translation of the 2008 Blue Book of Society (社会蓝皮书), the 16th annual report on social development in China since 1992, compiled by the Chinese Academy of Social Sciences. Each year the book has some common themes related to education, employment, people’s livelihood, and social security, and special reports analyzing major social events in the year. Chapter contributors include scholars and policy researchers from universities, the Academy, and government research institutes. Most analyses are descriptive, based on aggregate government statistics or survey data. The volume starts with an introductory chapter that provides readers an overview of the trend of economic and social development in 2007. According to the report, China’s economy in 2007 maintained a rapid growth, with a rate of more than 10 percent for 5 consecutive years, and the GDP is expected to reach the third largest worldwide in 2008. Under the flagship of constructing a harmonious society, a comprehensive strategy to accelerate social construction is accelerated in 2007. The report outlines six key areas in which significant progresses have been made: education and human resources, employment and labor relationship, income distribution, social security, health insurance, and social management. The policy changes and implications in selected areas are elaborated in subsequent chapters, though not necessarily in the order listed above. Several chapters are devoted to documenting new trends of income distribution and disparities as well as their consequences. One chapter by Lu examines the change of urban and rural income and consumption levels, reporting that both rural and urban disposable income and consumption continue to rise and people’s quality of life improves; more and more Chinese people are able to spend on leisure activities and tourism. Huge disparities, nevertheless, exist between urban and rural, rich and poor, which limit the expansion of domestic markets. The government has taken measures to address the problem of income distribution and boost domestic consumption. Another chapter by Yang and Gu discusses the implications of several new laws implemented in 2007 for income distribution: the “Employment Promotion Laws,” “Labor Contract Laws,” the adjustment of “PRC Anti-Monopoly

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Laws,” and the “Urban and Rural Planning Law,” are said to help reduce inequalities among different groups. On the other hand, since financial factors now play increasingly important roles in regional and urban-rural income inequality, government should also use financial means to adjust income differentials. These observations and suggestions are interesting and deserve further studies. The promotion of employment is an effective way to reduce income inequality and maintain social stability. Job creation for the new labor force, rural surplus labor and urban laid-off workers has long been a great challenge for Chinese government. The chapter by Mo analyzes the changing demand and supply of labor and government’s institutional innovation to address unemployment issues. One point worth mentioning is an increase in demand for front-line unskilled labor and machine operators, whereas 40 percent of the unemployed youth are university graduates. The Employment Promotion Law in 2007–2008 will have far-reaching impact on the resolution of the employment problem. Another important development in labor legislation in 2007 is the amendment of the Labor Contract Law, to be effective in Jan 1, 2008. The law attempts to seek for a balance between the protection of labor rights and employers’ interests, and between employment stability, and flexibility. This is a significant step towards reducing labor disputes and harmonizing labor relationships. A chapter by Qiao provides a detailed account of labor rights protection and the change of labor relations, and names 2007 as the “Legislature Year for Labor Security.” The advancement of the social security reform aims to promote social justice among all Chinese citizens. In one chapter, Wang and Wang provide a comprehensive review of the recent development in pension, unemployment insurance and medical insurance in 2007. Noticeably, special efforts have been made to extend the coverage to rural residents and to unify the urban and rural social security system. To be certain, as China is a huge country with tremendous regional inequality and institutional diversity, many programs are still in the stage of experiment in certain regions and among certain groups, but the long-term goal is to establish a unified system. This is exemplified by a chapter (Gu) on a new round of medical reform since mid-2007. Though the role played by the market in the new system is still unclear, China is on a track of building a national health insurance system. Measures towards political and new economic elites have also been taken to promote social harmony and maintain social stability. One chapter reviews China’s progress in enhancing the prevention and



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punishment of corruption in 2007, with more emphasis on the prevention by institutional and professional means. Another chapter examines the political participation of the rising private entrepreneurs. By the end of 2006, the private sector produced 40 percent of China’s GDP, and increasingly more private entrepreneurs came from former cadres, professionals, and salespersons (from 34.1% in 1993 to 67.5% in 2006). However, their desire for political participation has been quite low, although this might not reflect the true situation under China’s current political system. An interesting observation is that, the share of CCP membership among private entrepreneurs suddenly increased in 2006. The increase is due to “system reform,” in which public firms had been converted into private ownership by former party-member mangers. A secretly on-going privatization process in China under the CCP regime deserves further investigation. The effectiveness of social policy implementation will eventually be reflected in the overall life satisfaction of Chinese people. A study by Yuan and Zhang shows that the public concerns for old-age care (pension) decreased and the confidence in government management increased in 2007 compared to previous years. Interestingly, the rural residents have higher overall life satisfaction than do urban residents, although the contributing factors differ. While income and consumption were major factors, community security and food safety also became increasingly important, putting government effective management and regulations in high demand. Due to the space limit here, chapters on security situation and food safety are not discussed in details. Overall, this volume provides comprehensive and accessible information for those who wish to have update knowledge of Chinese society in 2007. Most descriptive analyses are not rigorous and many are assertions without much justification with evidence, but they contain some interesting observations. Scholars will find that it is also a useful source from inspiration of ideas for academic research. Xiaogang Wu Hong Kong University of Science and Technology June, 2009

The Development of a Social Infrastructure that Prioritizes an Improvement of the People’s Livelihood—2007–2008 General Report: Analysis and Forecast of China’s Social Development Research Group on “Analysis and Forecast of China’s Social Development,” Chinese Academy of Social Sciences Li Peilin and Chen Guangjin Key words: social situation, people’s livelihood, farmers’ income, employment, education, social security, civil society, worker’s rights and interests

In 2007, the macroscopic social economy maintained positive development. The primary components of this new social development were harmonious reform measures, an emphasis on the promotion of the people’s livelihood, and an increased focus on fairness. I.  Social Development in 2007 China’s economic and social development in 2007 had two outstanding characteristics: one, the economy maintained high-speed growth and the GDP growth maintained a rate of more than 10% for 5 consecutive years, which provided a solid foundation for the development and construction of society. And two, social construction made new progress through advancements in certain key areas related to the people’s livelihood. A.  The Formation of a Development Strategy to Accelerate Social Construction The development strategy being promoted at this stage in the new century boosts social construction and emphasizes the improvement of the people’s livelihood. It includes six key tasks for accomplishing these goals: one, to first develop the educational system and construct



li peilin and chen guangjin

a powerful nation rich in human resources; two, to positively expand employment options and harmonize labor relations; three, to establish and perfect a fair and just income distribution system; four, to speed the establishment of a social security system which covers both urban and rural residents; five, to establish a basic health system to improve the health of the entire population; and six, to maintain social stability and unity through the completion of a social management system. These six tasks aimed at improving the people’s livelihood are the key components for building a harmonious socialist society. B.  Economic Super-Cycle (超周期) Growth and the Prevention of Economic Fluctuations 2007 marked the fifth year of the third high-speed economic growth cycle since China’s reform and increased international involvement, which had begun in 2003. In the first three quarters, the GDP was 16.6 trillion yuan, an increase of 11.5% over the previous year, and a rate higher than the growth rate in 2006. It is estimated that the GDP growth speed in 2007 will be more than 11%, and the total GDP will surpass 23 trillion yuan, which will allow China to approach or reach the position of third largest GDP worldwide. Meanwhile, price levels maintained basic stability and consumer prices in the first three quarters increased by 4.1% over the previous year, while food prices increased by 10.6% over the previous year. Maintaining steady and sustained economic growth and preventing violent price fluctuations became the primary object of macroeconomic regulation and control; the country changed regulations three times to increase the reserve rate against deposits and the ruling rate of interest for financial institutions on Renminbi deposits and loans. C.  The Launch of a Comprehensive New Rural Reconstruction Plan; Rural Social Construction Makes Obvious Progress In 2007, agricultural production maintained stable growth. The output of summer grain crops was 115.34 million tons, which was a growth of 1.3% over the previous year by 1.45 million tons. The autumn grain crops maintained an increase in production and the total output was more than 500 million tons over the course of the year, making it the fourth consecutive successful harvest year. Farmer incomes also increased. It was estimated that the actual growth of net income per farmer would reach about 8%, making 2007 the year when the farmers



the development of a social infrastructure



had the quickest income growth since 1997. Rural social construction also made new progress. As a result of the government comprehensively bringing compulsory education funds into the security scope of public finance, the problem of compulsory education funds being paid by farmers, which had been haunting rural areas for some time, was solved. The country also allocated favorable financial investments for rural education so needy students partaking in national rural compulsory education were able to enjoy the policy of “two exemptions and one subsidy” (namely, they were exempted from certain miscellaneous expenses and book costs as well as boarding subsidies). In 2007, 148 million rural students benefited from this policy. The government also sped up the construction of a new rural cooperative medical service. By the end of June 2007, this system covered 84.9% of the counties and rural areas and 82.8% of the agricultural population. Meanwhile, the coverage scope of the rural minimum subsistence guarantee program was expanded rapidly and the rural retirement insurance program also made positive advancements. It was also found that the degree of satisfaction of the farmers regarding government services continued to rise yearly since the exemption from the agricultural tax was enacted, and that the stability of the rural social order was, indeed, quite stable. D.  The People’s Living Conditions Continue to Improve and the Farmers’ Income Growth Rate Is Noticeable In the first three quarters of 2007, the disposable income per person for urban residents was 10,346 yuan, an increase of 13.2% over the previous year after deducting price factors, and a rise of 3.2 percentage points over the previous year. The cash income per farmer was 3,321 yuan, an increase of 14.8% over the previous year after deducting price factors, and a rise of 3.4 percentage points over the previous year. However, despite the fact that the growth of the disposable income per urban person and of the cash income per farmer surpassed the GDP speed of growth, the differential between urban and rural incomes was still expanding while the speed of growth was decreasing. Along with the income increase and the enhancement of the national social security level, the resident consumer confidence index also rose and the driving force of economic consumption continued to improve. In the first three quarters of 2007, the total retail rate of consumables was 6.38 trillion yuan, an increase of 15.9% over the previous year, and 2.4 percentage points more than the previous year. However, the rise in prices was extraordinary, resulting in an alarming inflation trend.



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Consumption growth and an increase in the number of shareholders caused the balance of urban and rural personal deposits to increase at a slower rate. By the end of September 2007, the total Renminbi balance of resident account deposits in financial institutions was 17.2 trillion yuan, an increase of 6.9% over the previous year, and 9.2 percentage points less than the previous year. This rate increased by 762.1 billion yuan more than at the beginning of the year, a reduction of 971 billion yuan over the previous year. In 2007, the population entering the stock market increased sharply, new accounts increased by the tens of millions, and personal savings were transferred into the stock market more frequently. While the continued “hot stock market” trend increased shareholders’ property income, it also intensified the risks associated with the stock market. E.  Improvement of the Employment Situation, and Changes Made in the Employment Structure Although China is presently still experiencing severe employment pressures, under the impetus of a positive employment policy in 2007, the employment situation continued to improve and the tension of the overall situation was alleviated. By the end of September, the total newly employed urban population was 9.2 million, and it is estimated that the rate for the entire year would reach 12 million. In the first three quarters of 2007, 4.06 million unemployed persons were re-employed, and 1.1 million people who experienced difficulties obtaining employment were re-employed. By the end of September, 810,000 of 847,000 “zero-employment” households nationwide had obtained employment for at least one person in each family, which accounted for 95.7% of the total. Additionally, the unemployment registration rate in urban areas began to decline. In the first half of 2007, the urban unemployment registration rate was 4.1%, while it had been 4.2% in 2006 and 4.3% in 2005. In 2007, the characteristics of labor market were as follows: One, the personnel demand of urban tertiary sector was still dominant and the demand of secondary sector rose. Two, business employment dominated the labor market, the personnel demand for domestically-funded businesses declined, and the personnel demands of Hong Kong, Macao, and Taiwanese businesses and foreign investment businesses increased. Three, the demand for front-line ordinary workers in businesses rose and the demand for operators who produced transport equipment increased.



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Four, unemployment demographics underwent structural changes and businesses were faced with a shortage of technical personnel. The employment structure underwent significant changes during the “Tenth Five-year Plan” and the proportion of job holders in the primary, secondary, and tertiary sectors changed from 50.0 : 21.4 : 28.6 in 2002, to 42.6 : 25.2 : 32.2 in 2006. These changes signify that the process of industrializing China has entered an intermediate stage. In 2007, the employment structure was further improved, so the proportion of agricultural workers dropped to 41%. If the proportion of agricultural workers can drop to approximately 30% within the next five years, the employment structure will have affected historical changes. F.  Education Investment Is Dramatically Increased and Fairness in Education Is Promoted In 2007, the State Council authorized the “Eleventh Five-Year Plan’s Compendium of National Education Development”《 国家教育事 业发展 “十一五” 规划纲要》. This plan designated that during the “Eleventh Five-Year Plan,” the net enrollment rate of elementary schools should be kept above 99%, the gross enrollment rate of middle schools should reach above 98%, the retention rate of middle schools should reach 95% within three years, the gross enrollment rate of high schools should reach approximately 80%, the gross enrollment rate of higher education institutions should reach about 25%, and the illiteracy rate of young adults should drop to approximately 2%. In order to achieve the above targets in education development, the government will gradually bring compulsory education into the scope of public financial guarantees in order to ensure that the growth rate of financial educational expenses is higher than that of recurring income increases. In 2007, the amount of the educational expense budget in the national fiscal budget was 646.1 billion yuan, an increase of 19.5% over 2006 by 105.3 billion yuan, which was higher than the growth rate of the national fiscal expenditure. In 2007, the educational expense budget arranged by central financing was 85.854 billion yuan, an increase of 41.7% over 2006 at the rate of 25.249 billion yuan, which was significantly higher than the growth rates of the central revenue budget and of the expenditure budget at this level.

  Please see: http://scholar.ilib.cn/A-dagl200704014.html.





li peilin and chen guangjin

In May 2007, the State Council printed and distributed “Opinions on Building and Perfecting the Subsidization Policy System for Students from Poor Families in Universities, Higher Vocational Colleges, and Secondary Vocational Schools”《关于建立健全普通本科高校、高等 职业学校和中等职业学校家庭经济困难学生资助政策体系的意见》 , which designated that further development of a subsidization policy system for students from poor families would begin in the fall term of 2007. This policy was another that promoted fairness in education after completely exempting the miscellaneous expenses and tuition fees at the rural compulsory education stage. In the area of subsidization, the National Academic Encouragement Scholarship (国家励志奖学金) was expanded from 0.3% every year to 3%; the national stipend for universities was expanded from 3% every year to 20%; and the national stipend for secondary vocational education was expanded from 5% every year to 90%. In terms of subsidization strength, the national scholarship was increased from 4,000 yuan per student each year to 8,000 yuan. The newly established National Academic Encouragement Scholarship provided 5,000 yuan for each student every year. The national stipend for universities was increased from 1,500 yuan per student each year to 2,000 yuan. The national stipend for secondary vocational education was increased from 1,000 yuan for every student to 1,500 yuan. In order to establish this new subsidization policy system, central and local financing invested about 15.4 billion yuan in the first half of 2007. Investments in central and local financing will double this figure in 2008, reaching approximately 30.8 billion yuan. This important policy change will benefit approximately 4 million students from more than 1,800 universities and colleges nationwide and approximately 16 million students from 15,000 secondary vocational schools. G.  Expansion of Urban and Rural Social Security Coverage and Improvement in Coverage Levels Coverage for all social security programs continued to expand. By the end of September 2007, policyholders of basic retirement insurance, basic medical insurance, unemployment insurance, industrial injury insurance, and maternity insurance received 196.76 million, 188.96 million, 114.73 million, 115.3 million, and 73.27 million, respectively; increases



 Please see: http://ilib.cn/I-zgzyjsjy.2007.22.html.



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of 4.6%, 16.7%, 2.5%, 10.9%, and 11.8% over rates at the end of the previous year. In the meantime, all levels of the government explored the development of a social security system for migrant laborers. At the end of September, migrant laborer policyholders of industrial injury insurance and medical insurance, respectively reached 34.47 million and 29.03 million, increases of 26.4% and 18.5% over the end of the previous year. The coverage for the urban and rural minimum subsistence guarantee program was expanded at a steady pace and the rural minimum subsistence guarantee program rapidly advanced. By September, urban residents who were covered by the minimum subsistence guarantee program reached 22.377 million, an increase of 100,000 over the previous year, and the rural population who were covered by the minimum subsistence guarantee program reached 27.813 million, an increase of 15.592 million over the previous year. New models for the minimum subsistence guarantee program in urban areas were launched comprehensively and the majority of 79 test cities instituted a plan, thereby increasing the number of urban policyholders for the minimum subsistence guarantee program. The issue of somewhat low retirement pensions for business retirees also received widespread attention. In order to resolve the discrepancy between the retirement pensions of business retirees and retirees of government institutions, and to address the issue that the retirement pensions of employees who retired early was somewhat low, the country made the decision to gradually improve pension standards for business retirees, with preference given to technical business retirees with highlevel titles, as well as retirees who retired early and whose basic pension was somewhat low. Beginning on July 1, 2007, this adjustment of the basic pension standard of business retirees marked the third time standards were raised since 2005. Based on this history, the country will continue to raise the basic pension standards of business retirees from 2008–2010 and this policy will benefit more than 40 million business retirees. H.  Development of the Social Infrastructure and Grass-Roots Level Social Organizations With the continuous improvement of marketability levels and the industrialization and urbanization of China, the average citizen’s abilities of self-organization, self-management, and self-service have greatly



li peilin and chen guangjin

improved, and protections of the individual’s legitimate rights and interests have been included in this sustained growth. By the end of September 2007, the number of registered national nongovernmental organizations reached more than 360,000, an increase of 12.1% over 2006; of which social groups numbered 195,000, nongovernmental non-business units 164,000 and foundations 1,245. The development of nongovernmental organizations has played a positive role in the provision of social services and in meeting social demands. Community construction is rapidly developing in order to encourage the growth of grass-roots level social organizations. The community has become a comprehensive platform of social management and a service network. Interactive coordination mechanisms, such as community resident committees, realty management departments, and owner committees, are gradually being established, while a new community-based system of social management and social service is in formation. I.  Institutionalization of the Coordination of Labor Relations and Expansion of the Protections for Worker’s Rights and Interests In 2007, the country consecutively promulgated the “Employment Promotion Law”《 就业促进法》and the “Labor Contract Law”《 劳动  合同法》, which both came into effect on January 1, 2008. These were two important legislations in the labor domain of China and they will play an important role in establishing harmonious socialist labor relations. The range of laborer benefits is also rapidly increasing. By the end of September 2007, a total of 13 regions nationwide had adjusted the minimum wage standard, and 19 provinces (municipalities and cities) issued wage guidelines. All levels of the trade unions also expanded, thereby encouraging large numbers of migrant laborers to join. By September 2007, trade unions nationwide had recruited 61.97 million migrant laborer members who worked in urban areas, which accounted for approximately 51.6% of the total number of migrant laborers. In order to protect migrant laborers’ legitimate rights and interests, various regions also implemented various experimental programs. More than ten provinces and cities had

 

 Please See: http://www.lawinfochina.com/law/display.asp?id=6382&keyword=.  Please See: http://www.lawinfochina.com/law/display.asp?id=6133&keyword=.



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signed the “Agreement on the Inter-provincial Cooperation of Legal Aid for Migrant Laborers”《省际农民工法律援助合作协议》, as a result of which, efforts to boost the integration of migrant laborers into local society made positive progress. In 2007, nationwide special inspections of wage payment for migrant laborers recovered 1.735 billion yuan in delinquent wages for 1.5 million migrant laborers. From 2004 to the end of July 2007, a total of 43.32 billion yuan in delinquent wages were recovered for migrant laborers, which basically resolved the problem of businesses being behind in their payments. Additionally, the driving mentality behind the system of guaranteeing the payment of migrant laborers’ wages has changed from “cleaning up old debt” (清理旧欠) to “the prevention of new debt” (预防新欠). J.  Basic Production Safety and Improvement of Social Infrastructure In 2007, China continued to increase the strength of supervision over production safety and organized taskforces to carry out nationwide inspection of production safety in industrial and mining businesses, while simultaneously launching a special action that comprehensively inspected and rectified the hidden dangers of production safety. Overall, the nationwide production safety situation in 2007 was more stable than in the previous year; from January to October, a total of 69 serious accidents occurred in the entire country, 6 less than in 2006, while the death toll and number of missing persons was 1,038, a reduction of 5 persons compared to the previous year. In the different industrial areas, serious accidents both increased and decreased. Of these, the numbers of serious accidents which occurred in metal and non-metal mines dropped, the number of serious accidents which occurred in coal mines stayed the same (though the death toll increased), and serious accidents in construction, fireworks and firecracker production, road traffic work, and the fishery industry and shipping production industry increased, as did the number of fire accidents. The social order has been basically stable; from January to October 2007, the countrywide public security organizations registered altogether 3.749 million criminal cases, a reduction of 41,000 over the previous year. Additionally, public security organizations uncovered altogether 2.21 million criminal cases nationwide, an increase of 113,000 over the previous year, and the detection rate also improved, as evidenced by the fact that from January to September, the rate of solved homicide cases reached 87.57%. From January to October, the rate of major criminal

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offenses, such as murder, rape, arson, use of explosives, and dangerous substances etc., which had been seriously influencing the public’s sense of security, decreased markedly. The number of cases of theft, robbery, and larceny also dropped comprehensively and four types of criminal offense cases, including disturbing the public security, infringement of human rights and democratic rights, trespassing on public and private properties, and the impairment of social management order, experienced a drop of 2.4% over the previous year in rural areas. Cases of murder and rape prone to occurrence in rural areas maintained a decline, while casualties and direct economic losses, involving fire and traffic accidents, also experienced a large decrease. China also further expanded the protection of intellectual property rights. From January to October 2007, altogether 1,904 cases concerning the infringement of intellectual property were registered, an increase of 31.5% over 2006. Additionally, the number of cases of counterfeiting a registered trademark or patent or selling replicas increased. II.  Primary Problems Facing Social Development in 2007 While remarkable achievements were accomplished in 2007, social development and construction was also faced with a series of outstanding problems and contradictions. In order for the process of expanding reform and speeding development to be successful, we must carefully consider these problems and properly resolve them. A.  The Influence of Food and Housing Cost Increases on Low-Income Groups In the first three quarters of 2007, consumer prices increased by 4.1% over the previous year and food prices increased by 10.6%. The reasons behind these price increases were complex and involved the rise in labor costs and other factors, as well as the influence of the rise in price of agricultural products and crude oil on the international market. Although the rise in food prices is helpful for farmers in increasing their income, it has a negative influence on the daily life of the urban lowincome family. In addition, as a result of the fact that the government carefully monitored and controlled the rise of housing prices, in the first three quarters of 2007, the housing prices in 70 large or mediumsized cities rose by an average of 6.7%; in September alone, prices



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rose 8.9% over the previous year. The reason behind these increases was that housing difficulties for low-income groups were still difficult to alleviate in the short term and a system for affordable and low-rent housing still needed to be developed. B.  A Simultaneous Surplus of the Total Employment Rate and Deficit in the Employment Infrastructure At present, the supply of Chinese laborers still exceeds demand; new urban laborers, transferred rural laborers, and unemployed persons are the focus of employment efforts. China has more than 10 million employment openings every year, yet the supply of laborers seeking employment continues to exceed demand. Moreover, employment elasticity in the present economic growth period continues to drop. In the first three quarters of 2007, the GDP had a realized growth of 11.5% and 9.2 million people were newly employed. This meant that the number of the employed increased 800,000 for every increase of a percentage point in the GDP, which was a reduction of nearly 100,000 employed persons over 2006. However, in the meantime, the labor shortage phenomenon became increasingly worse. First, the primary labor market of industrially intensive areas began to experience a shortage of young laborers, then, a shortage in professional technical workers, and finally, a shortage in senior professionals in the new industries. Additionally, in the graduate employment market, with the yearly increase of graduates year after year, the employment situation for new graduates worsened daily. In 2007, the number of countrywide graduates reached nearly 5 million and more than 1.40 million graduates were still unable to find work at the end of October. Maintaining the stability of student recruitment for universities, while resolving the issue of graduate employment, became an urgent problem. C.  The Expansion of Income Differentials Is Not Reversed and Consumption Continues to Slowly Contribute to Economic Growth In 2007, the expanding income differentials between urban and rural areas, between local areas, and between members of different social classes were not yet reversed; this issue of income distribution was still an area of intense public scrutiny. Looking at the situation of the past three years, if the local GDP composition is calculated according to

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expenditure, the proportion of worker benefits continued to drop; it stayed above 50% before 2003, but then dropped to 49.6% in 2004, to 41.4% in 2005, and to 40.6% in 2006. Although the driving force of consumption in economic growth experienced some improvement, its contribution rate was still low. In the first three quarters of 2007, the contribution rate of investments to the economic growth was 41.6%, and the contribution rate of foreign demand to economic growth was 21.4%. However, the contribution rate of domestic consumption was only 37%, far lower than that of the majority of other nations. D.  Discordant Labor Relations Are Still an Outstanding Problem; the Implementation of the “Labor Contract Law” Is Fraught with Challenges Presently, China is facing several outstanding problems concerning labor relations. First, the signing rate for written labor contracts is low, and so effective protection for workers’ legitimate rights and interests is not possible. Second, labor contracts are short-term and labor relations are unstable. Third, the employer unit often infringes upon the workers’ legitimate rights and interests and even forces the workers to sign certain illegal provisions, such as “the employer is not responsible for the worker’s birth, old age, illness, or death” (生老病死与用人单位无关). In the first quarter of 2007, labor dispute arbitration committees at all levels accepted 75,000 labor dispute cases that involved 142,000 workers. At present, labor disputes and labor-capital disputes exhibit several key characteristics: first, comprehensive cases of labor dispute increased sharply; and in some places, this type of dispute accounted for more than 90% of the total dispute cases accepted. Second, the emergence of labor disputes in the community, the complexity of legal procedures, and the involvement of more laborers in dispute cases increased the difficulty of resolving these disputes. Third, because the current labor dispute settlement system is flawed, the difficulty facing arbitration proceedings is great. In July 2007, in response to the illegal brick kiln event of Shanxi Province, nine government ministries, including the Ministry of Labor and Social Security, established a group to launch a special action targeting illegal employment and cracking down on crimes involving rural small brick kiln factories, coal mines, and mines and workshops nationwide. However, it is estimated that the signing rate of labor



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contracts for migrant laborers was only about 20% at that time. Also, the new “Labor Contract Law” had not yet come into force at that time and some employer units had begun devising methods to dodge related provisions contained in the “Labor Contract Law,” by either dismissing employees with long service records or by requesting employees to sign new short-term labor contracts. Additionally, since October, a general trend of reducing staff members has occurred nationwide. These phenomena indicate that the implementation of the new “Labor Contract Law” will have serious implications. E.  Medical Service Problems and Increased Conflicts between Medical Institutions and Patients In the second half of 2007, China began a new round of medical system reform, at the forefront of which were the pilot programs providing basic urban resident medical insurance across the country. Through these programs, three levels of a public medical insurance system were formed, composed of medical insurance for urban employees and urban residents and a new rural cooperative medical service. However, because the medical system reform plan was still not available to the entire public, substantive system reform was not implemented yet and so “the issue of difficulty and expense involved in seeing a doctor” was not yet resolved. Additionally, basic medical services for the more than 100 million migrant laborers residing in urban areas were not covered by the scope of basic medical insurance for urban residents, and the public at large was still waiting for the actual implementation of medical system reform. On the other hand, due to the lack of public confidence in the medical and public health departments, the fact that a portion of medical and public health personnel did not exhibit medical ethics, and the fact that the communication and dispute settlement mechanisms between medical institutions and patients were not yet perfected, the number of disputes between medical institutions and patients continued to rise. The direction of medical system reform is, in fact, part of the entire institutional reform trend in China, and the key to its success lies in the establishment of an operational system composed of nonprofit organizations that insist on established public welfare goals and effective systematic management. This system would need to conform to budget restraints, supply quality, and cost effective services for the populace, and would need to focus on benefiting the

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nation, the hospitals, the patients, and medical personnel, a process of reform which would be even more arduous than the reform of the state-owned business system. F.  New Changes in the Social Infrastructure; the Economic Crime Case Rate Increases The socialist market economic system has become the basic institutional structure of Chinese economic life; thus, the structure of the market economy has become an important component of the social order. In 2007, economic crime cases actually continued to increase, although criminal offense cases were reduced and the social order overall was improved. From January to October of that year, the national public security organizations altogether registered a record 62,000 cases, an increase of 9.1% over the previous year. Of these cases, 27,000 cases involved manipulation of the market order, an increase of 29.2% over the previous year; and 1,904 cases involved infringement of intellectual property, an increase of 31.5% over the previous year. Of these, counterfeiting of registered trademark cases increased by 49% over the previous year, counterfeiting patent cases increased by 33.3%, and cases of selling replicas increased by 134.8%. Along with the development of a market economy, maintaining the market order has become an important social welfare problem that deeply affects the people’s livelihood. G.  Environmental Problems and an Increase in the Rate of Environmental Pollution Issues In 2007, as a result of the fact that swift economic growth continued to increase pressures on the resource environment, the perception of environmental protection underwent a historical transformation. The government increased its efforts in the areas of energy conservation and discharge reduction, it rigorously enforced the law-enforcement supervision of the environment, and proposed efforts to resolve outstanding environmental problems that harm the health of people and affect sustainable development. From January to June 2007, the countrywide GDP energy consumption units experienced a drop of 2.78% over the previous year. The total sulfur dioxide discharge was 12.634 million tons, a drop of 0.88% over the previous year, which reversed the recent tendency of increasing sulfur dioxide discharge. The total discharge of



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chemical oxygen demand (COD) in 2007 was 6.913 million tons, an increase of 0.24% over the previous year; though the increased range experienced a drop of 3.46 percentage points over previous years. However, in 2007, while the GDP rate of increase surpassed 11%, the objective of the central government for “energy conservation and discharge reduction” was once more faced with unprecedented pressure after remaining uncompleted in 2006. Environmental losses in China accounted for 8%–13% of the GDP in 2006, and China’s rank in the sustainable environment index was 133rd among 144 nations. Moreover, given the enhancement of material and cultural demands, environmental pollution problems involving the people’s livelihood have increased. In 2007, the growth of blue algae in Tai Lake caused the several million residents in Wuxi City of Jiangsu to halt the supply of drinking water for several days, a clear warning that paroxysmal environment problems could endanger the people’s livelihood. This instance serves as a warning that, from now on, environmental problems that directly affect the people’s livelihood will increase and the environmental deterioration of drinking water security must be reversed. III.  Socio-Economic Development in 2008 Generally speaking, in 2008, the socio-economic development will maintain its positive trajectory, social construction focused on the people’s livelihood will be promoted, the strength of social management system reform will increase, and scientific development concepts and strategies to promote the establishment of a socialist harmonious society will be further implemented. A.  Socio-Economic Development in 2008 1.  2008 Will Be a Landmark Year in the Development History of China 2008 will become a landmark year in the development history of China. This is not only because 2008 is the 30th anniversary of China’s international reform, but also because this is the year that China will hold the Olympic Games for the first time; in the cases of Japan and South Korea, hosting the Olympic Games became a milestone in their modernization history. 2008 is also the preparatory year for the celebration of the 60th anniversary of the establishment of the People’s

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Republic of China, so the Chinese people will be preparing for their country’s first anniversary celebration in the new century. China’s GDP in 2008 will surpass Germany’s to be ranked third in the world, and its international standing regarding economic and social development will be further promoted. 2.  Maintaining Swift Economic Growth and Preventing Violent Market Fluctuations In 2007, the rise of the price index in 2007 surpassed the regulative goal and the economy exhibited signs of overheating, a situation which could possibly be exacerbated by China’s hosting of the Olympic Games in 2008. As a result, the prevention of violent market fluctuations and the maintenance of steady and swift economic growth have become focal issues. Meanwhile, vigilance must be maintained regarding a possible decline in economic growth following the Beijing Olympic Games, as well as the possibility that the withdrawal of international “hot money” (热钱) will influence the stability of the Chinese economy on a macroscopic level. Judging from the current development, in 2008, China will continue the trend of an economic growth rate of 10% and above; a trend which has lasted for the past five years. Additionally, China’s huge economic system will absorb the impact of the 2008 Olympic Games on the Chinese economy so that the fluctuations will be less than anticipated. 3.  Promotion of a Social Infrastructure that Prioritizes the Improvement of the People’s Livelihood In 2008, national finances will continue to be invested in the areas of social construction and fiscal expenditure that favor education, employment, medical services, housing, and environmental protection; the requirements for social construction will also be comprehensively carried out. In the area of education, focal points will include the balanced development of compulsory education, improving the popularity of high school education, developing vocational education, and ensuring that rural migrant laborers in urban areas enjoy equal access to compulsory education. In the area of employment, focal points will include diligently establishing a unified and standard human resources market, forming an equal employment system for urban and rural workers, and standardizing and coordinating labor relations. In the area of income distribution, focal points will include diligently promoting efficiency



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and fairness in primary employment assignments and redistribution, creating conditions that give a larger population property income, and gradually reversing the tendency towards expanding differential in income distribution. In the area of social security, focal points will include comprehensively advancing basic medical insurance for urban employees and residents, constructing a new rural cooperative medical service system, formulating a national unified measure for the transfer and renewal of social security, and accelerating the resolution of the housing difficulties of urban low-income families. In the area of medical service, focal points will include advancing reform according to the principle of separating government administration from medical institutions and increasing government responsibilities and investments. In the area of social management, focal points will include properly settling disputes, promoting the construction and management of social organizations, and strengthening the services and management of the floating migrant laborer population. 4.  Public Welfare Goals Become a Focus of Medical System Reform The medical system reform plan was formed after extensive consideration, controversy, and argumentation, and it is estimated that it will be submitted to the National People’s Congress in March 2008 for discussion, examination, and approval. This plan emphasizes public welfare and promotes public medical services, strengthens the government’s responsibilities and investments, focuses on differentiating the responsibilities of the government and the market, and stresses the construction of a public health care service system, medical service system, medical insurance system, and an insurance system for medical supplies that covers both urban and rural residents. It also establishes eight policy mechanisms, including the medical management mechanism, the operation mechanism, the financing investment mechanism, the supervisory mechanism, the information technology mechanism, the human resources mechanism, the pricing mechanism, and the legislative safeguard mechanism in order to guarantee the sound operation of a basic medical and health care system in a market environment. Additionally, it stressed the establishment of two basic national systems: a national system for basic pharmaceuticals and a public hospital managerial system, in order to gradually realize “the proper treatment of patients” and the objective of public basic medical services.

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5.  Official Implementation of the New “Labor Contract Law” Will Further Improve Labor Relations On January 1, 2008, the new “Labor Contract Law” will come into effect, and its implementation will be a hot topic in 2008. This new “Labor Contract Law” will standardize the employment system in many aspects. For example, the signing rate of labor contracts will be further expanded, the collective negotiation system and the consultation mechanism between the government, trade unions, and businesses will be further developed, the function of trade unions will be strengthened in the coordination of labor relations, laborer’s rights and interests will have better institutional safeguards, and actions which violate laborer’s rights will be further contained. The employer unit’s legal interests will also be protected, businesses’ human resources management structure will be further adjusted, and the development of legitimate flexible employment forms will be undertaken. In short, the official implementation of the new “Labor Contract Law” will cause the establishment of harmonious labor relations to enter a new stage. 6.  A Successful Beijing Olympic Games Will Further Promote China’s Increased International Involvement In order to successfully host the 2008 Olympic Games, China carried out comprehensive preparation in 2007. For example, in 2007, the construction of all hardware facilities is expected to be completed, and other preparatory work will reach the countdown stage as the public at home and abroad wait for the 2008 Beijing Olympic Games. Because China has carried on unprecedented preparation for this Olympic Games, the 2008 Beijing Olympic Games will successfully exhibit China’s reform and development achievements over the last 30 years. This prosperous, unified, and harmonious image of a civilized ancient nation and current economic power will strengthen the exchange and interaction between China and the world and promote China’s international involvement and understanding. B.  Policy Suggestions that Promote the Harmonious Development of Chinese Society In light of certain problems that China faced in 2007 in the areas of construction and development, and in order to successfully promote economic development in 2008, the following policy changes are suggested:



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1.  Improvement of Scientific Regulation and the Prevention of Economic Development Risks Since China’s reform and increased international involvement of thirty years ago, relations between the Chinese economy and the global economy have become closer and mutual influence is gradually increasing. At the beginning of 2007, the overall condition of the world economy was not performing as expected. The American real estate and junior debt crisis affected not only America’s consumption, but also the world economy, creating a large variable in global economy trends. Since 2007, the Chinese stock market has experienced superior development. A great number of residents have participated in the stock market and exceptional changes in the market have had tremendous influence on social stability. Moreover, the price of food and housing continues to rise, which has had a great influence on a large portion of mid- and lower-income residents’ life and consumption. Environmental pollution, in particular the safety of urban drinking water, has also become an important factor that increasingly influences the economic growth and society at large. Therefore, in 2008, the power of scientific macroeconomic regulation and control must be strengthened, violent economic fluctuations must be prevented, and the risks in price, stock market, finance, and environment must be carefully followed. 2.  Improvements in Income Distribution Adjustment and Worker Benefits China’s financial revenue grew by more than 20% in recent years, and 2007 marked the 15th year that the growth rate of financial revenue surpassed the GDP growth rate. The proportion of financial revenue in GDP rose from 10.3% at the end of the “Ninth Five-Year Plan” to 18.4% at the beginning of the “Eleventh Five-Year Plan.” However, in the meantime, the position of resident and labor income fell in relation to the national income, and the proportion of total staff wages in the GDP dropped from 13.3% at the end of the “Ninth Five-Year Plan” to 11% at the beginning of the “Eleventh Five-Year Plan.” The influence of these changes in the income distribution pattern on the economic development must be carefully analyzed in order to gradually improve the proportion of resident income within the distribution of national income and the proportion of labor benefits in the primary distribution, as well as to strengthen the drawing function of resident consumption towards economic growth. Tax regulation must also be strengthened, management monopolies must be broken, and fair opportunity must be established. We must also continue to advance the reform of the

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civil servants’ wage system and of the income distribution system of institutions in order to reverse the expanding differentials in income distribution gradually and, in particular, the expansion of differentials between urban and rural resident’s incomes. 3.  Developing a Support System for the New “Labor Contract Law,” and Reducing Evasion and Abuse Even before the new “Labor Contract Law”《劳动合同法》had fully come into force, certain actions to evade this law occurred, indicating that information and interpretation regarding the “Labor Contract Law” for employers and employees must be comprehensively developed. Simultaneously, rules regarding the implementation of the “Labor Contract Law” needed to be developed in order to facilitate and protect workers’ legitimate rights and interests as well as safeguard employers. And finally, other supporting laws, regulations, and criteria must be formulated as soon as possible, and new labor disputes should be properly dealt with. 4.  Comprehensive Plans Regarding Urban and Rural Areas, the Integration Process, and the Promotion of a Balanced Development Presently, the statistical urbanization rate is about 44%. However, the comparison of two statistical indicators indicates that the differential between the proportions of the urban registered permanent population and the urban resident population continues to increase, and has reached approximately 15 percentage points as of 2006. This is to say that, at present, more than 200 million of the statistical urban populations nationwide, who have lived in an urban area for at least six months, are still registered at their rural permanent residence. This situation is very disadvantageous for the rural population working in urban areas and for urban development. This situation is also very unfair to migrant laborers as they presently face many difficulties in enrolling their children in school, seeing a doctor, and securing housing. Urban areas must regard the rural resident populations working in the city as new citizens, and must enhance the level of social management and community service supporting this demographic. Urbanization must be further developed, and concurrent to the increasing numbers of migrants, the status transformation of these transferred populations must also be realized. Thus, the integration of migrant laborers and urban areas will be promoted, and a fair and balanced development between urban and rural areas will be encouraged.



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5.  Development of an Anti-Corruption Initiative and the Construction of Important Anti-Corruption Systems In 2007, the Chinese government made important achievements in anti-corruption work. A group of corrupt individuals, including Chen Liangyu, were given due penalty and the public was both inspired and encouraged by these prosecutions. The State Council also established the National Bureau of Corruption Prevention of the People’s Republic of China to create new conditions for strengthening the construction of a domestic anti-corruption system and to increase international cooperation in these efforts. The report of the 17th Party Congress promoted greater requirements for the improvement of anti-corruption work. In particular, it stressed that the punishment and prevention of corruption would influence public sentiment towards this or that regime and ultimately to the success or failure of the party as a whole. Anti-corruption efforts must be continued and research and planning of important anti-corruption systems should be accelerated, including an open system of cadre income and property registration, in order to create a positive environment for secure economic development and social stability.

Income and Consumption Levels of Urban and Rural Residents in China Lü Qingzhe Key words: resident income, resident consumption, quality of life, traveling consumption, Engel’s coefficient, housing price, gap between the rich and the poor, food prices

I.  The Accelerated Growth of Urban and Rural Resident Incomes The disposable income per person for urban residents reached 11,759 yuan in 2006, a growth of 52.7% over 2002; the average progressive increase was 9.2% yearly after deducting price factors. From January to September 2007, the disposable income per urban resident was 10,346 yuan, and it actually grew to 13.2% after deducting price factors, with the increased range of 3.2 percentage points more than the previous year. Along with the accelerated growth of urban residents’ incomes, the composition of these incomes also underwent changes. The wage income as the main component of urban residents’ incomes accounted for 68.9% of total income, a drop of 1.3 percentage points over 2002. The proportion of transfer income was 22.8%, a drop of 1.7 percentage points over 2002. The proportion of income from business and property also increased, becoming a bright spot in urban residents’ income increases. The proportion of net income from business was 6.4% and the proportion of property income was 1.9%, a growth of 2.3 and 0.9 percentage points over 2002, respectively. Rural resident incomes were steadily growing and in 2006, the net income per rural resident was 3,587 yuan, a growth of 44.9% over 2002 by 1,111 yuan, and a yearly average growth of 6.2% after deducting the influence of price factors. From January to September of 2007, the cash income per rural resident was 3,321 yuan and actually grew to 14.8% after deducting the price factors, which was 3.4 percentage points higher than the previous year.

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lü qingzhe II.  Improvement in Urban and Rural Residents’ Consumption

In 2006, relative to the swift growth in income levels, urban residents’ nonproductive expenditures were steady. The annual nonproductive expenditure per person was approximately 8,697 yuan, a growth of 44.2% over 2002, and the yearly average growth was 7.6% after deducting price factors. The living cost per rural resident was enhanced from 1,834 yuan in 2002 to 2,829 yuan in 2006, a growth of 54.2%. The average progressive increase was 11.4% per year and it actually grew 36.1% after deducting the price factors, while the yearly average growth was 8.0%. In the past four years, the yearly average actual increase of nonproductive expenditures was 1.8 percentage points more than that of incomes; therefore the rural resident consumption level experienced a comprehensive rise. In regards to the eight aspects of rural residents’ personal consumption, the expenditure per rural resident in food, clothing, housing, and household equipment reached 1,217 yuan, 168 yuan, 469 yuan, and 127 yuan, respectively, in 2006, growth rates of 43.5%, 60.0%, 56.2%, and 57.5% over 2002. Additionally, consumption levels in the areas of transportation and communication, culture, education and entertainment, healthcare, and others areas reached 289 yuan, 305 yuan, 192 yuan, and 63 yuan, respectively, growth rates of 1.2 times, 45.1%, 84.2%, and 9.4% over 2002. III.  Distinct Improvement in Urban and Rural Residents’ Quality of Life In recent years, along with the increasing prosperity of the consumables market and the progressive improvement of the consumption environment, residents have had more choice in their consumption, and their quality of life has seen a distinct improvement. A.  Increase in the Consumption of High-Quality Foods and Improvement in Overall Nutrition Presently, the basic characteristics of residents’ food consumption are that the consumption level has improved and the proportion of diet expenditures at home has dropped. Additionally, the consumption quality has improved, the consumption of meat, eggs, milk, and aquatic



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products has increased, and the overall meal structure is developing in accordance with nutritional and scientific guidelines. Regarding urban residents’ food consumption structure, the grain consumption per person had dropped from 78.4 kg in 2002 to 75.9 kg in 2006, and the proportion of food expenditures had dropped from 8.4% in 2002 to 7.9%. The expenditures of eating out have also grown largely. In 2006, these expenditures per urban resident were 691 yuan, a growth of 67.3% over 2002, and the proportion in food expenditures rose from 18.2% in 2002 to 22.2%. In 2006, the rural residents’ nonproductive food expenditures reached 1,217 yuan, a growth of 43.5% over 2002. Compared with 2002, rural resident consumption of grain, vegetables, cooking oil, and sugar dropped, though there was an increase in meat, eggs, milk, and aquatic product consumption etc. During the past four years, the per-person consumption of grain, vegetables, cooking oil, and sugar was reduced by 31 kg, 10 kg, 1 kg, and 0.6 kg, respectively. In the meantime, the consumption per person of meat, poultry, and other products increased by 3.7 kg, a growth of 19.9%; the consumption of eggs and egg products increased by 0.3 kg, a growth of 7.4%; the consumption of milk and milk products increased by 2 kg, a growth of 1.6 times; and the consumption of aquatic products increased by 0.7 kg, a growth of 15.1%. Considering the basic meal structure, the meal structure of rural residents was changing and the level and quality of food consumption experienced comprehensive improvement. The expenditures per rural resident for eating out increased from 90 yuan in 2002 to 164 yuan in 2006, and the proportion of food expenditures increased from 10.6% to 13.5%. B.  Ownership of Primary Consumer Durable Goods Doubles From 2003 to 2006, the modern durable consumer goods owned by urban residents continuously increased and every hundredth households’ possession of a family car, air conditioning, a computer, and a mobile phone etc. also continued to increase. In 2006, every hundred urban resident families’ owned 4.3 family cars, a growth of 3.4 times over 2002. Every hundred families also owned 87.8 air conditioning units, a growth of 0.6 times over 2002; every hundred families owned 47.2 computers, an increase of 1.1 times; and, every hundred families owned 152.9 mobile phones, a growth of 1.3 times over 2002.

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In 2006, of the newly bought primary home appliances owned by rural residents, every hundred families purchased an average of 2.4 refrigerators, a growth of 2 times and an expenditure growth of 2.1 times; 0.9 air conditioners, a growth of 1.6 times and an expenditure growth of 1.1 times; 0.3 ventilators, a growth of 62.1% and an expenditure growth of 1.3 times; 1.4 water heaters, a growth of 1.3 times and an expenditure growth of 2.1 times; 0.6 microwave ovens, a growth of 2.1 times and an expenditure growth of 1.9 times. In regards to the newly bought primary culture, education and entertainment goods purchased that year, every hundred families purchased an average of 5.4 color TV sets, a growth of 32.4% and an expenditure growth of 18.2%; 0.2 cameras, a growth of 39.3% and an expenditure growth of 4 times; and 0.6 computers, a growth of 2.3 times and an expenditure growth of 2.1 times. C.  Distinct Improvements in Housing Conditions and Environments In 2006, the housing floorage per urban resident was 22 m2, a growth of 3 m2 over 2002, or 15.8%. Additionally, the expenditures for purchasing and constructing housing were 972 yuan, a growth of 81.3% over 2002, and the occupancy rate of private houses was 87% in 2006, a growth of 5 percentage points over 2002. In 2006, the living area per rural resident was 30.7 m2, a growth of 15.5% over 2002. In regards to the rural housing conditions, first, the sanitary conditions of housing improved; laborer households with a bathroom accounted for 14.7%, a growth of 75.1% over 2002, and the laborer households without a bathroom accounted for 8.8%, a reduction of 26.4%. Second, the amount of laborer households using clean energy increased and the laborer households that used the clean fuels of liquid gas and electricity accounted for 14.0%, a growth of 51.4% over 2002. Third, the quality of drinking water improved; laborer households with running water accounted for 38.8% of the total, a growth of 26.9% over 2002. Additionally, the number of laborer households drinking unhealthy water, including shallow well water, rivers, lakes, and pond water was reduced to 13.5%. Fourth, the external housing environment has improved; in 2006, 32.4% of peasant households had cement or paved roads around their houses, and 25.8% of peasant households had hard-surfaced roads, such as stone or flagstone, around their houses.



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D.  An Increase in the Consumption of Ready-Made Clothing In 2006, the clothing consumption per urban resident was 902 yuan, a growth of 52.6% over 2002. This tendency towards ready-made clothing consumption was improving yearly, and clothing expenditures were 647 yuan in 2006, a growth of 55.5% over 2002. The clothing expenditures per rural resident were 168 yuan in 2006, of which 113 yuan were for purchasing ready-made clothing, a growth of 85.0% over 2002, and accounting for 67.1% of nonproductive clothing expenditures, a growth of 8.8 percentage points over 2002. In 2006, each person purchased 2.3 items of ready-made clothing on average, a growth of 65.4% over 2002. 1.  Travel Consumption in China Ranks First among 14 Asian Countries and Regions Along with the growth of household incomes, more and more Chinese people are able to spend their extra funds on leisure activities and tourism. The globally famous media organization the Nielsen Company’s last investigation indicated that 53% of Chinese consumers planned on spending their surplus funds on vacationing, and the country ranked first place among 14 Asian countries and regions in its travel, which was higher than Singapore, Thailand, Malaysia, Vietnam, Japan, and India. The Nielsen Company’s online investigation of 3,000 Chinese network users indicated that nearly ¾ of all consumers had made at least one domestic leisure trip or more (being away from home at least one night) in the past 12 months (from June 2006 to May 2007). More than half of this number then travelled 2–3 times, and 16% travelled 4 times or more. The Nielsen’s investigation also showed that enjoying the natural scenery on a sightseeing trip was a priority for Chinese tourists when planning domestic travel. More than 40% of interviewees expressed the desire to return to nature, and nearly one out of three leisure tourists had traveled to a forested park area in the past 12 months. Therefore, the forested park was the leisure sightseeing site most favored at home. However, “city travel” was also a fashionable option. Last year, nearly 1/5 (19%) of leisure tourists traveled to Shanghai, of which Shanghai City and Zhejiang Province both became the most visited leisure traveling destinations. Because more and more companies encouraged their staff with travel packages, and reward travel had become increasingly

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common, from June 2006 to May 2007, reward travel composed 15% of all business trips. The findings of the investigation indicated that the prevalence of leisure travel mainly reflected a change in the Chinese people’s ideological state and life style, and their attention has begun to shift from work to leisure and amusement. Obviously, increases in individual wealth have driven this change, and this has enabled more Chinese people the opportunity to travel with ease. IV.  Changes in Urban and Rural Resident Consumption in the Areas of Development and Enjoyment In recent years, the proportion of urban and rural resident consumption in the areas of development and enjoyment continued to improve, and the proportion of food expenditures continued to drop. A.  The Engel’s Coefficient Drops The urban residents’ Engel’s coefficient dropped from 37.7% in 2002 to 35.8% in 2006, a drop of 1.9 percentage points. The rural residents’ Engel’s coefficient dropped from 46.2% in 2002 to 43.0% in 2006, a drop of 3.2 percentage points. B.  Development and Enjoyment Related Consumption Increases Of the urban and rural residents’ living costs, the development and enjoyment-related consumption in the areas of traffic and communications, culture and education, and amusement and healthcare were increased by a large margin, and the proportion increases were stable. Along with the increases in the numbers of family cars and the popularization of electronic products, such as the computer and the cellular phone, traffic and communications have become a new horizon in consumption. In 2006, the traffic expenses per urban resident were 607 yuan, a growth of 127.3% over 2002; and communications expenditures per person were 540 yuan, a growth of 50.4% over 2002. In 2006, the expenditures per urban resident on education, culture, and amusement services were 1,203 yuan, a growth of 33.4% over 2002. The expenditures in medical services increased from 122 yuan in 2002 to 192 yuan in 2006, a growth of 57.4%.



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In 2006, the percentages of expenditures per rural resident in the areas of traffic and communication, culture, education and amusement, and healthcare were 10.2%, 10.8%, and 6.8%, respectively. The total proportions of these three expenditures were raised 3.6 percentage points, of which the proportions of traffic and communication expenditures grew the fastest. In 2006, the rural resident’s traffic and communication expenditure levels were 1.2 times higher than 2002, and the proportion of expenditures rose 3.2 percentage points over 2002. 1.  Service Expenditures Improve Along with the improvement of basic living standards, the tendency of urban residents regarding home services is becoming more and more obvious, the demands of service expenditures are on the rise, and residents’ nonproductive expenditures have been gradually diverted to the service consumption. In 2006, the service expenditures per person were 2,441 yuan, a growth of 47.9% over 2002, and the proportion of nonproductive expenditures rose from 27.4% in 2002 to 28.1% in 2006. Of the rural residents’ nonproductive expenditures, the service expenditures per person rose from 528 yuan in 2002 to 867 yuan in 2006, and the proportion of nonproductive expenditures rose from 28.85 to 30.6%, a rise of 1.8 percentage points. 2.  Urban Residents Experience an Increase in Housing Costs The improvement of living conditions has made urban residents pay more attention to their living conditions and environment and seek a comfortable home life with environmental protections. The housing cost per urban resident was 904 yuan in 2006, a growth of 44.9% over 2002. 3.  The Increase of Rural Residents’ Monetary Consumption Expenditures The cash expenditures of rural residents’ personal consumption rose from 1,468 yuan in 2002 to 2,415 yuan in 2006, a growth of 64.6%. Additionally, the proportion of cash expenditures in the total amount of personal consumption rose from 80.0% in 2002 to 85.4% in 2006, a growth of 5.4 percentage points.

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lü qingzhe V.  Key Issues Regarding Residents’ Personal Consumption

A.  The Rise in Urban Housing Prices Exceeded the Financial Capacities of Residents In recent years, housing, education, and medical expenditures, also known as the “three mountains” (三山), have divided resident purchasing power to a great extent. However, of those three expenditures, the continuous rise of housing prices has grown to occupy an unanticipated portion of total resident consumption, and has become a destabilizing factor in the current economy. If this violent rise in housing prices cannot be effectively checked, the desire to own a house among middle and low income residents will be thoroughly destroyed, bringing housing to the forefront of current social issues and attracting the public attention. Since 2000, the price of real estate has risen continuously. From 2004 to 2006, the selling price index for housing was respectively 109.7, 107.6, and 105.5, of which the increase in the housing selling prices was higher than that of the non-housing selling prices, and the index had surpassed 5% for 4 consecutive years. Looking at this year, the house selling prices exhibited a consistent rising tendency. In the first quarter, the selling price in 70 large or mid-sized cities rose by 5.6% over the previous year; in the second quarter, it rose to 6.3%; in the third quarter, it rose to 8.2%; in September, it rose to 8.9%; and in October, it rose as high as 9.5%. Of these, individual cities had a faster rise; in the first three quarters, there was a rise of 15.7% in Shenzhen, a rise of 12.1% in Beihai City, and a rise of 10.1% in Beijing. In regards to the percentage of commercial house sales funds in the urban residents’ gross incomes, this percentage has risen rapidly after the reform of urban housing system in 1998, and reached 25.41% in 2005, which was a raise of 16.52 percentage points over 1998. Compared with the percentage of urban residents’ nonproductive housing expenditures in the total amount of disposable income per person, the percentage of commercial housing sales funds in the gross incomes of urban residents actually showed the situation of residents’ expenditures in regards to purchasing a house. This means that more than 1/4 of urban residents’ incomes in 2006 were used for purchasing houses, and it is estimated that this percentage will reach approximately 30% in 2007. If the proportion of housing expenditures is larger than the residents’ consumption, then this situation can become a destabilizing factor that



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affects the sustainable, timely, and sound development of the entire national economy. The heavy economic burden associated with buying a house would not only outweigh the residents’ other consumptions, but it could also easily create an abnormal consumption structure. From 1998 to 2006, the disposable income per urban resident calculated by the current prices grew by 8.9% on average, though the housing sales amount growth according to current prices reached 32.6%. An increasing portion of national income is being used on housing consumption, which will have a big extrusion effect on the consumables market. Because the anticipated price of real estate will continue to rise to a large extent, many families are able to curtail other areas of consumption in order to scrape together the initial down payment and pay their monthly installments. Exorbitant initial down payments and monthly installment amounts have begun to eclipse other consumer demands, and the overwhelming majority of house-buyers have reduced their consumption of other commodities and services. This in turn has badly weakened the policy effects by which China stimulated domestic demand and has become a primary barrier to resident consumer demand. To be able to live and work in peace and contentment is a basic condition necessary for establishing a harmonious society. If an individual cannot purchase a house after a lifetime of striving, or if an individual has to work their entire lives just to purchase a house, then it is difficult to say that individual has a happy life. The relevant government departments should focus on this problem concerning the people’s livelihood, and should expand their efforts to resolve the problem of high housing prices. B.  The Increase in the Price of Raw Foods and the Costs of Living for Urban Low-Income Families Worsen In the first half of 2007, it was discovered that the disposable income per person among urban low-income families was 2,029 yuan, and the nonproductive expenditures per person were 1,922 yuan. The nonproductive expenditures per person on food were 920 yuan, which comprised 45.4% of disposable income, and was 20 percentage points more than the average nationwide percentage. Additionally, the percentage of nonproductive expenditures on food in the total nonproductive expenditures (namely Engel’s coefficient) reached as high as 47.9%, 10.8 percentage points more than the nationwide average. The rise in the price of raw food products, such as grains, edible vegetable oil, pork,

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fresh eggs, and fresh vegetables, had a big influence on low-income families, and definitely increased the cost of living for low-income urban families. C.  Urban and Rural Market Shares Do Not Match and the Contribution Rates of the Rural Market Are Low In 1995, the percentage of urban and rural consumable retail rates among the total retail rates of social consumables were 55% and 45%, respectively, a difference of 10 percentage points. This figure was expanded to 27.2 percentage points in 2001 and 35 percentage points in 2006, of which the proportion of rural market consumable retail rates among the total retail rates for social consumables was less than 1/3. In regards to total consumption, the rural population of China was more than 1.3 times the urban population in 2006, though 48.2% of the total rate of retail purchases of consumables was made by urban residents. The contribution rate of the rural market to the retail rates of social consumables was only 20.8% in 2003 and 30.2% in 2006. In regards to the consumption structure, the urban residents’ Engel’s coefficient dropped to 35.8% in 2006, which was still considered well off. However, the rural resident’s Engel’s coefficient still reached 43%, and simply concentrated on the provision of food and clothing, with their nonproductive expenditures still confined to the basic necessities of life. If service consumptions in the areas of culture, education, and services, excepting physical commodities, are counted, the differential between urban and rural consumption is even more marked. Therefore, whether from gross amount and structure or quality of consumption, the rural residents’ consumption level was far lower than that of urban residents, and has dropped about 10 years behind their urban counterparts. D.  Expansion of the Consumption Differential China is a low-income developing country and the excessive expansion of the income differential is reducing the consumption tendencies of residents, so that in recent years, consumption tendencies have assumed a declining trend. For example, the average propensity to consume among the 10% of highest-income urban households had dropped from 72% in 2000 to 67.1% in 2006, which was 7.6 and 6.9 percen-



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Table 2.1: Average Consumption of Urban and Rural Residents Unit: % Year

2000 2005 2006

Countrywide average level

Lowest income households

Urban residents

Rural residents

Urban residents

Rural residents

79.6 75.7 74.0

74.1 78.5 78.9

92.6 92.3 89.8

121.8 145.1 137.5

Highest income households Urban Rural residents residents 72.0 68.0 67.1

59.5 59.3 62.3

tage points lower than the nationwide average level of urban residents (See Table 2.1). From these figures, we can see the difficulties in realizing the potential of the larger market are a result of the fact that the growth of the income differential may cause different propensities to consume. Large income disparities mean that social wealth will increasingly be bestowed on high-income residents, therefore damaging the distribution of purchasing power and creating an interruption in the consumption chain. In 2006, every hundred urban resident families owned 137.4 color televisions, 91.8 refrigerators, and 96.8 washers, while every hundred rural residents owned only 89.4, 22.5, and 43, respectively. These home appliances prematurely reached overcapacity because of insufficient demand, while some emerging products experienced the phenomenon of becoming unsellable after coming onto the market soon, and the expansion of social demands was restricted by issues of supply and demand. Some foreigners consider China to be a country of nearly 1.3 billion consumers, though in fact only 10% of the Chinese people could be classified as customers with strong purchasing capacity or with any purchasing capacity at all. E.  Problems Regarding Product Safety, Particularly Food Safety Although the relevant departments have succeeded in expanding efforts to rectify the market order, and this measure has worked to a certain extent, the production of fake and sham products and other issues that badly damage consumption in the commodity market still go unchecked. Additionally, nonstandard competitive market behavior, such as exaggerated advertisements and false discounts, also frequently occur. For

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example, in rural areas, many farmers are still frequently harmed by the existence of fake and shoddy commodities, and as well as false agricultural chemicals, seeds, and chemical fertilizer, a phenomena which indicates that the problem of consumption safety in China is still severe and that these problems will continue to restrict the normal development of the commodity market to a certain extent. F.  Contrasts in the Actual Living Conditions of Different Consumer Groups Unbalanced development of the economy results an increasing expansion of resident income differentials between industries, regions, and different social groups, and these income differentials also lead to continued differentials in the residents’ purchasing power. Because of a huge diversity of income and wealth, an intense contrast of actual living conditions is apparent between the richest sectors of society and the poorest. A minority of people lead a rich and even luxurious life, while others are incapable of providing sufficient food and clothing for themselves. This type of differentiation inhibits the huge potential of the Chinese market from being realized. 1.  The High-Income Group In 2006, the disposable income of urban and rural high-income households was equivalent to 2.26 times and 2.36 times the national average, and the consumption level per person were equivalent to 1.96 times and 1.87 times the national average. This group mainly focused on consumption quality and the personalization and modernization of the consumption structure. They emphasized high quality, brand, fashion, and individuality in their material consumption. Additionally, spiritual consumption and service consumption have become key trends as well. In regards to concrete commodity demands, high-grade products, import commodities, and luxury goods have become consumables, and consumption consists mainly of travel abroad, star-rated hotels, golf, and high-quality import goods. However, this consumption only accounts for a small percentage of the total, and cannot settle the problem of insufficient consumer demand in China. Moreover, it is worth noticing that, although the high-income consumer group represents a small part of the population, its total consumption is limited and its function as model and guide cannot be underestimated.



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2.  The Middle-Income Group The basic consumer demands for this stratum of society have been met, its consumer behavior is rational, and its consumption level is relatively high. However, the consumption structure is in position for further improvement, the rate of expenditures on development and enjoyment related consumption are continuously expanding, and the proportion of expenditures on subsistence consumption has continued to decrease. This sector of society pays great attention to the quality and design of consumables, but is not immune to pursuing famous brand names. They also value home decoration and fashion. Regarding the upscale consumables, such as housing and automobiles, they pay attention to the price; economical considerations and practical basic household goods are still their primary area of consumption. For the majority of middle-income consumers, thousand-yuan level and ten thousand yuan level consumption demands have been basically met. Yet, because of the restriction of purchasing power, the potential for higher-level consumer demand (for consumables at the ten-thousand yuan level and above and hundred-thousand yuan level) still needs a long time in order to be realized. 3.  The Low-Income Group At present, the low-income group mainly consists of unemployed urban residents and a majority of farmers and, although the income levels in this group have improved in recent years, its members still belong to the impoverished sector of society. Their income restrictions have dictated their cautious consumer behavior, and for the most part, they just meet their basic living demands. In regards to the improvement of their living conditions and their quality of life, they often lack the ability to do what they would like, although they do possess the desire and demand. This group presents a large consumption potential, though their low-income levels have restricted the realization of their potential consumption; therefore increasing this group’s income level could result in the doubling of consumption with only half of the promotion effort. Presently, the residents of low-income households still suffer from financial pressures. In 2006, in 10% of the urban and rural lowestincome households, the income per person was respectively at 38.8% and 33% of the national average, and the nonproductive expenditures per person were at 47.2% and 57.4% of the national average,

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respectively, so that income and expenditures basically balanced out. In 2005, the Engel’s coefficient of 10% of urban and rural low-income households was respectively 47.4% and 51.4%, 10.7 and 5.9 percentage points higher than the national average. The food expenditures alone accounted for up to half of the incomes of urban and rural low-income families and housing expenditures accounted for 12.3% and 13.3% of their income, with the family healthcare expenditures increasing to more than 15%. The amount of these expenditures increased at a rapid pace and served to increase financial pressures on low-income households, while reducing their risk resistance abilities. VI.  Suggestions for Improving Residents’ Living Standards A.  Prevention of a Structural Rise in Prices The policy of supporting and benefiting agriculture must be further implemented in order to stabilize grain-producing areas. Effort must be exerted to establish far reaching policies that ensure steady development in the area of animal husbandry, especially in area of pig production, in order to mobilize cultural enthusiasm regarding pig feeding, which would fundamentally settle the issues and problems surrounding live pig production, circulation, consumption, and market regulation. Simultaneously the policies and measures concerning the production of oil producing plants and the dairy industry must be implemented. The supply of agricultural products and byproducts, such as grain, must be increased; the export and demand for grain used in the ethyl alcohol industry must be suitably controlled; and measures regarding live pig production must be further implemented. Policies concerning price adjustment must also be implemented at the appropriate moment in order to prevent overlaps in cost price fluctuations. The market order must be further standardized, illegal behaviors concerning price fixing must be curtailed, direct grants for low-income groups should be increased, and continually anticipated price increases must be reduced. Additionally, attention must be paid to changes and influences of price, especially cost fluctuations.



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B.  Perfecting and Implementing Preferential Policies in Employment and Expanding the Job Market by Any Means Possible Since 2002, along with the implementation of a positive employment policy, the overall employment rate has been steadily growing nationwide, and the population of the newly employed continues to rise. At the end of 2006, the national employment rate reached 764 million. From 2003 to 2006, altogether 19.65 million unemployed persons were reemployed, of which 5.37 million people experiencing difficulties securing employment because of their advanced age (mainly laid-off men over 50 years of age and women over 40 years of age) obtained re-employment. The rate of newly employed urban residents reached nearly 10 million, on average, yearly nationwide, and the rate of newly employed urban residents reached 11.84 million in 2006. From January to September 2007, the rate of newly employed urban residents reached 9.20 million nationwide. Preferential policies and measures must be perfected and implemented, including policies regarding employment and re-employment and policies regarding tax reduction, exemptions, and micro-credit. The function of the government in the employment sector should be comprehensively developed, vocational guidance and vocational training should be established, and high-quality employment services should be provided in order to allow more unemployed persons to obtain full-time employment, as the issue of the Chinese population and the laborer supply exceeding demand will still continue to exist for a long time. Additionally, the re-employment problem for laid-off and unemployed persons from state-owned and collective businesses has not yet been completely settled, and the employment problems of new laborers, such as university graduates and migrant laborers, as well as the issue of employment and settlement for farmers with levied land are still outstanding. Also the employment and re-employment situation continues to be severe, and the duties of the government will increase accordingly. Those barriers affecting resident consumption must be eliminated, and the consumption domain must be expanded in order to create more employment opportunities while also promoting consumption.

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C.  High Housing Prices Must Be Checked, and the Housing Securities System Should Be Improved Presently, housing system reform in China is faced with outstanding problems that need urgent resolution. Public perception of housing system reform has gradually turned to indifference, and it is even believed by some that this reform has already been completed. The price of ordinary commercial housing is excessively high, and has surpassed the financial abilities of low-income earners; simultaneously, intervention on the part of the city governments has been insufficient, and the supply of affordable housing and of cheap rental housing has been seriously low. Additionally, the establishment of a housing related legal system urgently needs strengthening, and laws concerning housing system, or the “Housing Law”《住宅法》, must be formulated in a timely manner. Also, administrative management is weak in the areas of housing development and reform. The housing problem cannot be simply resolved through the general adoption of the market principle; the government must intervene and bear the responsibility of providing housing safeguards. In particular, the government must reduce housing level differentials between middle and low-income populations and other income sectors using social redistribution means; they must also realize housing fairness and establish a reasonable mechanism by which market distribution and social security distribution can develop simultaneously, both for house purchases and rentals and for the new and old housing market. D.  Expanding the Middle-Class Income Bracket and Improving National Consumption The aim of this reform is to facilitate the majority of the population increasing their financial capabilities together. Expanding the population of the middle-income bracket will serve as both a model and an encouragement to arouse the enthusiasm and creativity of all members of society at all class levels in their self-promotion and professional enrichment. Additionally, it will promote the development of productive social forces, increase the total social wealth, and finally realize the objective of eliminating societal polarization. Moreover, expanding the population of the middle-income bracket is advantageous not only in reducing the numbers of the impoverished, but also in strengthening consumption power in order to maintain the sustainable and stable



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growth of a national economy. In order to achieve this goal, great efforts should be undertaken in the following three areas: 1.  Expanding Urban Employment Channels, and Encouraging the Establishment of Individual Businesses The service industry in urban areas must be developed and more employment opportunities should be provided. At present, the traditional and emerging service industries have had huge development opportunities. The experience of other developed countries indicates that the proportion of middle-income earners can only increase when the role of the tertiary sector in the total industry increases to 50% or above. The emerging service industry must be strengthened through standardization of management in order to promote positive development. The establishment of individual business should be encouraged, and they should be provided with every convenience in the license application process, the capital assessment process, home business use, and employee recruitment. The private sector should also be developed, practical help in loan acquisition should be provided as well as the use of real estate, professional staff should be attracted and renowned brands should be established. Additionally, the manufacturing industry must be further developed, and more employment and development opportunities should be provided for low-income earners, the unemployed, new laborers, and recent graduates. 2.  Expansion of the Middle-Income Bracket Would Allow More Farmers to Transition into the Secondary and Tertiary Sectors In order to speed up urban construction, more than 200 to 300 million surplus laborers will enter the cities within 5–10 years, and the “threshold” deciding city access must be demolished in order to give farmers in the city resident benefits. Simultaneously, professional training must be provided to help them obtain employment, settle, and establish businesses in the city. On the other hand, the programs of “business + peasant household” (企业＋农户), the cooperative society program, the culturist family program, agricultural products processing program, contracting architectural engineering program, and the organizing labor service export program should be developed in rural areas to guarantee that a portion of farmers also become middle-income earners in rural areas.

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3.  Expanding Professional Training Support, Especially in the Area of Occupational Education The government or businesses involved should provide free professional training with certificates partially at their own expense and partially through government subsidy in order to facilitate trainees obtaining employment through the completion of a training certificate course. This would solve the shortage problem of skilled workers, as well as increase wage incomes. The government should also provide suitable subsidy support for the vocational and technical schools or training centers that will provide the professional training. E.  Decreasing the Gap between Rich and Poor and Reducing the Number of Low-Income Earners 1.  Government Regulation of the Redistribution of Societal Wages The government should continue to regulate significant income differentials through revenue and transfer payments. The main source of revenue is the high-income bracket and the main source of transfer payments is the low-income bracket. Through the redistribution of income, not only will the expansion of the high-income bracket be restrained, but a portion of the low-income bracket will also be able to enter the middle-income bracket. 2.  Improvement of Low-Income Earners’ Income Levels Should Be a Primary Goal The government must perfect and implement a basic social security system for urban residents, create a minimum wage system, and increase the strength of transfer payments. The standards for minimum wage must be raised, and basic social security, unemployment safeguards, and timely medical treatment be implemented in order to guarantee basic quality of life standards for the lowest-income bracket. The government must solve the employment problem for common laborers, increase income levels through the enhancement of employability for the lowestincome bracket, and ensure a portion of the lowest-income bracket enters the middle, and even the low, income brackets. In regards to rural residents, quickening the urbanization of rural areas and reducing the quantity of working farmers are both important ways of enhancing farmers’ income and consumption capacities. Other important methods include: concentrating efforts to raise the purchase price of agricultural



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products, relieving the agricultural tax, implementing direct subsidies for grains, and canceling miscellaneous fees for rural education. F.  Promoting Resident Consumption Attention must be paid to the subdivision of the market, and the reasonable apportioning of the consumable market must be realized. The subdivision of market must be implemented, and the target market must be identified and changed to meet the multi-level demands of the residents. Beginning with the urban and rural residents’ income and consumption environments, an analysis of the demands of the rural and urban market and different urban income groups in terms of consumption and subdivision of the market must be realized in order to satisfy the demands of high, middle, and low-income groups. Additionally, market resources should be integrated and management of commodities and services should be undertaken in order to gradually change the present situation of a coexisting structural surplus and a shortage of consumable markets. Therefore, in the expansion of domestic demand, the goals of creating a “human oriented” market, establishing a harmonious society, and strengthening the middle-income group, while reducing the low-income population through the reduction of income distribution differentials based on the continued rise of income levels, should be remembered and realized. The construction of a consumables market must be hastened, and effective supply should be realized in the expansion of domestic demands and business start-ups. Additionally, the long-term stability and development of the national economy should be promoted. VII.  2008: Predictions Regarding Residents’ Standards of Living and Consumption According to the primary target growth of the national economy in the first three quarters of 2007 and the changes of previous years, and considering the possible influence of a regulative policy, it is estimated that the growth of national economy will not be lower than 11% in 2007. In 2008, it is predicted that the development of the national economy will be face with advantages in both the domestic and foreign environment.

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In the domestic environment, the holding of 17th National Congress of the CPC and the Beijing Olympic Games, the gradual expansion of system reform, and the increased international involvement will all mobilize the potential of various aspects of economic development and the economic growth rate will reach about 10%. As a result of the swift economic growth, the residents’ income and consumption will enjoy more enhancements. In 2008, the resident consumption structure will continue to be promoted, consumption will be still concentrated in the real estate market and the automobile market, and enjoyable consumption items, such as traveling, will maintain swift growth.

Employment in 2007: Innovative System Reform Mo Rong Key words: labor market, institutional innovation, employment situation, new laborers, rural surplus laborers, unemployed persons, employment promotion, administration of unemployment

China’s population is more than 1.3 billion people and it has the largest labor force in the world. China’s employment problem is different than that of other developed countries that are mainly faced with the problem of employing young laborers. It is also different than the employment problems of other transforming countries that are mainly faced with structural unemployment and re-employment problems brought on by their transformation. Finally, it is also different than the problems of other developing countries that are mainly faced with the problem of employment regarding migrating rural laborers. The transformation of the employment market, youth employment, and the problem of employment for rural migrant laborers are all problems facing China currently. The simultaneous appearance of these issues has created a complex and arduous problem, unprecedented in any other country. I.  An Analysis of the Employment Situation in 2007 A.  The Supply of Laborers Is Larger than the Demands of the Labor Market The Ministry of Labor and Social Security collected supply and demand information on the labor market from the public employment service organizations of 102 cities distributed across various regions throughout the country which accounted for approximately 180 million urban residents, or more than 47% of the national urban populations. In these cities, there were 52.34 million urban employees (including self-employed workers), which accounted for approximately 53.5% of the urban employees at the regional-level or above. The information on the supply and demand of vocation in the labor market    An Analysis of Supply and Demand in the Labor Market of Partial Cities in the Third Quarter of 2007. Monitoring Center for Information Network of China Labor Market.

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(­hereinafter referred to as the labor market information) indicated that, in the third quarter of 2007, the labor market experienced active supply and demand, employer units advertised for approximately 4.82 million personnel positions through the labor market, and the number of job seekers was approximately 4.94 million. Additionally, the population of job seekers in that quarter had increased greatly since the previous year, from 723,000 at 22.2% to 608,000 at 17.3%. The ratio of job offers to job seekers was approximately 0.98, which was equivalent to a 0.98 post for each laborer. According to the statistics gathered from the bulletins of local labor and social security departments, from January to September 2007, urban areas increased their employed populations to 9.20 million, which was 102% of the annual goal of 9 million people. The number of unemployed and re-employed persons was 4.06 million, which was 81% of the annual goal of 5 million people, and the rate of jobseekers that were re-employed after initially encountering difficulties was 1.10 million, which was 110% of the annual goal of 1 million people. By the end of September, the accumulative total number of zero-­employment families was 847,000, and through the help of local special aid organizations, 810,000 zero-employment families had realized the goal of at least one person in every family obtaining employment, which accounted for 95.7% of the total, and surplus zero-employment families reached 37,000 by the end of period. By the end of the third quarter of 2007, the registration rate of urban unemployment was 4.0%, a drop of 0.1 percentage points over the previous year, and the employment situation maintained overall stability. Judging from the present development trend, the annual employment and re-employment goal can be comprehensively achieved. B.  Urban Employment Demands in the Secondary and Tertiary Sectors Information regarding the labor market indicated that, in the third quarter of 2007, the rate of the demand in the primary, secondary, and tertiary sectors was 2.7%, 36.3%, and 61% in turn (See Figure 3.1).

   Ratio of job offers to job seekers = demand populations/seeker populations, which indicates the quantity of employment posts from which every job seeker in the labor market may choose.



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Primary sector (agriculture, mining, etc.) 2.7% Tertiary sector (service industries) 61.0%

Secondary sector (manufacturing and construction industries) 36.3%

Figure 3.1:  Rate of Demand According to Industry

Judging from the overall quantity structure, employment demands in the tertiary industry still occupied a primary position. However, the rate of demand in the secondary sector experienced a rise of 3.7 percentage points over the previous year, and the rate of demand in the tertiary industry dropped by 4.2 percentage points. Judging from industrial demand, the employment demands of 78.7% of businesses were concentrated in the manufacturing industry, the wholesale and retail industries, the hotel and catering industries, resident services and other service industries, the lease and commercial service industry, and the building industry and the proportion of employment demands in the above listed industries was 29.1%, 16.3%, 10.7%, 9.3%, 8.6%, and 4.7%, respectively. Among these, employment demands in the manufacturing industry and the construction industry accounted for respectively 80% and 13% of the total employment demands in the secondary sector and together they added up to 93% of the total demand. The employment demands in the wholesale and retail industries, the hotel and catering industries, resident services and other service industries, and the lease and commercial service industry respectively accounted for 26.7%, 17.5%, 15.2%, and 14.1% of total employment demands in the third industry, and the four together added up to 73.5%. The demand rate in the manufacturing industry increased by 5 percentage points over the previous year, and the demand rate in the building industry had dropped by 0.5 percentage points. In the third industry, the proportion of employment demands in the wholesale and retail industries, the hotel and catering industries, and resident services and other service industries dropped by 0.5, 0.8, and 1.8 percentage points, respectively, and a rise of 0.2 percentage points was experienced in the lease and commercial service industry.

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C.  Business Employment in the Labor Market, Employment Demands of Domestically-Funded Businesses, and the Employment Demands of Hong Kong, Macao, and Taiwan Businesses, as well as those of Foreign Investors Information regarding the labor market indicates that, among employers, business employment occupies the main position and the ratio is 96.8% of the total employment rate, while the proportion of employment demands of institutions only accounted for 0.6% and the proportion of employment demands of other units was 2.6%. In regards to employment demands, domestically-funded businesses accounted for 74.9% of the total number of businesses, of which private businesses, limited liability companies, and joint-stock companies all presented large employment demands, with rates of 27.5%, 21.9%, and 9.3%, respectively, while the state-owned and collective businesses only represented 6.7% of the total employment demands. Hong Kong, Macao, and Taiwan investment businesses represented 7.3% of the total demand, foreign investment businesses 9.2%, and individual operations 8.5%. In 2006, the proportion of domestically funded businesses’ employment demands dropped by 2.5 percentage points. And the employment demands of investment businesses from Hong Kong, Macao, and Taiwan increased by 1.8 percentage points, while foreign investment businesses experienced a growth of 1.3 percentage points. D.  An Increase in the Demand for Front-Line Unskilled Labor, Production, and Conveyer Equipment Operators Information on the labor markets indicates that, considering demand by vocation, the demand for personnel in the commerce and service industries and for operators of production and conveyer equipment constitutes the majority, at a rate of 35.5% and 30.2%, respectively, and together they account for approximately 65.7% of total demands. In addition, the demand for specialized technical personnel, clerks, and other related personnel is also greater, with the proportion at 12.8% and 11.3%, respectively. The proportion of personnel in demand in the commerce and service industry experienced a drop of 3.1 percentage points compared to 2006, and the rate of demand for operators of production and conveyor equipment rose by 2.3 percentage points. However, demand for unit



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managers experienced a slight drop, and the demand for specialized technical personnel rose. Judging from a comparison of supply and demand, the demand for operators of production and conveyor equipment and for personnel in the commerce and service industry was larger than the quantity of job seekers, and the ratio of job offers to job seekers was 1.04 and 1.05, respectively. In other various vocational categories, the supply of laborers was greater than the demand, so the ratio of job offers to jobseekers was the lowest at 0.75. E.  Changes in the Structure of the Unemployed Population and Technical Shortages in the Business Sector Information on the labor market indicates that, among the total number of job seekers, the proportion of unemployed persons was 54.3%, a reduction of 0.6 percentage points over 2006. Of these, unemployed youth accounted for 20.5%, a drop of 1.6 percentage points over 2006. Of the unemployed youth, that year’s university graduates accounted for 40% of the total, an increase of 1.5 percentage points over the previous year. 16.8% of jobholders became unemployed, a reduction of 5 percentage points over 2006, while other unemployed persons accounted for 17%, an increase of 6 percentage points over 2006. The migrant worker population, composed of rural personnel in a specific urban area coming from other areas, accounted for 12.9% and 16.3%, respectively, and the total proportion was 29.2%. Of this figure, the proportion seeking work among rural personnel in this city dropped by 0.5 percentage points, and increased by 0.9 percentage points among personnel from other towns (See Table 3.1). If the unemployed demographic is grouped according to sex, male job seekers accounted for a larger population, though the ratio of female job offers to job seekers was slightly higher that of men. According to the gender structure of job seekers, there were more male job seekers than female, with the proportion at 54.7% and 45.3%, respectively. When comparing supply and demand, the ratio of male job offers to job seekers was 0.94, and the female ratio was 1.02. If the unemployment demographic is broken down by age, the ratio of job offers to job seekers in the various age groups of 16–24, 25–34, 35–44, and 45 years old and above is 0.95, 1.03, 0.96, and 0.88, respectively.

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mo rong Table 3.1: Structural Changes in the Unemployment Demographic Unit: Person; %, and percentage points

Category of job seeker

Unemployed youth Of these: that year’s university graduates Unemployed persons transferred by jobholder Other unemployed persons Jobholders Laid-off personnel Retirees Personnel at school Rural personnel in the city Personnel from other areas Total

Quantity of Proportion Occupational job seekers shift over previous year 1014323 405753

20.5 40.0

–1.6 +1.5

830569

16.8

–5.0

838590 363458 269128 27398 155505 639864 804868 4943703

17.0 7.4 5.4 0.6 3.2 12.9 16.3 100

+6.0 +0.9 –0.6 –0.3 0.0 –0.5 +0.9

If the unemployment demographic is broken down by educational attainments, the ratio of job offers to job seekers for educational attainments at the junior high school level and below, at the high school level, the technical college level, the university level, and the master’s level is 1.07, 0.99, 0.84, 0.89, and 1.16, respectively. If the unemployment demographic is broken down by technical class, the ratio of job offers to jobseekers among various technical classes is larger than one, and the demand for laborers is larger than the supply. Of these, the senior engineer, the senior technician and the technician have a larger ratio of job offers to jobseekers at 3.21, 2.47, and 2.38, respectively. Those job seekers whose application met the specific requirements of the technical class accounted for 56.3% of the total demand and were mainly concentrated in the areas of primary skilled personnel, the medium-grade skilled personnel, and technicians and engineers, with the proportion adding up to 47.4%. F.  Promoting Overall Urban and Rural Employment and Exploring Systems that Establish Social Security for Migrant Laborers In the process of encouraging overall urban and rural employment, employment services and skill training for migrant laborers must be



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improved and the transfer of employment for migrant laborers should be promoted. The government has organized and developed “the action of spring wind” (春风行动), and implemented a free employment service for migrant laborers, which further aided migrant laborers in obtaining urban employment. All public employment service organizations have been made free for migrant laborers and the three-pronged approach of training, employment, and rights protection was continuously implemented to encourage the establishment of various interregional labor cooperative services. Various regions also established a laborer dispatch base and cultivated specific types of laborer services. Moreover, these urban and rural overall employment experiments have been launched in 27 cities. In the process of exploring and establishing a social security system for migrant laborers, the “Wellness Program,” in which migrant laborers participate in industrial injury insurance, and the special action, in which migrant laborers participate in the medical insurance system, continued to be implemented and the number of migrant laborers participating in industrial injury insurance and medical insurance maintained steady growth. By the end of September 2007, the populations of migrant laborers who participated in industrial injury and medical insurance programs reached 34.47 million and 29.03 million, respectively, an increase of 9.10 million and 5.36 million people over the end of the year before. In the area of labor security for migrant laborers and the maintenance of their rights and interests, a three-year action plan for a labor contract system was implemented to encourage migrant laborers to sign labor contracts with their employers. The government also organized and implemented special wage payment inspections for migrant laborers nationwide. According to the figures, 1.50 million migrant laborers recovered 1.735 billion yuan in delinquent wages, further checking the problem of delinquent wages for migrant laborers. From 2004 to the end of July 2007, an accumulative total of 43.32 billion yuan in delinquent wages were recovered, which basically settled the problem of businesses being behind with migrant laborers’ wages. Additionally, a majority of provinces have established a wage guarantee bond system.

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mo rong II.  China Faces the Most Severe Employment Situation in a Long Time

Employment is the foundation of the people’s livelihood and the underlying policy of a stabilizing nation. Drawing from historical experience, we also know that the employment problem is the core problem of economic and social development; therefore, it should be a topic of national focus. As for the workers, employment is an important means by which they can make a living, integrate with society, and realize their value, and it is also a basic condition by which they can share in the achievements of social development. Therefore, employment is a basic human right and the foundation of the people’s livelihood. From an economics standpoint, employment is inseparable from the labor unions and other elements of production and is a basic guarantee for the development of productive forces. From the sociology standpoint, employment is tied up with the vital interests of hundreds of millions workers and their families, and is an important basis for social accord, therefore making it the policy of a stabilizing nation. Employment is driven by economic growth, and at the same time, employment can also promote economic development. Since China’s reform and increased international involvement, China has maintained the development of productive forces as its primary concern, and has focused on highlighting the superiority of China’s rich labor resources. Other efforts of the government have been to vigorously develop laborintensive industries and products and to use the lower manpower costs to promote the swift growth of the national economy for over 20 years. These accomplishments have been realized in the following ways: A.  The Total Employment Rate in China Increases in Accordance with Economic Growth and the Scale of Urban and Rural Employment Is Expanded The number of urban and rural jobholders reached 764 million in 2006, an increase of 180 million people over 1991, and an average increase of 12 million people per year. The registration rate of urban unemployment was 4.1%. New employment positions increased and not only provided massive opportunities for the employment of new laborers and the re-employment of unemployed persons, but also created new possibilities for rural laborers’ to transfer their employment.



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B.  Improvement in the Employment Structure Since China’s reform and increased international involvement, huge changes in China’s economic structure have led to similar changes in the employment structure. In the industrial sector, the number of nonagricultural jobholders surpassed the number of agricultural jobholders for the first time in 1997. In 2006, the proportion of the jobholders in the primary, secondary, and tertiary sectors was 42.6%, 25.2%, and 32.2%, respectively. In both the urban and rural sectors, along with the cancellation of limits set on rural laborer migration, the urbanization of the population has been marked, and the proportion of urban employment has increased yearly. In 2006, the urban employed population reached 283 million, which accounted for 37% of the total number of urban and rural jobholders and nearly 130 million rural laborers shifted their employment. In addition, the swift development of a non-public economy has created a new channel for employment. C.  Establishment of a Market-Oriented Employment Mechanism and Development of a Public Employment Services System In the early 1980s, the Central Party Committee and the State Council proposed an employment policy of “three combinations” (三结合), in which the labor department introduced employment. As a result, the public has voluntarily organized to obtain employment and selfemployment under the instruction of a national unified plan, which had developed many kinds of employment channels, and had begun establishing the primary status of laborer employment. In July 1986, the State Council promulgated the “four provisions” (“Temporary ­Provisions on State Businesses Implementing the Labor Contract System”《国营企业实行劳动合同制暂行规定》, “Temporary Provisions on State Businesses Employing Staff ”《国营企业招用工人暂行 规定》, “Temporary Provisions on State Businesses Retiring Employees in Breach of Principles”《国营企业辞退违纪职工暂行规定》, and “Temporary Provisions on Unemployment Insurance for the Staff of State Businesses”《国营企业职工待业保险暂行规定》), reformed the state business employment system, and implemented a labor contract system, which determined the primary status of business employment. In October 1992, the 14th National Congress of the CPC determined the goal of establishing a socialist market economic system and the Third Session of the 14th National Congress of CPC officially proposed the

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“cultivation and development of the labor market.” In order to adapt to the development of a market economy, in June of 1998, the Central Committee proposed an employment policy in the 10th Document, which stated, “the workers choose their occupations independently, the market regulates employment, and the government promotes employment,” and also determined an employment mechanism that would establish market orientation. Meanwhile, the government’s public employment service abilities continued to be improved, 100,000 service systems for unemployed persons based on the community were established, and the public employment service system made great strides towards institutionalization, specialization, and socialization. D.  Establishment of an Employment Policy System and the Successful Resolution of the Re-Employment Problem during System Transformation and Structural Adjustment In the mid and late 1990s, during a time of significant adjustment of the economic structure, the problem of unemployed former employees of state-owned businesses became increasingly severe, and the number of laid-off personnel and unemployed persons also grew significantly. In order to resolve the basic problem of living security and re-employment for the unemployed, the Central Party Committee and the State Council held a special conference in 1998, made concrete arrangements for the security of basic living costs for laid-off personnel from state-owned businesses, and created provisions for the on-time and full payment of pensions for retirees, while also promoting specific requirements for the re-employment of laid-off personnel. In September of 2002, based on the experiences of various countries and the successful practice of various Chinese regions, the Central Party Committee and the State Council held a national conference on reemployment, promulgated the “Notice on Further Completing Work for the Reemployment of Unemployed Persons”《关于进一步做好下岗失业人员再就业工作的 通知》. During that conference, a system of positive employment policies with Chinese characteristics was formulated, in which the focus of the resolution efforts changed from providing “basic social security” to implementing “employment security.” At the end of 2005, based on the practical experiences of the last 3 years, the State Council formulated the “Notice on further Strengthening Employment and Reemployment Work”《关于进一步加强就业再就业工作的通知》, which “continued,



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expanded, adjusted, and enriched” the original policy so that a ­positive employment policy was further developed. From 2003 to 2006, through the implementation of this employment policy, the work of employment and reemployment made compelling progress; nearly 10 million employment positions were increased on average every year, nearly 3 million people more than the figure of 7 million people in the late 1990’s. In four years, a total of nearly 20 million unemployed persons from stateowned businesses and collective businesses obtained re-employment. Through the development of non-profit positions, more than 5 million people with difficulties obtaining employment were aided in their search for re-employment for four years, over which large quantities of unemployed persons, formerly dependent on relief, were assisted in obtaining employment and the problem of re-employing unemployed persons in the midst of the readjustment of the economic structure was successfully resolved. E.  Development of Vocational Training and Worker’s Educational Levels Through an increase in the strength of vocational training and the implementation of an improved occupational qualification certificate system, the quality level of skilled workers was improved. During the “15th Five-year Plan,” altogether 25 million hours of training for unemployed persons was competed. By the end of the “15th Five-year Plan” period, 60 million people obtained certificates of occupational qualification and “the plan to train 500,000 new technicians within three years” was more than fulfilled in 2006. The improvement in laborer vocational skill levels enhanced the productivity of labor across the entire society and boosted human resource development and the realization of the strategy for replacing resources. However, China will face a severe employment situation for a long time, the details of which are as follows: 1.  The Basic Pattern of the Supply of Laborers Exceeding the Demand China has a wealth of population and labor resources and a long­standing situation in which the supply of laborers exceeds the demand. The working population of 16–60 year olds will reach 930 million in 2014, and this high level will remain steady for a long time. Over the next few years, the workforce infrastructure will be increased by more than 10 million new laborers and 8 million unemployed persons each

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year, more than 6 million laid-off personnel from state-owned and collective businesses, and the other populations for which the cities must arrange employment every year will remain steady at about 24 million. Calculating according to an 8% economic growth rate and the existing driving capacity of economic growth in regards to employment, approximately 8 million employment positions are created each year. When factoring in the posts made available due to a natural reduction of staff and workers, urban employment positions will total approximately 11 million, and the gap in the supply of laborers exceeding demand will be about 13 million, with an urban unemployment registration rate of approximately 5%. 2.  Structural Issues Regarding Employment Are Becoming Increasingly Severe The structural issues of employment have had different manifestations in different times, and the current primary manifestations are the inadaptability of the workers’ educational levels and the somewhat low population of the employed in the tertiary sector. Chinese economic development and the transformation of economic growth requires a higher level of education in its workers, but because the educational level of workers does not adapt to the current requirements of economic development, there is a shortage in the personnel needed by the emerging industries, high-tech industries, and skilled occupations. The specialized technical manpower and skills needed by the modern manufacturing and service industry are in an extreme shortage. At present, a variety of worker skill levels are in short supply and businesses are experiencing a large gap between high-level workers, technicians, and senior technicians. Meanwhile, the majority of workers are facing difficulties obtaining employment because of low vocational skill levels. On the other hand, in comparison with the international circumstances, China has a somewhat low proportion of jobholders in the tertiary sector. In 2006, the proportion of employment in the tertiary sector was 32.2%, which was far lower than the rate of approximately 75% in developed countries, and lower than the rate of approximately 40% in developing countries. The tertiary sector is a major industry in which all countries admit employment, and its somewhat low employment rate in China means that few contributions in the increase of employment positions have been made in this area.



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3.  New Laborers, Rural Surplus Laborers, and the Unemployed International experience indicates that as a result of their lack of work experience, youth can easily join the ranks of the unemployed, and in fact they often comprise the majority of the unemployed. Presently, Chinese university students have had an outstanding employment problem, and during the “Eleventh Five-Year Plan,” the populations of common university graduates will also increase yearly to approximately 27 million. The rural surplus laborers maintained a steady population of 150 million and the task of shifting rural laborers over to urban employment was arduous. With the unceasing advancement of urbanization, large numbers of land-levying farmers were also facing the problems of shifting employment and social security. The re-employment problem facing laid-off personnel from stateowned and collective businesses left behind in the system transformation was not yet completely settled, and the task of placing staff was still arduous against the background of system reform and the bankruptcy proceedings of state-owned businesses. From 2006 to 2008, there were nearly 10 million laid-off personnel from the collective businesses (included in the new policy) and state-owned businesses that needed to be placed because of the state-owned businesses’ bankruptcy by policy. Helping this demographic to realize re-employment and find stable employment merits further focus. Therefore, in order to achieve the goal of social employment in the face of the severe employment situation and the huge pressures of securing employment, the strength of employment work must be further increased, especially in the area of a long-term mechanism that would promote employment through legal means. III.  Employment Promotion Legislation A.  Government Promotion of Employment and the Administration of Unemployment Before the 1930’s, as a product of the wage labor system in existence during the initial period of industrialization and establishment of a market economy, it was generally believed the employment problems could be spontaneously regulated by the market mechanism, and

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g­ overnment intervention was unnecessary. After the 1930’s, in the face of the serious unemployment caused by the worldwide phenomena of the great depression and the global economic crisis, Keynes et al. proposed to expand efforts to resolve employment. They appealed to the government to stimulate economic growth and increase employment using the macroeconomic policy of increasing investments and reducing interests, while simultaneously establishing a system of social security in order to reduce the risks and stabilize employment. Around the 1970s, when facing the high tide of unemployment caused by the oil crisis and other factors, the developed countries began to explore the strategy of developing human resources to replace natural resources; namely, the improvement of labor quality through the improvement of education and training and the implementation of policies and measures that would improve supervision of the labor market. In the 1980’s, the developed countries and some developing countries began to focus on the use of comprehensive policy to resolve the employment problem. Using economic policy, these countries enlarged demands, implemented an anti-cyclical policy to reduce unemployment, promoted education and training to improve the educational level of workers, strengthened public employment services to provide employment help, and improved social security to promote the re-employment of unemployed persons. At present, international society has reached a common understanding that the government must bear the primary liability in the promotion of employment and unemployment administration; the promotion of employment has generally become an important part of various governments’ administrative programs, and even an important point in party campaigns. With the increasing prominence of the employment problem and the increasing importance of employment work, legislation has become the most widespread and important means for various countries to promote employment. Certainly, the legislative pattern differs according to the legal frameworks and legislative traditions of various countries. Some countries have specially legislated for the promotion of employment, such as Russia’s “Resident Employment Law” (in 1996), Germany’s “Employment Promotion Law” (in 1969), Peru’s “Employment Promotion Law” (in 1993), and South Korea’s “Basic Employment Policy Law” (in 1993). Through comprehensive legislation, some countries, such as France, included the promotion of employment in their comprehensive labor codes. Some countries integrated the promotion of employment in several special legislations through dispersed legislation, such as the USA’s “Law on Comprehen-



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sive Employment and Training” (in 1980) and Britain’s “Employment Service Institution Law” (in 1973). The practices of various countries also proved that legislation has played a positive role in the promotion of employment. In reviewing world labor law history, it becomes clear that employment promotion legislation has always been one of the most active domains in modern labor security legislation and has become an important action for the promotion of employment. B.  China’s Employment Policy Creates the Conditions for Employment Promotion Legislation In 2002, the Central Party Committee and the State Council issued the “Notice on further Completing the Work of Re-employing Unemployed Persons”《关于进一步做好下岗失业人员再就业工作的通知》, and implemented support policies regarding the deduction and exemption of taxation expenses, small secure loans, social security subsidies, position subsidies, the separation of major and auxiliary businesses, free employment services, and vocational training, which have formed an initial frame for positive policy with Chinese characteristics. In 2005, the State Council issued its “Circular on Further Intensifying the Work of Employment and Re-employment”《关于进一步加强就业再就业 工作的通知》in order to further extend, adjust, and enrich the original policies, to exploit those employment positions centered around economic development, and to realize the positive connection between economic growth and expansion of the job market. Other aims of this policy were to strengthen support for the promotion of employment and re-employment, to improve employment services and strengthen vocational training, to standardize employment management, and to strengthen unemployment regulation. Additional goals include the development of social security systems, the establishment and promotion of an employment linkage mechanism, and the promotion of a series of incentive and support measures. At the same time, the experience and successes of various regions were summarized and integrated in order to further strengthen the pertinence and validity of these policy measures and enrich and perfect positive employment policies.

  Please See: Circular of the State Council on Further Intensifying the Work of Employment and Re-Employment, at http://www.lawinfochina.com/law/displayModeTwo.asp?id = 4732.

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In regards to the positive employment policies of China, core support policies include the following 5 aspects: 1.  Workers Are Encouraged to Find Their Own Occupations and to Independently Establish Businesses Whenever unemployed persons are engaged in individual operations, the administrative operation expenses of the management class, the registration class, and the certificate and license class are exempted. Additionally, the taxation quota is awarded deductions and exemptions, and discounts on the interests of small, secured loans are given. 2.  Businesses are Encouraged to Increase Employment Social security subsidies and taxation quotas exemptions are given in a corresponding period to processing businesses in the trade business, service business, and the labor employment service business. Businesses that increase new posts to employ unemployed persons and sign a more than one-year labor contract with new employees and pay the social security charges are also awarded these benefits. Finally, small labor-intensive businesses that comply with the conditions are given the support of small, secured loans, which are decided according to the actual number of people employed. 3.  Disadvantaged Groups Are Aided in their Search for Re-Employment The creation and development of non-profit positions is encouraged, persons who have experienced difficulties securing employment are helped in their search for re-employment, and social security subsidies and position subsidies are given, according to the actual number of people employed. In those places where a portion of unemployed and laid-off employees worked for more than three years in a non-profit post, the time limit on social security subsidies may also be correspondingly postponed. 4.  State-Owned and Large and Middle Scale Businesses Are Encouraged to Reform State-owned large and middle-scale businesses are encouraged to reform their systems to establish corporate entities geared towards the market, maintain separate accounts, and are responsible for their own profits or losses. Additionally they are encouraged to use the non-principal and dormant business assets of the original business, as well as the effective assets of the bankrupt businesses to individually place surplus personnel. Moreover, when businesses have clear property rights and gradually



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realized multiple property rights, or they hire and sign labor contracts with more than 30% of the original businesses surplus personnel, they are exempted for the business income tax for 3 years. 5.  Free Employment Services and Vocational Training Subsidies Public employment service organizations provide free employment services for the unemployed, registered urban unemployed persons, and rural laborers registered to seek employment in the city. Additionally, rural laborers seeking urban jobs are provided with disposable subsidies for vocational training. Since the comprehensive implementation of a positive employment policy in 2003, the target tasks of yearly employment and re­employment have been more than met for the past four years. This was particularly the case in 2006, when the population of newly employed urban residents increased to more than 10 million for the first time, reaching 11.84 million. This phenomenon resulted in maintained employment stability and effective control of reform and development, and was influential in creating sustainable and swift economic growth, as well as a harmonious and stable society. In view of the remarkable effects of the implementation of a positive employment policy, all levels of society generally believed these effects should be maintained by extending the time limit of the policy, expanding its applicable scope, enlarging its beneficiary group, and making it more accessible to those workers needing employment aid. This outpouring of public support should impel the promotion of effective employment measures, after the examination of their practice, into legal norms. Additionally, working employment related mechanisms and systems should be legalized, and policies and measures regarding employment and funding investment should be institutionalized. These actions would establish a long-term mechanism of employment promotion and provide the conditions necessary for positive and quick economic development as well as for the establishment of socialist harmonious society. C.  The Influence of China’s “Employment Promotion Law” on the Resolution of the Employment Problem On August 30, 2007, the “Employment Promotion Law of the People’s Republic of China”《中华人民共和国就业促进法》(hereinafter referred to as “Employment Promotion Law”) was examined and approved in the 29th session of the Tenth Standing Committee of the

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National People’s Congress. It was promulgated by the Chairman of the People’s Republic of China, and came into force on January 1, 2008. The promulgation of the “Employment Promotion Law” has been an important achievement for the construction of legal labor security and it has further enriched and perfected the legal labor security system in China, having vital and profound significance on the promotion of worker’s employment and the establishment of a socialist harmonious society. The “Employment Promotion Law” is an important law that promotes the establishment of a socialist harmonious society, provides legal safeguards for China to implement a positive employment policy, and further perfects the legal labor security system of China. This employment legislation draws from the experience of various countries, while also integrating those conditions specific to China. It also maintains the four principles: the principle of increased jobs, the principle of market employment, the principle of equal employment, and the principle of overall employment. Increasing the number of jobs is regarded as the primary goal for economic and social development; the adjustment of the economic structure must realize the positive connection between economic development and an increase in jobs. The labor employment system has also been developed, and the perfection of a market oriented employment mechanism will guarantee the worker’s power to select and decide their vocation as well as the employer’s power to decide employment. In regards to equal opportunity employment, necessary actions include forbidding employment discrimination and providing impartial employment opportunities for workers. Finally, in order to improve overall employment, work must be undertaken to employ the increasing population of new urban laborers, to ease the employment shift of surplus rural laborers, to aid in the reemployment of unemployed persons overall, and to gradually form a unified urban and rural labor market. The “Employment Promotion Law” establishes an employment policy that states that “the workers choose their occupations independently, the market regulates employment, and the government promotes employment,” and this law has determined eight responsibilities by which the government promotes employment. Namely these are: the establishment

   “Notice on Further Strengthening Promulgation and Education for the ‘Labor Contract Law’ and the ‘Employment Promotion Law.’ ” Laoshe Bufa 39 (2007).



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of an employment objective responsibility system, the formulation and implementation of an economic and social policy which is advantageous to employment, the promotion of impartial employment, the improvement of employment services and management, the vigorous development of vocational training, the establishment and perfection of an unemployment insurance system, the development of research, investigation, and statistics regarding employment and unemployment, and the expansion of the scope of employment promotion in all its various aspects. The “Employment Promotion Law” also established a policy support system for employment promotion that included the implementation of the following 10 policies: an advantageous industrial policy, an advantageous financial policy, an advantageous tax policy, an advantageous financial policy, a unified urban and rural employment policy, a general regional employment policy, an overall community employment policy, a labor and social security policy that is advantageous to flexible employment, an employment aid system, and a policy of unemployment insurance. The “Employment Promotion Law” has determined that employment aid should be implemented and explicitly prescribes that all levels of the people’s governments establish and perfect an employment aid system. This initiative includes four aspects: 1. It defines the object of employment aid, with the object referring to those personnel experiencing difficulties in obtaining employment because of health conditions, skill level, family factors, and/or land loss. This also includes those who cannot obtain employment after an extended period of time. 2. It defines the measures of employment aid. First, all levels of the people’s governments must establish and perfect an employment aid system and implement measures for taxation expense deduction, discounted loan interest, social security subsidies, and post subsidies. Also, non-profit positions should be created in order to implement preferential support and aid for those personnel experiencing difficulties in obtaining employment. Second, all levels of local people’s governments should improve grass-roots employment aid services, implement important help for personnel experiencing employment difficulties, and provide target employment services and non-profit position aid. Third, those non-profit posts invested in and developed by the government should be first offered to personnel experiencing

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employment difficulties who meet the post requirements, and post subsidies should be awarded according to national provisions. Four, all levels of the people’s governments should implement special aid measures to promote the employment of disabled persons, and should request that employers provide employment for disabled persons according to the national provisions. 3. It specially prescribes employment aid for zero-employment urban families. Above county level of local people’s governments should implement various types of employment forms in order to expand the scope of non-profit positions and to develop employment positions, which would guarantee that at least one person per zero-employment urban family is able to obtain employment. 4. It prescribes support for special areas experiencing significant employment pressures. The state encourages those cities exploiting resources and independent industrial and mining areas to develop industries that meet market requirements and to guide workers in their employment shifts. For those fields with high populations of personnel experiencing employment difficulties because of resource exhaustion or the readjustment of the economic structure, the people’s governments at higher levels should provide necessary support and help.

Report on Social Security Development in China in 2007 Wang Fayun and Wang Xiaoming Key words: social security, overall planning for urban and rural areas, social fairness, basic rural social security system, unemployment insurance, minimum subsistence guarantee, medical assistance system, retirement insurance

Social security was one of the primary topics of concern in 2007. That year, creating an overall plan for urban and rural social security became a theme of social security development and institutional innovation to this end improved the pace of development. Important measures were taken on a regular basis to promote social fairness, justice, and harmony and to enhance the level of social security. In addition, social security management was improved, the safety of the social security system was further focused on, and a sustainable foundation for social security development was instituted. I.  Planning a Unified System of Urban and Rural Social Security The sixth plenary session of the 16th People’s Congress of the CPC convened in the second half of 2006 and proposed the new task of establishing a social security system that covered both urban and rural residents. The realization of a social security system that can be enjoyed by everyone by 2020 became an open social objective promised by the government. Additionally, the establishment of a social security system that would cover both urban and rural residents became one of most search terms on the internet. A.  A Comprehensive Rural Minimum Subsistence Guarantee System Is Established A system of guarantees for rural minimum subsistence standards was in development for nationwide implementation for seven to eight years since its exploration at the local level. At the beginning of 2007, the responsible departments proposed to comprehensively establish a system

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to guarantee rural minimum subsistence standards for the public. In July, the State Council issued the “Notice on Establishing a Nationwide Guarantee System for Rural Minimum Subsistence Standards”《关于 进一步加强就业再就业工作的通知》in order to provide a policy basis for the comprehensive establishment and implementation of a minimum subsistence guarantee system in rural areas. Through the establishment of such a nationwide system, all rural impoverished populations in accordance with the conditions have been brought into the scope of this system in order to steadily and effectively solve the problem of providing food and clothing to rural impoverished populations nationwide. This system of rural minimum subsistence guarantees implemented a responsibility system among local people’s governments and realized development leaps as soon as it was issued and implemented. Currently, it has been comprehensively established in all provinces. By the end of the first quarter, only 17.88 million people enjoyed rural minimum subsistence guarantees, 8.47 million families were covered by rural minimum subsistence guarantees, and the planned expenditures for the program were 4.93 million yuan by the last month. By the end of the third quarter, the populations supported by the rural minimum subsistence guarantee system reached 27.81 million and 12.77 million families, the average income standard was 70 yuan/per month, the monthly expenditures per person were 30 yuan/month, and the planned expenditures were 880 million yuan by the last month. It is estimated that the populations covered by the rural minimum subsistence guarantee system would reach 30 million by the end of the year. B.  National Experimental Programs that Provide Basic Medical Insurance for Urban Residents City employees enjoy basic medical insurance; however, after the rural areas established a new rural cooperative medical service system, unemployed urban residents consisting mainly of unemployed senior citizens and young people have become a blind spot in the medical insurance system. In July 2007, the State Council held a conference in Beijing to start up experimental basic medical insurance programs for urban residents. Through these experiments, a basic medical insurance policy system for urban residents was explored and developed, and a reasonable financing mechanism, a complete management mechanism, and a standard operational mechanism were formed. In this way, a standard



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and sustainable basic medical insurance system for urban residents was gradually established for the comprehensive provision of serious diseases. In accordance with the goal of establishing a basic medical service system to provide for urban residents by 2010, the State Council arranged for the establishment of these experimental programs within three years from 2007. In 2007, one to two cities (altogether 79 cities in the whole country) were chosen to implement experimental programs in each province that met the conditions. These experiments were to be expanded nationwide in 2008, and the number of experiment site cities was predicted to reach 80% and above in 2009, with these sites spreading nationwide in 2010. Basic medical insurance for urban residents integrated governmental subsidies with family payments, and central financing and local financing also provided some subsidies for policyholders. For vulnerable populations, such as the beneficiaries of the minimum subsistence guarantee system and disabled personnel who did not have the ability to pay insurance premiums, the government would provide more subsidies in order to guarantee they could buy insurance. By the end of September, urban residents who purchased medical insurance reached 18.14 million, fund revenues reached 1.750 million yuan, and fund expenditures reached 490 million yuan. C.  Experimental Programs that Promote Re-Employment through Unemployment Insurance Are Implemented in Eastern Areas Different from other insurance projects that are postponed to enlarge their coverage area, unemployment insurance is carried on in the reverse manner. In view of the fact that unemployment insurance funds have continuously been increased, and in order to further bring into play the promotion of re-employment through the unemployment insurance system, the country has instituted experiments in the eastern areas of Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, and Guangdong in order to suitably enlarge the scope of unemployment insurance fund expenditures, and in order to support the construction of a field training base and business establishment training. These experiments have even been increased in some areas so as to support migrant laborers participation in training. At present, those experiments that enlarged the scope of unemployment insurance fund expenditures in the eastern areas of the country, entered the material operational phase, and promoted employment through unemployment insurance funds has been fully exerted in both Beijing and Shanghai.

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D.  The New Rural Endowment Insurance System and Social Security System for Farmers Who Have Lost Their Land Along with the changes in economic and social development, the rural social retirement insurance system has entered a new stage of exploration and establishment. In accordance with the requirements of basic security, broad coverage, flexibility, transferability, and endurance, the developed areas of Beijing, Shanghai, Jiangsu, Zhejiang, Shandong, Guangdong, and Fujian and the Midwest areas of Anhui, Shanxi, Heilongjiang, Henan, Hebei, Sichuan, Yunnan, Shanxi, and Xinjiang have explored a mechanism for establishing public finance investments and farmer insurance subsidies through the methods of payment subsidies, discounted interest rates, direct subsidies for older people, and treatment adjustment. These methods will help guide and support those farmers joining the program and help to establish a new rural social retirement insurance system with individual payments, collective subsidies, and government subsidies for farmers. In recent years, social security for land-levying farmers has been the focal point of society and 18 provincial-level governments or departments issued documents to explore and establish social security systems for land-levying farmers. It was estimated that more than 10 million land-levying farmers would be included in the basic living or retirement insurance system by the end of 2007, and more than 200 billion yuan in retirement insurance funds for land-levying farmers would be raised. 1.  Social Security Coverage Is Expanded Along with institutional innovations, coverage for every type of social security continued to expand rapidly in 2007, and the most basic social security program for urban residents was stable. By the end of September, the number of retirement insurance policyholders reached 196.76 million, an increase of more than 9.10 million over 2006. Among these policyholders, the number of insured employees was 148.57 million and the number of insured retirees was 48.19 million, 7.26 million and 1.84 million more than in 2006, respectively. According to the progress made, the competent department proposed a new goal: that the number of retirement insurance policyholders would reach 200 million by the end of 2007. Additionally, the number of medical insurance policyholders reached 188.96 million, which was 31.64 million people more than 2006. Of this number, insured employees accounted for 126.33 million and insured retirees account for 44.49 million, which was 10.53 million



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and 2.97 million people more than 2006, respectively, with the estimated number of medical insurance policyholders reaching 200 million people by 2007. Also, the number of retirement insurance policyholders reached 114.73 million, 2.86 million people more than in 2006. Advocating for public institutions and non-profit organizations to join the industrial injury insurance program and establish a unified industrial injury insurance system which covers all classes of people was the focus of industrial injury insurance work in 2007. At the end of September, the number of policyholders of industrial injury insurance nationwide reached 115.30 million, which was 12.62 million people more than in 2006; the number of maternity insurance policyholders reached 73.27 million people, 8.68 million people more than in 2006. 2.  Development of the New Rural Cooperative Medical Services The coverage scope of the new rural medical services suddenly expanded; by the end of September 2007, the counties, cities, and regions which carried out new rural cooperative medical services reached 2,448, which accounted for 85.53% of the total number, and the number of policyholders in this new rural cooperative medical service program was 726 million, with the rate of insurance coverage at 85.96% of the total. Among these, 653 counties, cities, and regions in the eastern areas implemented new rural cooperative medical services, which accounted for 93.69% of the total in the eastern areas. The number of policyholders in the new rural cooperative medical services programs was 223 million and the rate of insurance coverage was 89.58%. 1,795 counties, cities, and regions in the Midwest areas implemented new rural cooperative medical services, which accounted for 82.91% of the mid-west areas. The number of policyholders in this new rural cooperative medical service program was 503 million and the rate of insurance coverage was 84.44%. In regards to the financing situation, by the end of September, the funds for new rural cooperative medical services in 2007 reached 35.326 billion yuan, of which central financing subsidy funds reached 8.205 billion yuan, local finance subsidy funds reached 17.353 billion yuan, farmers payments reach 9.412 billion yuan, and 356 million yuan came from other channels. In regards to fund expenditures, in the first three quarters, new rural cooperative medical service funds accumulated an outlay of 22.031 billion yuan. In the third quarter, the gross expenditures of funds for new rural cooperative medical services were 8.693 billion yuan. Of this figure, 7.361 billion yuan was used for hospitalization compensation,

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which accounted for 84.68% of the gross expenditures of the funds; 551 million yuan were used as compensation for outpatient services by the overall planning fund, which accounted for 6.34% of the gross expenditures; 618 million yuan were used as compensations for outpatient services through family accounts, which accounted for 7.10% of the gross expenditures; 40 million yuan were used for physical examinations, which accounted for 0.47% of the gross expenditures; and 123 million yuan were used for other compensations, which accounted for 1.41% of the gross expenditures. In regards to profits, in the first three quarters, a total of 263.32 million people profited from the funds of new rural cooperative medical services. In the third quarter, a total of 96.12 million people profited from it. Presently, the key problem facing this program is the contradiction that arises between increasing financing levels for farmers and guaranteeing insurance coverage rates. 3.  Urban Residents Covered by Basic Social Security Since the principle of a social security system that could cover the entire public was realized in 2002, the program of basic urban social security has functioned on the assumption that the public is responsible for maintaining the stability of social security; the level of security has continuously improved in accordance with yearly increases in financial investments. At the end of September 2007, the number of people covered by the most basic level of urban social security was 22.36 million, and the standard was 177 yuan/month. Average subsidies per person were 93 yuan per month. By the end of September, the gross expenditure of the program was 19.16 billion yuan, an increase of 26.1% over the previous year, and the residents covered by this type of social security reached 22.38 million, or 10.47 million families. II.  Efforts to Promote Social Fairness and Harmony The basic function of the social security system is to maintain social stability and promote social fairness and harmony. In 2007, this was a primary focus and the central and local governments frequently took actions to this effect, considering how best to maintain social fairness while at the same time guarantee that all medical treatments were fully paid for and that the standard of social security continued to improve.



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A.  Improvements in Pension Levels for Business Retirees Because pension levels for business retirees were somewhat low, this issue became increasingly important to society at large. Based on the pension levels of businesses retirees, which had continuously increased over the previous two years, the State Council decided to increase pensions by about 80 yuan for each business retiree each month, beginning on July 1, 2007. At the same time, in order to further implement a policy which would support technical retirees with senior titles, as well as early retirees with relatively low pensions, an executive meeting of State Council decided to increase pensions 40 yuan per month per person for these groups, based on the adjustment of their pension. The funds necessary to enact this among the 24 provinces in the Midwest areas and by the Xinjiang Production and Construction Corps were completely subsidized by central financing. The State Council also requested that these pension increases be paid to the retirees by the end of August. After this adjustment, the pensions of more than 40 million business retirees were increased, and more than 6 million business retirees with senior titles and early retirees with somewhat low pensions profited from this special policy. In order to further alleviate the income differentials, the State Council decided to continue to raise the basic pension standards for businesses from 2008–2010; the increase level would be higher than that of the previous three years. The State Council also decided to continue to implement policies that would support technical retirees with senior titles and early retirees with relatively low pensions. B.  Raising the Standards for Unemployment Insurance Funds Unemployment insurance funds correspond unilaterally to the local minimum wage, and are lower than the minimum wage standard and higher than the standards for the most basic social security plan. In 2007, although unified provisions were not made, various regions succeeded in generally raising minimum wage standards and the standard unemployment insurance funds were also improved. While these improvements were being made, certain regions dedicated themselves to increasing the rationality and fairness of these standards. For example, when the city of Beijing was in the process of revising unemployment insurance provisions, it separated unemployment insurance from the minimum wage levels. This action was enacted because standards for

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unemployment insurance funds were so high they were discouraging re-employment, as a result of which the standard of minimum wage was continuously being readjusted in recent years. C.  Raising Standards in the Most Basic Social Security Plans In August 2007, the State Council issued its “Urgent Notice on Earnestly Fulfilling Policies to Guarantee Market Supply and Maintain the Stabilization of Subsidiary Food Costs”《关于切实落实政策保证市场供应 维护副食品价格稳定的紧急通知》.   The Ministry of Civil Affairs and the Ministry of Finance also issued the “Notice Regarding Problems of Family Conditions Surrounding the Creation of Basic Social Security for Urban Residents”《关于妥善安排城市居民最低生活保障家庭生 活有关问题的通知》, which specifically requested that various regions guarantee that the actual subsidies for recipients of the most basic level of urban social security were increased by at least 15 yuan per person per month, and requested these subsidy funds be paid by August 31. By the end of third quarter, the average standard for the most basic form of urban social security was 179.2 yuan per person (per work month), an increase of 17.2% over 2006, and the quality level was also greatly enhanced; the expenditures per person for this level of social security were 95 yuan per month, an increase of 25% over 2006. D.  Establishment of a Universal Medical Assistance System Based on the comprehensive establishment of a medical services system in rural areas, 86% of cities, regions, and counties have established an urban medical assistance system, and the time spent on urban and rural medical assistance reached 7.6 million man-hours, an increase of 37% over 5.54 million man-hours in 2006. Nationwide, a total of 23.339 million impoverished people received subsidies to participate in the new rural cooperative medical services; each urban and rural participant obtained medical assistance of up to 344.7 yuan per visit. In 2007, a total of 7.12 billion yuan from all levels of financial investments were used for medical assistance. Of these funds, central financing subsidized 3.34 billion yuan for the urban and rural medical assistance fund, an increase of 133% over the 1.43 billion yuan provided in 2006. Additionally, all levels of local fiscal budgets provided 3.78 billion yuan for the urban and rural medical assistance fund, an increase of 40% over the 2.7 billion yuan spent in 2006.



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E.  The Rights and Interests of Migrant Laborers in the Social Security System Are Reinforced By the end of the third quarter of 2007, the number of migrant laborers enrolled in retirement insurance, medical insurance, unemployment insurance, and industrial injury insurance plans reached 17.14 million, 29.03 million, 10.96 million, and 34.47 million, respectively. Of these, the number of people enrolled in medical insurance and industrial injury insurance plans was 5.36 million and 9.10 million more than those at the end of 2006. The construction department, one of the key workers on the public accumulation fund for housing construction in 2007, was designated to take special measures and promote certain key points in order to gradually enlarge the coverage scope of the fund to include all urban employment groups, including migrant laborers with regular work. III.  The Safety of the Social Security System Along with the expansion of social security coverage, treatment standards have also been improved, and the income and expense scale of social insurance funds have increased exponentially. The five funds for retirement insurance, medical insurance, unemployment insurance, industrial injury insurance, and maternity insurance, amassed a gross fund income of 722.01 billion yuan in the first the quarters of 2007, an increase of 202.74 billion yuan over 2006. Gross expenditures were 565.5 billion yuan, an increase of 158.52 billion yuan over the previous year. It was estimated that the annual incomes and expenses of the five insurance funds would reach 2 trillion yuan; at the end of the third quarter of 2007, the total surplus of the five funds’ accumulations were 981.58 billion yuan, an increase of 222.98 billion yuan over 2006. In regards to the sub-items, as a benefit of the sustainable and rapid economic development, the fee collection of the five insurance funds experienced a growth of 20% more than the previous year, of which the fee collection for the retirement insurance fund was 450.20 billion yuan, an increase of 24.7% over the previous year; the fee collection for the medical insurance fund was 146.60 billion yuan, an increase of 22.4% over the previous year; the fee collection for the unemployment insurance fund was 31.28 billion yuan, an increase of 21.2% over the previous year; the fee collection for the industrial injury insurance fund

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was 11.40 billion yuan, an increase of 37.4% over the previous year; and the fee collection for the maternity insurance fund was 5.57 billion yuan, an increase of 28.2% over the previous year. Aside from the unemployment insurance fund, the expenditures of other four funds increased by quite a lot; their growth rates were higher than or equal to approximately 20%. Of these, the expenditures of the retirement insurance fund were 434.50 billion yuan, an increase of 27.9% over the previous year; the expenditures of the medical insurance fund were 107.60 billion yuan, an increase of 19.4% over the previous year; the expenditures of the unemployment insurance fund were 13.68 billion yuan, an increase of 2.5% over the previous year; the expenditures of the industrial injury insurance fund were 6.01 billion yuan, an increase of 30.8% over previous year; and the expenditures of the maternity insurance fund were 3.71 billion yuan, an increase of 40.1% over the previous year. Of the funds’ accumulative total surplus, the accumulative total surplus of the retirement insurance fund was the most, at 634.80 billion yuan. The current capacity and surplus of these insurance funds’ income and expenses are so large that public concern regarding the security and protection of these funds is well founded. The National Audit Office audited the social security funds of a portion of the provinces and cities directly under state planning in 2006, and in 2007, audited the social security funds of those counties and cities not audited in 2006. The responsible departments and the various social security organizations worked in complete cooperation with the auditor’s examination and sought to rectify and resolve those problems discovered during the audit. It is already known that the problems discovered by audit in 2006 were rectified and improved on a basic level, and that the audits for 5 social security funds were effectively completed in 2007. Meanwhile, various regions established a general committee of social security superintendence, implemented an important fund reporting system and an information disclosure system, and instituted an organizational internal control system to promote the institutionalization of fund management. The competent departments also carried out informational and educational activities to promote social security fund safety and created an informational column on social security funds on the website “www.cnss.cn” (China network for social security) to enhance public understanding of the significance of the social security fund and to further maintain the safety of this fund. Certainly, the depreciation



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of the social security fund is a risk and its safety cannot be unilaterally guaranteed; therefore, the responsible departments have noted this problem and are researching and formulating the “Provisional Measures on Implementing Management of Central Subsidy Fund Investments for Business Personnel’s Individual Basic Retirement Insurance Accounts”《做实企业职工基本养老保险个人账户中央补助资金投 资管理暂行办法》in order to designate the National Social Security Foundation responsible for investment and operation of the fund. The problem of fund security has also initiated discussion of the social security management system. In the draft of the “Social Security Law”《社会保险法》, the two opposing factions reached a stalemate and the intensity of argument over this matter was particularly severe. One faction believed, presently, that the primary factor affecting the safety of the social security fund was the relatively low level of overall planning and that funds were dispersed in various regions without the binding force of a higher authority to oversee the lower level departments. However, if the management of social security is dispersed among many departments and the departments mutually obstruct funds, this will pose a disadvantage for the development of social security. Therefore, this faction advocated that responsibility for the collection and payment of social security charges, as well as the fund management, should be bestowed on one department. The other faction advocated for a guarantee of the absolute safety of funds through effective decentralization, and also called for the implementation of a so-called management system for tax collection, financial control, social security provision, and audit supervision. The resolution of this problem definitely merits the judgments of both the policy-making organizations and the legislative institutions. In order to standardize the management of business annuities, the responsible departments decided at the beginning of the year to completely hand over the control of business annuities, administered at that time by the social security organization, to professional investment institutions by the end of the year. At the same time, according to the development of the business annuity market and the requirements of financial institutions, and based on the summary of authentication work conducted regarding the qualification of the first wave of business annuity fund administration, the second wave of qualification authentication was made. Altogether 18 organizations obtained their qualifications. Through the formulation of market management rules,

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the operation of business annuity funds, the examination and appraisal of authentication administration, and the transfer of original control, institutional innovations in business annuities have been realized from government administration to market regulation—a change that has promoted significant development in the area of business annuities. In the first half of 2007, business annuities increased by approximately 20 billion yuan, and the total accumulative funds were more than 100 billion yuan. The average earning rate of funds operated by the organizations that met the qualifications reached about 40% in the first three quarters. In addition to fund safety, the safety of social security data was also concerned. In May of 2007, the Japanese Ministry of Health uncovered the scandal that the Japanese Social Security Office had omitted 50.95 million records regarding retirement insurance, 14.30 million annuity records of the Ministry of Health had not been entered in the computer system, and several hundreds of municipal institutions, responsible for collecting this information, had destroyed the original records. More than 50 million old pension records had unidentified “original owners” and so became frozen, or “the pension records suspended in the midair” (悬在半空中的养老金记录). This scandal would directly influence the benefits of insured personnel and could even cause a portion of people who had paid their retirement insurance charges to be unable to draw their pensions on time. This event directly increased voter participation in the Senate election and became a focal point for the government and the public in the Japanese Senate election of 2007. The Japanese NHK’s findings on the investigation showed that 30% of interviewees listed “the pension problem” as the most important issue at hand, and believed that “the pension problem” was the primary factor deciding voting outcomes. Though more than 50% of voters voted for the Democratic Party, only 20% continued to support the Liberal Democratic Party. In China, retirement insurance and medical insurance implemented the integration of overall social planning and individual accounts, while departments handling account records experienced an increased workload; management experience in such an undertaking was unprecedented. The Chinese media widely reported on the problems happening in Japanese social security management in order to warn the Chinese social security administration not to make similar mistakes.



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IV.  Predictions Regarding the Development of Social Security in 2008 In regards to the present circumstances of system construction, the construction of a retirement insurance system that covered both urban and rural residents was lagging, and institutional innovations were necessary for surmounting the new difficulties that arose. Manifestations of this phenomenon are as follows: A.  Measures Regarding Retirement Insurance for Migrant Laborers The existing points of contention regarding the measures for retirement insurance for migrant laborers are as follows: Should a program of independent retirement insurance for migrant laborers be established? And, if it is established, how would migrant laborers already enlisted in retirement insurance for urban business personnel enlist in this type of insurance program? Also, how would migrant laborers transfer their retirement insurance? If all of the migrant laborers could make a transfer, this could discourage them from moving and thus dampen their enthusiasm for the program. If not all payments can be transferred, the outflow area will experience an increase in the coverage burden when migrant workers return to their home. The foundation of these problems is how to effectively realize migrant laborers’ rights and interests in regards to social security. Also, how would migrant laborers’ retirement insurance premium rates and business retirement insurance premium rates determined? B.  Institutional Retirement Insurance The institution is a unique phenomenon in China, and its form and composition are very complex. The reform of retirement insurance for institutional personnel has been ongoing for more than ten years and the extreme difficulty of the process is proven by the fact that a unified opinion on the matter can still not be reached by this day. In 2008, a common understanding needs to be reached. C.  Retirement Insurance for Unemployed Urban Senior Citizens The retirement insurance system for this demographic is non-existent; retirement insurance, which covers both urban and rural residents, must focus on resolving this issue. At present, using the method of national

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annuities paid overseas as a reference, the ideal security standards would be lower than the minimum wage and higher than the standard of the most basic social security, the funds for which would be appropriated by financing. D.  Maintaining a System of Individual Accounts in Retirement Insurance Maintaining a well-organized system of individual accounts in retirement insurance is a basic measure which transfers the financing pattern of retirement insurance, realizes partial accumulation, and handles the pressures felt by the retirement insurance system at the peak of population aging. In 2007, based on the experiments of three Northeast provinces, experimental individual account retirement insurance programs were expanded to 8 other regions. In 2008, these experimental programs were further expanded nationwide. E.  Establishing a Standardized Pension Regulation Mechanism in 2008 In the process of regulating pension levels and alleviating large pension differentials between business retirees and institutions, the establishment of a unified adjustment mechanism has come into consideration. In addition, experimental programs providing basic medical insurance for urban residents are in their second year. And, based on a summary of these experiments in 2007, the scope of this work will be further increased, the number of urban experiment sites will be further increased, and the population of beneficiaries is rapidly expanding. F.  Issues Concerning the Overall Planning of Urban and Rural Social Security In order to improve the overall planning of urban and rural social security and to speed the establishment of a social security system that covers both urban and rural residents, three outstanding areas of issue must be addressed: 1.  Financial Support Levels Raising the levels of business retirees’ pensions, satisfactorily completing individual retirement insurance accounts, implementing basic medical insurance for urban residents, providing coverage for all qualified urban and rural residents, and perfecting social aid are all goals necessary to increasing corresponding financial investment. To a certain



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degree, increases in financial investment have decided the progress and construction of overall planning for an urban and rural social security system. 2.  Grass-Roots Work Is the Foundation of an Effective Social Security Program In those cities implementing basic medical insurance for residents as well as retirement insurance for unemployed senior citizens, the programs are dependent on the community. In the rural areas, the government at the village and town level provides the most basic authority, as originally there were no businesses involved in the social security system and there was a shortage of corresponding institutions. At present, the work of grass-roots foundations in planning the overall construction of an urban and rural social security system is very weak; therefore great efforts must be made to extend the scope of control, to establish a network, and to construct a solid foundation. 3.  The Working Capacities of Social Security Organizations The workload of social security organizations will be exponentially increased along with the expansion of coverage. Presently, efforts to construct a social security information network, basic working conditions, and allocation of human resources are lagging. Additionally, the institutions managing and undertaking the social security programs are not unified or standardized and therefore cannot adapt to the work requirements for the overall planning of urban and rural social security; a phenomenon that has affected the realization of several policies. Strengthening the construction of the social security organization’s work capacity has become a key issue in the planning of an urban and rural social security program.

Advancements in the National Health Insurance Program Gu Xin Key words: national health insurance, public medical insurance, national basic medicine system, new round of medical system reform, medical service system, new medical system reform

In mid 2007, a new round of medical system reform (hereafter referred to as “new medical reform”) began to be implemented in national medical care; at its core was a plan for national health insurance. A key component of the move towards establishing a national health insurance program is the implementation of experimental programs nationwide that provide basic medical insurance for urban residents. On July 10, 2007, the “Guiding Opinions of the State Council on Creating Experimental Programs for Basic Medical Insurance for Urban Residents” (Guo Fa (2007) No. 20)《国务院关于开展城镇居民基本医疗 保险试点的指导意见》was officially issued. From July 23 to 24, the State Council presided over and held a national conference in Beijing regarding experimental work for providing basic medical insurance to urban residents in order to determine the first round of 79 experimental cities. During this conference, the State Council requested permission to release the implementation plan and to officially implement basic medical insurance for urban residents by the end of September. Based on the promotion of a national health insurance, the ruling party further proposed an administrative program in the health domain that would “establish a basic medical system, and raise the national health condition.” The direction of reform in the medical insurance system includes a third party purchase mechanism that is developing towards becoming   The text of this document may be found at the many government departments’ official websites. For example, the official website of the Ministry of Labor and Social Security is at http://trs.molss.gov.cn/was40/mainframe.htm.    Related news articles may be found at the many government departments’ official websites. For example, the official website of the Ministry of Labor and Social Security is at http://www.molss.gov.cn/gb/news/2007-07/25/content_189059.htm.

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a national health insurance system and the development of medical services available in the public medical insurance organizations on behalf of the policyholder’ benefits to purchases medical services. Of course, the realization of a national health insurance program and the formation of a third party purchase mechanism will involve many institutional details and heavy responsibility, and this work cannot be completed immediately. The reform strategy for the medical service system has two approaches. The first approach is to partially or comprehensively restore and develop the public health administrative department’s planned management and administrative control of public medical institutions. The second is to encourage all medical institutions to move towards market management. The starting point of the first approach is to maintain the feature of “public welfare” in public medical institutions; namely, to barter low-prices through planned control. The core idea of this approach is to implement “two lines of management in incomes and expenses” (收支两条线管理) for public medical institutions in the area of finance. Namely, public medical institutions would still charge some fees of their patients, but all their earnings would be turned in. Then, the public health administration would combine the accumulated charges with the government subsidies and authorize the charges according to the achievements and evaluation of the public medical institutions. Without a doubt, the foundation on which this pattern rests is the fact that the government would provide public medical institutions with massive subsidies from the fiscal budget. Additionally, the government would implement unified planned management of public medical institutions’ drugs, equipment, and consumptive materials purchasing, and even implement unified purchase and sale. However, the operation of this plan is dependent on the government changing from a plan of direct financial investment to being the provider of medical services; therefore this pattern is often called the “provider” plan. The second reform approach advocates that the role of the medical institution is inessential so long as the health insurance organization acts as the medical service fund-raiser and payer as well. Whether the institution is a public agency or a private organization, a nonprofit organization or a for-profit organization, they all may compete with the medical insurance organizations to provide medical services contracts for policyholders. With the improvement of financing levels in the public



advancements in the national health insurance program 81

medical insurance system, the majority of expenses incurred when seeing a doctor would be paid directly to the medical institutions by the medical insurance organizations. The medical insurance organization could then purchase relatively better medical services for the insured personnel using various advanced payment mechanisms. In other words, the payment mechanism would encourage medical institutions to control their expenses and to improve their services. Thus, it is unnecessary to recover the planned system in the medical service system, even on a partial basis. Obviously, correct understanding of the significance of government leadership is important and this reform approach highly emphasizes the positive role of medical services in the market principle. Because this type of reform stresses increased health related financial investments by the government into the medical security system on the basis of medical service demand, it is known as the “demand” plan. I.  National Health Insurance: The Evolution of the Urban and Rural Medical Insurance System The implementation of national experimental programs that provide medical insurance for urban residents signifies that national health insurance has begun to develop in the right direction. As part of this development, an infrastructure of three types of urban and rural public medical insurances, namely basic medical insurance for urban employees, medical insurance for urban residents, and the new rural cooperative medical services, is the foundation of the formation of this new medical insurance system. A.  Implementing a Medical Insurance System for Urban Residents In urban areas, the primary role of the original medical insurance system was the provision of medical insurance for employees and the provision of medical services at the public’s expense, both of which were beneficial for the working population. Generally speaking, the existing public medical insurance system does not cover the urban unemployed, namely minors (including students), old people without a previous work unit, and the unemployed. If economic conditions are not good, and commercial medical insurance is not affordable, then it is probable that these demographics will be without medical insurance.

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In view of this situation, many areas have recommended the implementation of a public medical insurance program for unemployed urban residents. (This program is known as “resident medical ­ insurance” in the majority of areas and also known as “urban cooperative medical services;”) and its system frame is similar to the new rural cooperative medical services already established in certain areas (e.g. in Handan City, Hebei Province). This program provides government subsidies to the insured and residents voluntarily pay charges to enlist in this medical insurance program. In the implementation of this program, the developed Zhujiang Delta Area is at the forefront. As early as July 2004, the two cities of Dongguan and Foshan of Guangdong Province led the way in implementing experimental programs in urban and rural resident medical insurance. Also, Zhuhai City established a medical insurance program for minors in August of 2005 and Zhongshan City recommended the creation of urban and rural resident hospitalization insurance in July of 2006. These areas planned according to the actual needs of urban and rural residents and also took into account the effect of steadily increasing urbanization. As a result, these areas were finally able to realize the development of an integrated urban and rural medical insurance program, one in which urban and rural residents have equal payment, standards, and treatment. Excepting certain cities, provinces, and municipalities, a plan providing medical insurance for urban residents was comprehensively carried out as early as 2006 within each area of jurisdiction. By October 2007, 11 provinces had implemented medical insurance for urban residents across the entire province (municipality). The provincial-level areas that implemented medical insurance for urban residents comprehensively included the three municipalities directly under the Central Government, the more developed Zhejiang and Jiangsu, and the undeveloped Heilongjiang, Jilin, Gansu, Jiangxi, Anhui, and Qinghai. Thus, it can be seen that the question of whether to implement a national health insurance program is not necessarily tied to the level of economic development.   On March 27, 2007, “Opinions of Handan People’s government on Implementing the urban Cooperative Medical Service System” was issued; all urban residents and urban migrant laborer residents who were not enrolled in the medical insurance for urban employees or the new rural cooperative medical services could enroll. Enrollment for urban cooperative medical services is by family, while individual expenses are 30 yuan every year. The municipal and area-level governments provide a subsidy of 50 yuan per person every year. Please See: China Social Security, Issue 5 (2007): 52.



advancements in the national health insurance program 83

Based on regional spontaneous experiments, the Guo Fa (2007) Document No. 20 determined a basic system frame for a medical insurance program for urban residents. This program would serve as a kind of public medical insurance system and all unemployed urban residents would voluntarily enroll in the insurance program as families. The government would then provide subsidies for all insured personnel through a generalized system of preferences and payment standards that could be partially or even totally exempted. The standards for individual payment and government subsidies would be independently decided by the respective local government, according to the level of local economic development. However, the Guo Fa (2007) Document No. 20 stipulated the lowest standards of economic development, namely an average of 40 yuan per person every year, which is the same as the government subsidy for the new rural cooperative medical services. During the process of these programs being established in the Midwest areas, the central government will set up a special transfer payment system, beginning in 2007, according to the standard of an average of 20 yuan per person each year. At the same time, the Guo Fa (2007) Document No. 20 also stipulated the lowest standards for government subsidies for impoverished groups, as well as the lowest standards for a special central government transfer payment system for the mid-west areas. B.  The Consolidation of Medical Insurance for Urban Employees During the process of establishing a medical insurance system for urban residents, medical insurance for urban employees was also consolidated. The coverage area of medical insurance for urban employees was originally limited to the so-called “employees,” namely the official employees of work units; however, afterwards it was gradually expanded to include self-employed individuals and migrant laborers. Coverage in the medical insurance program for urban employees was determined to include all employees (wage earners) as well as retirees, regardless of the social status of the employee. All employees will be able to benefit from this service immediately, so long as they enroll in the insurance program. The coverage of the medical insurance program for urban employees has continuously and stably expanded since 2000. By the end of 2006, the number of policyholders reached 157 million, which accounted for 46.6% of urban jobholders and retirees (See Figure 5.1). In 2007, the coverage scope of the medical insurance program for urban employees

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160 140

Number of People Participating in Insurance (ten thousands)

Ten Thousands

120

39.8% 32.4%

Coverage Rate (total base population of the urban employed and retired)

100

40

35%

25.8% 14.0%

20 0

1.4% 2.9 1993

1.9%

3.4%

3.7%

7.3%

7.4% 7.9%

4.0

7.5

8.6

17.6

18.8

20.7

1994

1995

1996

1997

1998

1999

55% 45%

36.1%

80 60

42.5%

46.6%

72.2

94.0

109.0

124.0

137.8

157.4 25% 15% 5%

37.9 2000

2001

2002

2003

2004

2005

2006

-5%

Figure 5.1: Rate of Insured Peoples and Percentage of Coverage under the Basic Medical Insurance Program for Urban Employees (1993–2006)

will be further expanded. According to a news release of the Ministry of Labor and the Ministry of Social Security, by the end of September, 2007, the number of policyholders in the medical insurance program for urban employees reached 189 million. From the viewpoint of development, the related government departments have undertaken huge efforts within the past few years and made several achievements. It should be acknowledged, however, that the medical insurance program for urban employees still faces severe challenges in expanding its coverage scope and it still relies on the government to improve the coercive strength of the insured. The challenges faced in the development of this program stems from three main sources. First, a large portion of private businesses, (in particular, foreign-funded businesses), are not willing to enroll in the medical insurance program for urban employees based on cost control issues and younger employee demographics. Moreover, certain local governments have been severely restricted in the implementation of compulsory insurance enlistment because of pressure to attract investments. Second, certain institutions which originally provided free medical services have not exhibited enthusiasm for enrolling in the medical insurance program for urban

   Please see: the official website of the Ministry of Labor and Social Security at http://www.gov.cn/wszb/zhibo163/content_781607.htm.



advancements in the national health insurance program 85

employees, as the progress of integrating the institutions’ free medical services with the medical insurance program for urban employees is slow. Third, employees and retirees from state-owned and collective businesses who are suffering from financial pressures are incapable of enrolling in the medical insurance program for urban employees. The third problem facing this program is an issue left over from history. In order to resolve this problem, certain local governments are implementing nonrecurring provisions in order to integrate impoverished business employees and retirees into the medical insurance program for urban employees. This work will take effect within two to three years in order to take advantage of the increase in financial incomes. For example, on September 13, 2007, the Department of Labor and Social Security of Guangdong Province and the Provincial Finance Department jointly issued the “Implementation Opinions on Resolving the Issues Related to Impoverished Business Retirees Enlisting in Basic Medical Insurance”《关于解决困难企业退休人员参加 基本医疗保险有关问题的实施意见》(E Fu Ban [2007] Document No. 74), and requested that all levels of the government finance and the medical insurance funds jointly pay for the concerned personnel’s insurance premiums for 10 years. The provincial finance departments created funds to subsidize the western, eastern, and northern areas of Guangdong Province with 100 million yuan each year for ten consecutive years and simultaneously invested 450 million yuan to pay insurance premiums for rural overseas Chinese employees and impoverished retired returning overseas Chinese, while also integrating them into the medical insurance program for urban employees. In other words, the government will pay a sum of money to bring old people, who have contributed to the construction of New China without health insurance because of various reasons, into the coverage scope of the medical insurance program for urban employees, an undertaking that has paved the way for the advancement of the medical insurance program for urban residents. Generally speaking, the financing level of the medical insurance program for urban employees was high, reaching 1,508.68 yuan per person in 2006 (See Table 5.1). Also, the surplus per person of the medical insurance fund for urban employees was also high, and rising yearly, reaching as high as 1,113.30 yuan per person in 2006 (See Figure 5.2). As a non-benefit project of social insurance, it is necessary to maintain a certain surplus as risk capital, but the maintenance of such a high a surplus rate is ineffective. Therefore, the paying level

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Table 5.1: Basic Medical Insurance Payment Levels for Urban Employees (1993–2006) Actual insured employees (ten thousand population)

Fund investment (hundred million Yuan)

Financing level per person (Yuan)

267.6 374.6 702.6 791.2 1588.9 1508.7 1509.4 2862.8 5407.7 6925.8 7974.9 9044.5 10021.7 11580.3

1.4 3.2 9.7 19.0 52.3 60.6 89.9 170.0 383.6 607.8 890.0 1140.5 1405.3 1747.1

52.32 85.42 138.06 240.14 329.16 401.67 595.60 593.82 709.36 877.59 1116.00 1260.99 1402.26 1508.68

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Data from: Statistical Yearbook of China 2007, 901–902.

900

100 Million Yuan

700 600 500

Average Disbursement Per Insurance Participant (Yuan)

0

615.13

479.41 278.89 289.94

300

100

772.27

Average Surplus Per Insurance Participant (Yuan)

400

200

927.31

13.79 17.49 41.56

350.27

106.51 74.79 94.21

44.81 72.45 97.87 189.32 229.85 283.86 334.58 328.76 337.95 435.48 599.81 695.12 782.64 811.46

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

1100 900 700 500 300 100 -100

Data from: Statistical Yearbook of China 2007, 901.

Figure 5.2: Income and Expenses of the Basic Medical Insurance Fund for Urban Employees (1993–2006)

I Yuan

800

1300 1113.30



advancements in the national health insurance program 87

(or security strength) of this public medical insurance program can be improved to help the insured to resist the risks of medical costs. At the same time, the enhancement of security strength is also helpful in enhancing its attraction to the public, especially to employees from private and foreign-funded businesses. In fact such an improvement could ultimately impel the development of coverage, and could finally help realize the policy goal of broad and even complete coverage. It is apparent that the responsible departments have already realized this issue and preparations are being made for improvement. C.  The Gradual Completion of a New Rural Cooperative Medical Service Program At the same time that the coverage of urban health insurance was expanded from only covering employees to covering all residents, the coverage scope of the new rural cooperative medical service program was also expanding. Experimental programs providing rural cooperative medical services began to be implemented beginning in mid-2003 nationwide, and 333 counties implemented experimental programs in 2004. By the end of 2005, the counties implementing such programs increased to 678, and approximately 180 million farmers enrolled in these cooperative medical service programs, a rate of 24.0% of the total 750 million farmers. However, by the end of 2006, the number of counties (cities and municipalities) instituting the experimental programs for rural cooperative medical services suddenly increased to 1,451, and the number of insured farmers increased to 410 million, which accounted for 55.4% of the agricultural population nationwide (740 million). Regarding the operational aspects of these new experimental programs, in the third quarter of 2007, the Ministry of Public Health stated that, by September 30, 2007, the counties (cities and municipalities) which had developed new rural cooperative medical services reached 2,448, which accounted for 85.53% of the total counties (cities and municipalities), and the enlistment rate in the new rural cooperative medical services reached 726 million, which accounted for

  Please See: Statistical Bulletin on Public Health Development of China in 2005, at http:// www.moh.gov.cn/newshtml/11872.htm.    Please See: The website of the Ministry of Finance at http://www.mof.gov.cn/ news/20070227_3194_24446.htm. 

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98.51% of the total agricultural population (737 million people at the end of 2006). In its initial implementation period of 2003 to 2005, as a result of the farmers’ low level of trust for the government and the low levels of payment received by the farmers, the coverage of the new rural cooperative medical services was relatively limited. However, in less than two years, the coverage for the new rural cooperative medical services expanded rapidly, and a national health insurance program in rural areas was realized. According to a preliminary analysis, the following factors were extremely important in this accomplishment: 1. Government Insurance Premium Subsidies Double The primary financing for the new rural cooperative medical services came from the government budget, and the government subsidized an average of 20 yuan per person for all policyholders for the new rural cooperative medical services as its lowest standard for 2003–2005. Beginning in 2006, the lowest subsidy standard was increased to an average of 40 yuan per person.10 Additionally, the responsibility for these governmental subsidies was not born by a specific level of government, but shared by various levels of government. Basically, in regards to the Midwestern areas and a small number of depressed eastern areas, half of the governmental subsidies were borne by the central government, while the rest were shared by local governments at the provincial, municipal, and county levels. 2.  Payment Levels Greatly Improved During the initial period of implementing the new rural cooperative medical services, and as a result of considerations regarding the maintenance of fund security and the lack of experience, each region exhibited

   On November 12, 2007, the Ministry of Public Health issued the operational aspect of the new rural cooperative medical services. Please See: the official website of the Ministry of Public Health at http://www.moh.gov.cn/newshtml/20562.htm.     Fang Liming and Gu Xin. “Breaking through the Predicament of Voluntarism: Incentive Mechanisms and Sustainable Development of the Cooperative Medical Services in the New Rural Cooperative Medical Services.” China Rural Survey, Issue 4 (2006), 24–32.     Please See: “Notice of the General Office of State Council on Transmitting the Opinions of the Ministry of Public Health Regarding the Establishment of a New Rural Cooperative Medical Service System” for detailed provisions. 10   Please See: “Notice on Hastening the Establishment of the Experimental Work of New Rural Cooperative Medical Services” for detailed provisions.



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a tendency to lower the payment level as much as possible, while the surplus rate of the funds for the new rural cooperative medical service programs maintained high levels, reaching up to 70% in some areas. Therefore, the Ministry of Finance, the Ministry of Public Health, and the State Administration of Traditional Chinese Medicine jointly issued a document on September 10, 2007, which clearly requested that “the overall surplus funds of cooperative medical services raised in the same year in each region should be no more than 15%.”11 Certain provincial governments also further raised the quota in order to depreciate the fund surplus rate of the new rural cooperative medical services in the same year.12 Afterwards, local grass-roots level government organizations devised means to enhance payment levels as well. As a result, the payment levels were enhanced and the individual payment level was kept low. Additionally, the attraction of the new rural cooperative medical service program to the farmers was naturally improved. 3.  Adjustment of the Payment Structure At the outset, experimental programs in the new rural cooperative medical service system were designed around the concept of “medical insurance for serious diseases,” and outpatient service costs were not covered. Because of the low probability of serious diseases, such institutional arrangements inevitably limited the benefits for the insured, which affected the farmers’ enthusiasm to enlist in the insurance program. Therefore, many areas devised means to integrate the outpatient service costs into the new rural cooperative medical service program through the establishment of a family account. According to an assessment made in March of 2006, in those areas where fund levels were low, more than 60% of the counties chose the pattern of hospitalization compensation and family accounts, 10–15% of the counties chose the pattern of overall hospitalization planning and outpatient services, and only 10% chose a pattern in which the new rural cooperative medical

11   “Guiding Opinions on Consummating the Overall Compensation Plan for the New Rural Cooperative Medical Services.” Wei Nong Wei Fa, No. 253 (2007). This article is available on the websites of the Ministry of Finance and the Ministry of Public Health. 12   For example, when conducting the investigation in Jiangsu Province, the author discovered that the provincial government had lowered the highest surplus rate to 10% and the Suqian municipal government had further lowered it to 5%.

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services only covered hospitalization.13 After 2006, with the enhancement of governmental subsidy standards, many areas had integrated the farmer’s partial costs of outpatient services in rural community medical service organizations (namely, the public health centers of villages and towns and the village clinics) into the reimbursement scope for the new rural cooperative medical services. The insured were allowed 20–30% off of costs to see a doctor and to obtain medicine in the public health center of villages and towns and village clinics, a change which increased public attraction towards this system. 4.  Increased Mobility among the Insured After the rate of people insured by the new rural cooperative medical services became a primary indicator in the evaluation of the achievements of this program for all levels of the governments, all levels of the government along with the rural grass-roots authorities strongly encouraged farmers to enlist in the new rural cooperative medical services by using a variety of mobilization methods. These included: grassroots governments with abundant financial resources directly paying the farmer’s insurance premiums and exemptions from insurance premium payments for those people enlisted in the new rural cooperative medical services in areas with developed collective economies. Additionally, in these areas, the new rural cooperative medical services evolved into a system of free medical services paid at the lowest level. In other areas, in regards to the insured people who did not fall sick, payment discounts were implemented if a person was continuously enlisted in insurance. Though the urban and rural public medical insurance program expanded its coverage scope, it was still apparent that the coverage of the present medical security system program is not broad enough and is still far from realizing the model of universal coverage for its members (namely “national health insurance”). At the same time, another issue is that except for medical insurance for urban employees and urban residents, the new rural cooperative medical services have somewhat low financing levels and the majority of actual medical costs are paid by the insured. In such a situation, not only are the risks of medical costs ineffectively shared by the insured, but the formation of a third party purchase mechanism is also difficult. 13  Experimental Work Appraisal Group for the New Rural Cooperative Medical Services. New Rural Cooperative Medical Services of China in Development. (Beijing: People’s Medical Publishing House of Beijing, 2006), 3.



advancements in the national health insurance program 91 II.  Medical Service System Reform

Effecting organizational change in the public medical institutions has resulted in pressure and difficulties for medical service system reform as the numerous public medical institutions occupy a large market share and the process of reform is a very difficult matter. Basically, two approaches to this reform have risen to the forefront. In the first, “a separation of administration and operation” would be carried out, which would allow public medical institutions to disconnect from the responsible administrative departments in order to truly realize legalization (法人化) and to compete with the various facets of the medical institution on an equal footing. In the second approach, administrative control of public health administrations would be restored to these organizations in order to implement unified management. As a result of the fact that the public medical institutions were nominated to the management level and the government still held pricing power over medical services, the government undertook three important reform measures in 2007; the implementation of the management of “two lines of income and expense” (收支两条线) over the finances of public medical institutions; the implementation of centralized purchasing and unified allocation of medical instruments; and the establishment of a basic medicine system based on unified purchase and sale. A.  “Two Lines of Income and Expense” The term “two lines of income and expense” refers to a system in which the medical institution still sell the drugs to patients, but all costs are turned over to the public health administration, who then distributes these costs and the government allocations back to the medical institutions. The original intention of the “two lines of income and expense” implementation was to cut off direct contact between the medical institutions’ business income and the medical care personnel’s individual income, and thus eradicate the phenomenon of excessive inspections and high priced medicines and avoid so-called “excessive consumption induced by the supplier.” Meanwhile, the public health administration has reacquired the property rights of public medical institutions, as well as management control. In recent years, the development of an urban and rural community medical service system has become a primary goal in national health policy. The government’s goal is to establish and complete a community medical service system in all prefecture-level cities, as well as in ­

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county-level cities that meet the conditions, before 2010. In each of these sites, urban residents would enjoy public medical services, including sickness prevention, as well as basic medical services for common diseases and frequently occurring diseases in the community. To this end, all levels of the government allocated certain funds from the fiscal budget in order to build community medical service organizations, as well as to expand the establishment of the original organization. Because the existing community medical service organizations14 are facing universal difficulties, most are willing to accept the management plan of “two lines of income and expense.” Additionally, a reform method in which hospital management centers are established and public hospitals are disconnected from the local health bureau has been instituted in the large, medium, and small hospitals of certain areas (e.g. Wuxi, Shanghai, and Haidian District of Beijing). These hospital management centers are organized as institutions under the local health bureau, and their function is to replace the health bureau through various management functions.15 Presently, this pattern of separation between administration and operation is still at the experimental stage, and its main issue is to divide the functions of the health bureau and the hospital management center, as well as the relations between the hospital management center and the hospitals. B.  Centralized Purchasing and Unified Allocations for Medical Instruments On June 21, 2007, the Ministry of Public Health issued the “Notice on Further Strengthening the Administration of the Centralized P­urchase of Medical Instruments”《关于进一步加强医疗器械集中采购管 理的通知》(WeiBan GuiCai [2007] No. 208). The Ministry of Public Health requested that all non-benefit medical institutions established by government, industry, and state-owned businesses should participate in the centralized purchasing of medical instruments; no medical institution was able to dodge this regulation. According to the views of the Ministry of Public Health, the centralized purchasing of medical instruments would benefit the guarantee of purchase quality, reduce

14  Gu Xin. “The Government’s Role in the Construction of the Community Health Service System.” Reform, Issue 1 (2006): 106–114. 15  The reform measures concerning Wuxi City can be seen in “The Wuxi Method: The separation of Administration and Operation in Health Services.” China Healthcare Innovation. November Edition/General Issue 6, (2006).



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procurement costs and prices, relieve the patient’s and the businesses’ burden, and simultaneously prevent commercial bribery in the purchase and sale of medicines. The Ministry of Public Health held a press conference on the topic of the “Centralized Purchase of Medical Instruments” on July 27, 2007. At this conference, this new measure was challenged by the attendant reporters, and the question was raised of whether the government-centralized purchase of medical instruments could be open and transparent.16 In addition, the question was raised about whether the proposal was even feasible. In regard to the overwhelming number of medical instruments and medical consumables, similar products made by different companies would be very difficult to single out for achieving overall superiority. Even if the government procurement procedure was open and transparent, it would still be hard to imagine how the government could choose one company’s products to meet the demands of various medical institutions, in regards to consumables and medical instruments. C.  Comparison of a Basic Medicine System and a System of Unified Medical Purchase and Sale Presently, the problem of “underpaid doctors being compensated by excessive medical expenses” is rampant in public medical institutions. In order to solve this problem, the establishment of a “drug security system” was included in the government policy agenda. Its specific measures included the establishment of a “national basic medicine system,” in which the state organizes experts to select 300–400 basic drugs of widespread prescription based on safety, reliability, efficacy, and moderate price, and then organizes businesses to carry out production, government procurement, and centralized allocation. On February 9, 2007, the State Food and Drug Administration issued its “Notice on Promulgating the List for the First Batch of Urban, Community, and Rural Basic Medication Appointing Manufacturing Businesses”《关于公布 第一批城市社区、农村基本用药定点生产企业名单的通知》(Guoshi Yaojian An [2007] No. 76), and authorized 10 pharmaceutical manufacturing businesses, including certain pharmaceutical industry limited

16   The official record can be seen at the official website of the Ministry of Public Health at http://www.moh.gov.cn/newshtml/19667.htm.

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liability companies in Beijing, as the first batch of appointed manufacturing businesses for 27 basic drugs. However, by the end of August and after half a year, only four of these ten pharmaceutical businesses had begun the production of inexpensive drugs. Even if they were evaluated at the end of the year, it was already apparent that this small, unified purchase and sale system was still not working smoothly. The national basic medicine system involved various components, including a financing mechanism for basic government drug procurement; evaluation mechanisms for the security, validity, and economical efficiency of the drugs; production and allocation mechanisms for basic drugs; standards for the reasonable use of basic drugs in clinics; and patient history with various drugs, all of which necessitated interdepartmental cooperation and integrated medical reform. Moreover, in regards to the production and circulation of basic drugs, the implementation of a unified purchase and sale was also disputed. Obviously, a system of unified purchase and sale could no doubt lower prices; however, it could also result in the suppression of quality improvement and product innovation. Instituting centralized purchasing using fixed government prices and adopting unified purchase and sale could be another viable method. Researching which method can best achieve the goal of basic drug security based on the promotion of drug market development merits further exploration. III.  A Planned System of Market Management: The New Medical System Reform 2007 marks the first year in the new round of medical service system reform in China. At the beginning of the year, the Leading Group for the National Reform of the Medicine and Health System invited six domestic and foreign organizations, including Peking University, Fudan University, the Development and Research Center of the State Council, the World Bank, the World Health Organization, and McKinsey and Company to respectively propose their own plans regarding medicine and health system reform in China. In April, Beijing Normal University also accepted an invitation to participate. The plans of these seven organizations, with the addition of a plan spontaneously proposed by Renmin University of China, finally appeared publicly at a closed international seminar held at the end of May. According to the original plan, the Leading Group for The National Medicine and Health Sys-



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tem Reform Organization would comprehensively promote an official new plan regarding medicine and health system reform, beginning the 8th of September, that incorporated all of the plans and opinions and would submit this plan to the public for discussion. However, at the time of publication, an official new plan regarding medicine and health system reform has not yet been proposed; a situation which reflects the differences among the various government departments in their direction and strategic choices regarding the new medicine and health system reform. Despite all of this however, the reform process is underway. Although security levels are still not high, the multi-layer, multi-level public medical insurance system has been established on a system framework. At present, the most important challenge to this system is to realize universal coverage based on voluntary insurance, also known as national health insurance. Over the next five years, this system will face many difficulties regarding the improvement of the delivery of service and administrative structure. Among these problems is deciding whether the organization of public medical insurance is done on behalf of the insured and whether utilizing suitable specialized payment mechanisms and purchasing various medical services will hinder the reform of the overall medical system. However, a more serious issue is that the direction of the reform of the medical service system is not explicit, while the medical insurance system is making possible headway. Although there are various possibilities, at present the majority of public opinion regarding the reform supports a return to the planned system. Through the management system of “two lines of income and expense” in the area of finance, the unified government procurement of medical equipment, the unified purchase and sale of basic drugs, price control of medical services, and the government nomination of medical institution leadership, the public health administration is attempting to become the “chief ” authority over the nation’s medical institutions, while medical institution chiefs become directors of the section offices. In a word, the country’s medical service system will become a huge bureaucracy. It is hard to imagine how such a health service system could respond to the diverse medical service demands of the people, raise operating efficiency, and continuously anticipate improvements in service quality, while at the same time promoting innovation. A new round of medical system reform has indeed begun, though the establishment of a new smoothly running medical service system is still several years away.

The Security of Chinese Society in 2007 Song Erdong and Sun Huilin Key words: the security of society, social psychology, cracking down on crime, criminal offense, economic crimes, violent offense, public safety

I.  Improvements in Security: the Result of Social Stability In 2007, under the combined efforts of the whole of society, Chinese economic and social development was further strengthened, the principal issues and problems affecting society were contained and alleviated, and the overall security and positive development of society was maintained. A.  The Number of Registered Criminal Cases is Equal to the Rate in 2006 From January to October 2007, national public safety organizations registered a total of 3.79 million criminal cases, the same number as in 2006, and the number of direct victims involved in criminal offenses reached 2.11 million, a drop of 3.7%. According to the circumstances in various regions, from January to October 2007, the number of criminal cases registered by public security organizations in 16 provinces, autonomous regions, and municipalities declined in comparison to the rate in 2006. B.  A Decline in the Number of Violent Offenses From January to October 2007, national public security organizations registered 49,000 cases of violent offenses concerning explosives, the use of dangerous substances, murder, arson, kidnapping, and rape, a drop of 5.2% over 2006. Of these, there were 508 cases of criminal explosive use, a drop of 25%; 839 cases involving dangerous substances, a drop of 15.9%; 14,000 cases of murder, a drop of 10.2%; 5,054 cases of arson, a drop of 9.3%; 3,073 kidnapping cases, a drop of 3.4%; and 27,000 cases of rape, a decrease of 1.2%.

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C.  A Decline in the Frequency of Property Crimes From January to October 2007, national public security organizations registered 3.21 million property crime cases, a drop of 1.1% over 2006. They registered 2.96 million cases of burglary, plunder, and robbery crimes, which was equal to the rate in 2006. In the burglary cases, cases of stealing safe contents, picking locks and stealing, stealing vehicles, and burglary experienced a downtrend. Of these, there were 6,212 cases of stealing safe contents, a drop of 19.4% over 2006; 126,000 cases of picking locks and stealing, which experienced a drop of 7.9%; 49,000 cases of stealing vehicles, a drop of 5.4%; and 842,000 cases of burglary, a drop of 3.4%. Regarding the number of cases of robbery, from January to October 2007, the national public security organizations registered 144,000 cases, a drop of 12.5% over the rate in 2006. Regarding cases of plunder, from January to October 2007, the national public security organizations registered 239,000 cases, a drop of 7.3% over in the rate in 2006. D.  A Decline in the Number of Cases of Disruption to the Social Management Order From January to October 2007, national public security organizations registered 180,000 cases concerning the crime of disrupting social management order, a drop of 0.5% over 2006. Of these, 85,000 cases involved the crimes of pornography, gambling, drug abuse, and drug trafficking, a drop of 5.2%. Of this number, 57,000 cases concerned the crime of drug abuse and trafficking, a drop of 12.3%; 15,000 cases of gambling crimes, a drop of 12.1%. E.  A Reduction in the Number of Apprehended Criminal Organizations From January to October 2007, national public security organizations apprehended 49,000 criminal organizations (or gangs) and 191,000 members, a drop of 4.1% and 6.3% over rates in 2006, respectively. Of these, the criminal cases involving organized crime and gang activity dropped by 41.9%; the cases of organized crime or gang contract fraud dropped by 21.6%, and the number of cases of organized crime and gang robbery dropped by 15.7%. The number of cases of organized crime or gang involved property fraud dropped by 15.2%; and the number of cases of organized crime drug abuse and trafficking dropped by 3.4%.



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F.  A Reduction in Accidents Concerning Public Security and Disasters From January to October 2007, 268,000 road traffic accidents occurred, which caused the deaths of 64,000 people, injured 318,000 people, and directly resulted in property damages of up to 950 million yuan, a respective drop of 15.9%, 13.7%, 13.4%, and 26% over 2006. 134,000 fire accidents occurred, resulting in the deaths of 1,154 people and the injury of 732 people, a drop of 32.3%, 16.4%, and 44.5% over rates in 2006, respectively. The resulting property damages reached 790 million yuan, an increase of 9.9% over 2006. G.  The Public Sense of Security Stays High Survey data concerning the public sense of security in 2006 showed that 15.4% of interviewees believed themselves to “be very safe” under the present social order conditions, 40.1% of interviewees believed themselves to “be safe,” 36.5% of interviewees believed themselves to “be basically safe;” and the interviewees who felt they were “very safe,” “safe,” and “basically safe” accounted for 92% of the total number of interviewees. Public disorder, criminal offenses, and traffic and fire accidents were the most significant determinants of the people’s sense of security. And, judging from the development trend in regards to these issues, in 2007, the Chinese people’ sense of security would maintain high levels. II.  Principal Issues Affecting the Security of Society In the different periods of social development, the various contradictions and problems which affect the Chinese economic and social development have tended to fluctuate, with one decreasing as the other increases, and the influence and impact these issues have on the social order differ in both their depth and breadth. A.  Principal Issues Affecting the Security of Society Judging from the various anfractuous phenomena, contradictions, and problems facing social stability and social order in 2007, including “non-immediate conflicts of interest,” “family murder cases,” “hatred of the rich,” and “taking revenge on society,” it has become apparent that, under the macroscopic background of fierce social reform, the

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problem of maintaining the social order should be analyzed from the viewpoint of reinforcing changes made in the social psychology and the degree of association to the social order. 1.  In the Process of Diversifying Social Values, Guidance and Support for Moral Rules and Common Values has been Weakened In comparison to other cultural traditions throughout history, China’s society is relatively secular, and lacks a reverent religious and spiritual consciousness. Therefore, the social foundation of traditional virtues and values is continuously weakened. Realistically, China is undergoing fierce social changes in the process of industrialization and modernization, which will inevitably influence and impact its original values, and could even cause discontinuity in traditional values and the negation of social norm to a certain extent. Because China is lacking the guidance and support structure of mainstream social values, the ability of moral rule and social ethics to socially integrate has been weakened, a problem that results in worsening rates of criminal acts and general social deviation. The existence of these problems has directly caused a weakening in the public’s acknowledgement of guilt, and the subjective “evil” character of criminal activity has increased. As a result, on one hand, criminal intent in committing serious crimes has been strengthened; on the other hand, this criminal activity is increasingly apt to injure innocent persons, including the very old and very young, as well as women and children, relatives, and family members. 2.  The Stability of Primary Social Groups Including the Family, the Neighborhood, and the Community Presently, along with the constant social transformation, mutual conflict, and the impact of various thoughts and ideas on the harmony and stability of primary social groups, the number of various family issues and community and neighborhood disputes have increased greatly, resulting in “internal strife” or violent offenses. Since 2006, cases in which the suspect killed all people at the crime scene, also called “family murder cases” by the media, have occurred throughout the country. Through analysis of the statistical data, it was discovered that “family murder cases” induced by marital and familial disputes accounted for nearly 70% of the total rate. Marriage and family disputes involve many emotional factors, and this type of criminal offense is often retaliatory, and can even involve innocent persons.



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3.  Psychological Coping Abilities Regarding Current Social Changes; Anxiety and Inhibition Rates among Different Social Classes Generally speaking, although criminal acts are directly influenced by the social environment, the criminal’s physiological and psychological abnormalities also play a vital role. Presently, China is in a phase of economic transformation and social reform, and as a result of the overlap of various social contradictions and conflicts, the issues and pressures faced in everyday life are gradually increasing, resulting in intense interpersonal and inter-group relations to a certain extent. Under such conditions, the issues and pressures of society will eventually affect the individual’s self-esteem, and their ability to psychologically adjust. These conditions also weaken self-restraint and self-control and it is increasingly easy for long-term accumulative anxiety and tension to explode into violence under such circumstances. .

4.  The Universal Social Demand for Fairness, Justice, and Public Safety and Their Widespread Manifestations Since 2006, the degree of attention paid by the media and social public to problems of social order and problems concerning criminal cases has increased remarkably. In particular, certain major and negative cases resulting in serious personnel casualties have attracted the universal attention of the public. A massive number of related stories and review articles were reported in the media and their social impact has surpassed the category of normal social news. The media’s centralized reports and their elaboration of various points of view increases the amount of public attention paid to problems concerning social order, and affects the objective evaluation of such situations and the objective analysis of government measures instituted to maintain the public order. It is worth noting that the social damage inflicted by criminal offenses is not only limited to the direct victim. In particular, the impact of a portion of these violent cases on public security and the individual’s ability to live and work in peace and contentment will be further intensified with the development of the media. B.  Problems Concerning the Social Order that Merit Attention 1.  An Increase in the Criminal Offense Rate and the Maintenance of Overall Stability Since 2004, national public security organizations have increased their efforts to crack down on crimes and the sustained growth tendency

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of criminal offenses has been initially suppressed. Presently, China is experiencing frequent criminal offenses and under the comprehensive influence of various social issues and problems, this rise in criminal offenses will possibly increase further. At the same time, in 2007, the rate of exposed criminal cases varied among the different provinces and regions, and the crime rate in many developing provinces with large population densities continued to rise. Moreover, the influence of the “number of hidden crimes,” which has been internationally recognized, should be considered, though this phenomenon exists universally in various countries. As a result of the fact that China has a large population base and that it maintains the social management of an extensive region, and despite the continuous improvement of the public security organizations’ abilities of investigation, crackdown, and containment, the degree of exposure to criminal activity that endangers social management, including narcotic drugs and cyber-crime, has increased and could possibly drive a rise in the quantity of criminal offenses. 2.  Damage Caused to Society by Malicious Personal Injury Cases and Large Scale Property-Related Crimes In 2007, the rate of serious violent offenses and the frequency of ­propertyrelated crimes continued to decrease, while the number of personnel casualties caused by serious malicious cases and the property losses caused by large property-related crimes actually increased. Statistical data showed that, in 2006, the national public security organizations registered 21,000 murder cases, resulting in the deaths of 19,000 people, with the number of people killed in each case increased to 0.93 persons from 0.91 in 2004. From January to October 2007, the national public security organizations registered 14,000 murder cases, resulting in the deaths of 13,000 people, and the number of people killed in each case increased to 0.95 persons from 0.94 persons in the previous year. In August 2006, a malicious and severe murder case occurred in Hanyin, Shanxi; the suspect, Qiu Xinghua, killed 10 innocent people, a casualty rate that is rare for just one case. In 2006, national public security organizations registered 161,000 injury cases, a rise of 3.8% over 2005, and the eighth consecutive year of increase since 1997. From January to October 2007, the national public security organizations registered 131,000 injury cases, a rise of 1.3% over the previous year. The statistical data also showed that, from January to October 2007, the national public security organizations registered 483,000 cases of property-related crimes, resulting in property losses between 5,000



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yuan and 10,000 yuan, a rise of 2.2% over previous year; and 381,000 cases of property-related crimes which caused more than 10,000 yuan in property losses, a rise of 1.3% over the previous year. 3.  A Rise in the Number of Large Scale Economic Crime Cases A level of invisibility and intelligence are both outstanding features of economic criminal activities, and there are many difficulties involved in apprehending and containing economic criminal activities. Along with the increasing development of a socialist market economy environment, the skills necessary to discover suspects in the various domains and links of economic activity are crucial to identifying and exposing the criminal acts which destroy the market economy order, to discourage economic criminal activity, to restrict the growth of economic criminal activities, and to maintain a legal environment, while also maintaining the normal operation of a market economy. In 2006, the national public security organizations registered 81,000 criminal cases of destroying the socialist market economy order, a rise of 11.6% over 2005. From January to October of 2007, the national public security organizations registered 79,000 such cases, a rise of 5.9% over the previous year. The number of economic crimes discovered by public security organizations has also increased. On one hand, this phenomenon is explained by the existence of certain system and mechanism issues that encourage economic crimes in the operation of the current market economy. On the other hand, this increase could also be explained by the fact that the abilities of the public security organizations to discover and apprehend economic crimes and to maintain the legal operation of a market economy have been strengthened in recent years. It is also worth noting that, in the current market economic environment, the new trend of committing economic crimes that involve many people has become outstanding since 2007, including the crimes of illegally raising capital and illegally operating securities businesses. The statistical data showed that, from January to October 2007, swindling cases concerning financing rose by 70.9% over 2006, cases of illegally operating securities businesses rose by 52.2%, and cases of illegally absorbing public deposits rose by 16.2%. The number of people exposed to economic crimes is increasing; the majority of these people are innocent. The social harmfulness of crimes is not only limited to the destruction of the market economy order; in fact, the destabilizing factors involved in crimes can easily influence social stability and social order. It is worth noting that currently, national public security organizations are developing a special

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action to crack down on and rectify wide scale economic crimes, which has achieved remarkable results so far. 4.  The Number of Criminal Activities Disturbing the Public Order Increased In tandem with the continuous advancement of urbanization, a massive non-native population is entering the cities to work and, because of outstanding employment issues, as well as the inadaptability brought on by changes in the working and living environment, large incendiary public gatherings have become a frequent means of venting emotion and handling problems, resulting in the hindrance of official business and social unrest. This phenomenon has become an outstanding aspect of criminal activity since 2006. The statistical data shows that, in 2006, the national public security organizations registered 94,000 cases of disturbing the public order, a rise of 8% over 2005. There were 4,279 cases of assembling a mob for incendiary purposes, a rise of 27.3% over 2005; 37,000 cases of starting fights and stirring up trouble, a rise of 27.5%; and there were 8,474 cases of hindering official business, a rise of 27.9%. From January to October of 2007, there was a further increase in the number of criminal cases exerting a negative influence on the public order, including assembling a mob for incendiary purposes, starting fights and stirring up trouble and hindering official business. The national public security organizations registered 3,957 cases of assembling a mob for incendiary purposes, a rise of 16.6% over in the rate in 2006; 31,000 cases of starting fights and stirring up trouble, a rise of 6.9%; and 7,223 cases of hindering official business, a rise of 3.8%. It is worth noting that, generally speaking, along with the continuously developing social transformation process, the distribution of urban and rural criminal offenses has also undergone marked changes, and a pattern in which the property-related crimes are dominant in urban areas and violent offenses are more common in rural areas has been formed. This change is consistent with the structural changes of criminal offenses experienced in many countries during the modernization process. 5.  The Social Impact Caused by an Individual Case Is Expanded through Media Communication Presently, the public demand structure of the members of different social classes has undergone profound changes and the quantity of demands has risen rapidly, with the demands for fairness, justice, and public safety becoming increasingly urgent and intense. Against such



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a background, the unification of the social order problem was further strengthened. For example, certain criminal cases aimed at certain social group’s members easily attracted the attention of the entire public and brought scrutiny to bear on the public safety problem through media communication; thereby affecting the people’s subjective feelings of public safety, as well as their objective evaluation of the public order. III.  Countermeasures for Maintaining Social Order Presently, and in the future, China’s social order will continue to develop in a stable and sound manner. However, we should also realize that maintaining a sound and orderly development of the social order and meeting the increasing demands of public safety are still arduous tasks. A.  Implementing Special Initiatives and Maintaining Pressure on Criminal Activities The implementation of the principles of “forward attack measures, early crack-downs on petty offenses, comprehensive measures, and the thorough elimination of evil” must be maintained in order to further expand the government’s ability to curtail the criminal activities of underworld and guarantee the comprehensive success of this special initiative. A positive long-term work mechanism should be established that resolves the problem of homicide cases, thoroughly promotes the settlement of homicide cases, and severely cracks down on serious violent offenses. Furthermore, crackdown efforts regarding serious crime should be viewed as necessary to effectively guard against the frequency of property-related criminal activity. The launch of such centralized rectification activities will attack multi-level marketing crimes, while the special initiatives that attack illegal finance crimes will work both to increase government control of large-scale economic crimes and maintain the people’s vital interests, the economic security of the state, and the socialist market economic order. Development and expansion of heroin regulations, the containment of new narcotic drugs, and the prevention of the outflow of precursor chemicals and narcotic psychotropic drugs will all serve to further develop the control of the drug addiction problem, increase abstinence, aid recovery, and consolidate and expand the achievements of the people’s war on drugs.

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B.  Implementing Control of the Public Order The authorities should investigate and resolve outstanding public safety problems in particularly chaotic areas by organizing and implementing centralized rectification activities according to local conditions. According to the unified deployment of the Central Committee for Comprehensive Management of Public Security, they should thoroughly carry out investigation and management of public order in the rural areas and improve people’s sense of security. They should also further expand rectification efforts in those areas in which there are serious problems concerning pornography, gambling, drug abuse, and drug trafficking and work to improve social morality. Finally, they should implement special initiatives to solve the areas of primary concern, such enforcing punishment for bicycle theft and violent offenses, the seizure of firearms, and the regulation of crimes of sabotage aimed at electric power, telecommunication, broadcast, and television facilities. C.  Improving Population Management and Social Management Services The authorities should forcefully promote the construction and application of information based on population management, post and update verified population information on the internet, and improve the transmission of information regarding population management. This initiative should start from the level of the targets of criminal offenders, and should monitor eating, housing, traveling, shopping, and entertainment activities. Additionally, position control and information management should be enacted depending on the trade organization, which would guarantee that criminal activities are promptly discovered, controlled, investigated, and prosecuted. Regarding the internet, harmful information should be discovered and handled quickly and further effort should be exerted to enhance discovery abilities, handling, investigation, attacks, initiative offense, and prevention and control. By using the public security organization’s superior abilities in public management and technological use, the spread of harmful information and malicious hypes on the internet can be controlled, on-line criminal activities can be curtailed, and on-line security order can be maintained, which would guarantee the security of the basic information network and this important information system.



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D.  Instituting Police Services in Local Communities and Rural Areas The public security departments must carry out the “Decision of the Ministry of Public Security on Implementing the Strategy of Instituting Police Services in the Communities and Rural Areas”《公安部关于实 施社区和农村警务战略的决定》in order to further optimize the police forces’ disposition, normalize the operation of police services, promote police force work in grass-roots units, and promote the development of police services. This measure will also speed up the establishment of police service work that meets the requirements of the new community management system and socialist new rural reconstruction plan and which guarantees that the police in the communities and villages will continue their work in grass-roots level units for the long-term. This decision also states that police in the communities and villages must undertake positive work concerning the public and work to understand community situations and public opinions. Police must manage actual populations, organize safety precautions, and maintain public safety and social order through interviews and investigation, information, patrols, protection, field inspection, and notices on police information etc. E.  Promoting the Construction of a System of Prevention and Control of Social Order Public security departments should scientifically adjust the deployment of police forces, reform the service pattern according to the requirement of “police information guides the police forces,” and deploy police forces in the key areas and times where cases are frequent and protection is weak. These actions will aid in the realization of effective control of the social order in such a dynamic environment. The public security departments should participate in safe activities, promote the establishment of a network of public safety and of internal unit safety, and work to prevent and reduce criminal activity.

Prevention and Punishment of Corruption in 2007 Wen Shengtang and Li Yuanze Key words: anti-corruption, honest and clean government, emphasis on prevention, commercial bribery, job abuse offenses, comprehensive control

On January 9, 2007, the General Secretary of the Central Committee of the CCP, Hu Jintao, made a speech at the plenary session of the Central Committee for Discipline Inspection to designate “radical and stopgap measures, simultaneous and comprehensive control, prevention and punishment, and emphasis on prevention” as the strategic policy of anti-corruption for the establishment of a clean and honest government. On June 25, Hu Jintao also emphasized in an important speech in the Central Party School that, “while firmly punishing corruption, we must pay great attention to effect a permanent solution, construct a prevention system, strengthen the integrity and self-discipline of the leading cadres, and firmly investigate and handle illegal cases.” The establishment of the “16-character policy” (十六字方针) of anti-­corruption and developing a clean and honest government and the proposal of “the requirement for three more points of focus” (三个更加注重的要 求) indicates that contemporary China has formed a new approach, one that focuses more on prevention by punishing and preventing the corrupt with both radical and stopgap measures and comprehensive control. As a result of these measures, China has obtained marked results in the construction of an honest and clean government and in the struggle to eradicate corruption. I.  Punishment of Corruption A.  Investigation and Prosecution of Various Corruption Cases 1.  Investigation and Prosecution in the Cases of Cadres Violating Regulations In recent years, China has emphatically investigated and handled cases concerning leading cadres’ misuse of authority, embezzlement and

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bribery, villainous conduct, and dereliction of duty. Additionally, cases concerning cadres who sought personal gains by abusing their position and authority in personnel matters, judicial administration, examination and approval, and in administrative law enforcement were also primary investigations, as well as cases in which government officials and businessmen colluded with each other and acted as “umbrellas,” or fronts, for underworld and criminal forces. Other important cases were those that involved serious infractions of group benefits. In all of these instances, the criminal suspects were promptly transferred to judicial organizations for processing. From December of 2002 to June of 2007, the national discipline inspection organizations altogether registered 677,924 cases, settled 679,846 cases, and 518,484 people were sentenced to party disciplinary measures. 2.  Special Measures Regarding Commercial Bribery The national procuratorial organizations vigorously investigated and handled criminal cases of commercial bribery that occurred in certain important domains and industries, including engineering, construction, and the purchase and sale of medicines. Other important cases in this vein included those in which national public servants claimed and accepted bribes by abusing their administrative examination and approval authority and law-enforcement power, and which resulted in a destruction of the market order and endangerment of the people’s vital interests according to the law. From 2006 to July of 2007, the Supreme People’s Procuratorate made a decided effort to handle 65 typical cases of commercial bribery. The countrywide procuratorial organizations registered and investigated altogether 16,691 criminal cases of commercial bribery involving national public servants, investigated and prosecuted 2,224 cadres at above office level, of which there were 156 cadres at department level and above and an aggregate amount of more than 2.30 billion yuan involved in the cases. From January to August of 2007, national procuratorial organizations registered and investigated altogether 8,040 criminal cases of commercial bribery, which was a rise of nearly 20% over the previous year, with an aggregate amount of 1.03 billion yuan involved in the cases. Of

  Wang Jia. “Prosecutorial Organizations Retrieved A Loss of 21.70 Billion Yuan for the Country in Anti-Corruption Efforts over Five Years.” Prosecutorial Daily, 2007. 



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these cases, 5,328 were major cases, involving 1,103 leading cadres at office level and above and 2,181 national public servants. The statistics indicated that from August of 2005 to August of 2007, the national functional departments investigated and settled altogether 31,119 cases of commercial bribery, and an aggregate amount of 7.079 billion yuan was involved in the cases. 3.  Preventing Collusion between Businessmen and Government Officials The common phenomenon of collusion between businessmen and government officials regarding severe and particularly severe accidents has been thoroughly checked and rectified in recent years. On September 22, 2006, the Central Commission for Discipline Inspection, the State Administration of Work Safety, and the State Administration of Coal Mine Safety jointly held a press conference to report that 5,357 people were registered in the apprehension and correction process, 755 million yuan in investments and bought stocks were reported for registration, and 709 million yuan in disinvestments and stock sales were registered, which accounted for 93.9% of the total amount of disinvested and sold stocks. Statistics indicated that crimes of malfeasance and infringement registered for investigation by the national procuratorial organizations from 2003 to 2006 resulted in 43.98 billion yuan in direct economic losses, and caused the deaths of 14,049 people and the serious disability of 2,033 people. In regards to those serious production safety accidents caused by malfeasance being investigated and handled by procuratorial organizations in recent years, the offense of job abuse exhibited the following characteristics: Suspects were mainly concentrated in grass-roots administrative law-enforcement and supervisory departments, which accounted for approximately 88% of the total number of cases registered. Dereliction of duty and malfeasance involved primary links, including administration, trade management, production safety, law enforcement, and supervision. Dereliction of duty and the abuse of power by state organization personnel was one of the primary causes of serious accidents. 4.  Serious Accidents Caused by Crimes of Malfeasance It is reported that procuratorial organizations will further investigate and prosecute the job abuse offenses that result in serious safety accidents; in particular, crimes of malfeasance in which state organization staff

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colluded with illegal mine owners to not report or conceal accidents. Additionally, “collusion between government officials and real-estate developers” has experienced catastrophic growth in recent years and has become a problem even more serious than “collusion between government officials and coal mine owners.” This corruption has four primary types: a. Power-money deals and public employees seeking self-interest at the public expense  The majority of grafters were governmental agency staff and they accepted bribery in the form of project contracting, the examination and approval of plans, the reduction or remittal of expenses in urban construction, and the examination and approval of business qualifications, in order to secure profits for other people. b. Arranging for huge illegal profits and small costs  In this case, the briber would exchange market opportunities for reduced costs and illegally obtain comparatively huge commercial profits through bribery. c. Diverse techniques and covert behaviors   Certain bribers directly supplied money, and some made bribes in the name of information fees or subsidized funds for children’s study. d. Raiding the market and incurring social endangerment  These types of cases have damaged the market order and have destroyed fair competition in the market environment, which has seriously damaged national and social public interests. 5.  Legal Punishment for Various Job Abuse Offenses From 2003 to July of 2007, national procuratorial organizations registered 136,570 criminal cases of embezzlement and bribery for investigation, and 157,569 people involved in 82,162 major cases concerning amounts of 50,000 yuan and above. Additionally, 11,557 cadres at county office-level or above were investigated and prosecuted, as well as 791 cadres at the departmental level and 32 cadres at the provincial departmental level and above. These cases resulted in 21.78 billion yuan in economic losses for the country. Of these cases, 19,676 cases concerning job abuse offenses were registered for investigation; 23,700 people were registered in the period from January to June of 2007, which was a rise of 4.6% and 6.5% over the previous year. Additionally,



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the guilty decision rate was continuously improved and the withdrawal rate dropped, which had a positive influence in society. In the process of severely punishing the corruption crimes of embezzlement and bribery, the procuratorial organizations vigorously strengthened the establishment of the institution of the Bureau of Anti-malfeasance and Infringement, reformed and perfected the judicial handling mechanism, and severely cracked-down on corruption and crimes of malfeasance. From May 10 to June 15, 2007, national procuratorial organizations’ anti-malfeasance and infringement information month took place, during which 11,670 cases were accepted, reported, prosecuted, and transferred by the related departments, and the number of cases and persons registered and investigated experienced a rise of 13.4% and 20.7% over the number in 2006. The statistics indicate that, from 2003 to June of 2007, the national procuratorial organizations registered and investigated 31,884 criminal cases of malfeasance and infringement involving 38,093 people and retrieved 1,976.0486 million yuan in national economic losses through the handling of these cases. Of these, 1,386 cadres at county office level and above, 59 cadres at the departmental level, and 2 cadres at the provincial level were registered and investigated as suspects. B.  Curtailing Damage Inflicted on the People’s Benefits In regards to new situations and new problems that damage public benefit, and in response to public concern, anti-corruption work was centralized in order to rectify land requisition, home relocation, the reform of the business system, migrant laborers, migrant laborer wage payments, production safety, environmental protection, food and drug safety, and the management of social security funds. In particular, outstanding problems involving the people’s livelihood were incorporated in the rectification efforts in order to launch corrective measures regarding indiscriminate charges in education, unhealthy tendencies in the purchase and sale of medical supplies and medical services, and the mitigation of the farmer’s burdens. The aim of these measures was to thoroughly develop the appraisal activities of government ethos and business ethos through democratic discussions and to positively promote long-term measures by establishing a socially corrective force. According to the State Council cadres’ data on social correction, given on September 20, 2007, more than 68,000 projects of appraisal were

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abolished and the average cancellation rate reached more than 97%, which saved 3.47 billion yuan in funds. Where the projects abolished were restarted and maintained after external changes, the departments concerned were severely investigated. Various regions cleaned up more than 70,000 appraisal projects, reaching the standards and commendation through repeated examination and verification. More than 2,000 projects were retained after the preliminary verification, of which there were nearly 1,500 projects for the administrative organizations and more than 500 projects for social groups. The people in charge of the State Council Office for Rectifying Malpractices indicated that the joint conference would formulate and issue its opinions on the activities of appraisal, receive commendation based on thorough investigation and study, and would establish a long-term mechanism in order to guarantee this system. In June of 2007, the General Office of the Central Committee of the CCP and the General Office of State Council issued the “Notice on the Problem which further Controls the Construction of Buildings of the Party and Government Organizations”《关于进一步严格控制 党政机关办公楼等楼堂馆所建设问题的通知》(hereafter refer to as “Notice”), and made more explicit and strict provisions to the construction of Party and government organizations’ buildings from the standpoint of examination and approval, construction criteria, examination of sources and management of funds. The “Notice” stated that all newly constructed, expanded, relocated, purchased, and renovated office-building projects of the party and government organizations must comply with the examination and approval procedure. Henceforth, party and government organizations’ office buildings could not be designated as city landmark buildings, had to be strictly controlled in their land use scale, could not occupy cultivated lands, and could not construct large-scale squares and parks as supporting facilities. For example, the construction and investment process for institutions’ office building projects had to use appropriated party and government organization funds and finances had to be arranged through the government budget; bank loans could not be used and any support or donations could not be accepted. Furthermore, no financing or apportionment could be made, money could not be borrowed from other units, and the construction unit could not pay for the construction. Finally, these institutions were strictly prohibited from diverting any special funds. Land incomes and property transfer incomes had to be strictly implemented according to



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the two-line management of income and expenses and could not be directly used in the construction of office buildings. C.  Rectification of Integrity and Self-Discipline Problems in Leading Cadres The leading cadres’ outstanding problems in integrity and self-discipline must be resolved and the behaviors of seeking anticipated illegal benefits, acquiring property through trades, and gaining illegal benefits under the guise of trusting others to manage money matters must be strictly prohibited in order to promote the involvement of leading cadres in transparent and fair politics. In the document by the Central Committee for Discipline Inspection, “Certain Provisions on Prohibiting to Seek Illegal Benefits Taking Advantage of One’s Position”《关于严 格禁止利用职务上的便利谋取不正当利益的若干规定》(hereafter refer to as “Provision”), issued on May 30, 2007, it was proposed that when an individual voluntarily explained his problem within 30 days, the problem could be handled leniently according to the individual’s situation. This “Provision” has not only provided a powerful basis for handling cases concerning a breach of party discipline, but also has provided an opportunity for cadres who have made mistakes to correct them. The statistics indicate that 1,790 people chose to explain their problems within the prescribed time limit and more than 77.89 million yuan was involved. Some people acted out of self-correction, and some were corrected under investigation or supervision. In the event an individual did not clearly explain his problems, his case would be seriously handled after investigation and verification. The public power agency and the public officers’ abuse of authority, conspicuous consumption of the national assets, and seeking of group benefits and individual perks were all outstanding features of corruption in recent years. In 2007, the Ministry of Supervision took the lead in supervising and urging various regions and departments to fulfill the pertinent regulations of the Central Committee, regarding the enforcement of economization and regulation of extravagance and waste. The ministry also seriously investigated and prosecuted those cases that violated financial and economic regulations and squandered national assets; a total of 4,866 party and government officials were given party and administrative disciplinary measures as a result in the first half of the year.

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wen shengtang and li yuanze II.  A Strategy of Punishment and Prevention: Attempting to Strengthen the Administration of Corruption Causes

According to the new national requirements in the strategic policy regarding anti-corruption, the primary areas of effort now, and in the future, are as follows: A.  Adopting Radical and Stopgap Measures “Adopting both radical and stopgap measures” is an important action against corruption in contemporary China. However, in strategic policy, it has shifted to “paying more attention to the radical measures,” rather than stopgap measures. 1.  “Radical Reform” through the Improvement of Moral Character In recent years, the Chinese government has promoted the administrative examination and approval system, the financial control system, the cadre personnel system, the judicial system, the investment system, and reform of the monetary system. It has implemented and perfected the bidding system for engineering construction projects, rights of auction and public transfer for commercial land use, property rights transactions, and government procurement. It has expanded the reform of the civil servant wage system, standardized allowance subsidies, and promoted reforms in official business and travel expense management, all of which have brought about positive results. In order to effectively contain and rectify corruption consumption of public money, and to prevent and control privatization authority and benefit authorities at the source, the Ministry of Finance announced on July 26, 2007, that it would implement an experimental official business card system for the central budget units in the Central Commission for Discipline Inspection, the Chinese Academy of Social Sciences, and the Song Qingling Foundation that month, and would make every effort to carry out the management of official business cards in all central budget units through 2008. Implementing an official business card system would further reduce the settlement of unit cash payments and strengthen financial monitoring, which would be advantageous for slowing the diversion of cash payments and realizing transparent consumption and official business expenditures. On September 28, the Central Committee for Discipline Inspection and the Ministry of Finance held a joint conference to deploy the Central Committee, state agencies,



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and the departments directly underneath them in the comprehensive implementation of business trip management and conference location designation. On the 29th, the Ministry of Finance disclosed that they had entrusted the Government Offices Administration of the State Council, various provincial finance departments (bureaus), and various prefecture-level municipal finance bureaus to complete designated hotel work through government procurement. More than 2,600 hotels in the above prefecture-level cities were designated as official hotels for upcoming party and government organizations’ business trips and conferences in 2007 and 2008. This reform is advantageous in preventing nonstandard behavior in reporting travel expenses, in further perfecting the system of official business reception, and in strengthening the development of an honest and clean government. Additionally, this measure has prevented and obstructed corruption in official business consumption at the source. 2.  Reduction of Costs through a Plan of “Better Officials and a Simpler ­Administration” In order to find a radical resolution to the phenomenon of excessive numbers of officials, 31 provincial level and village and town party committees successively launched the work of new committee elections beginning in 2006. By the end of June of 2007, 31 national provincial level party committees, 408 cities (states), 2,763 counties (town and areas), and 34,976 villages and towns smoothly completed their elections, an important step in simplifying the cadre system. Other measures to simplify this system included the following: The overwhelming majority of provincial, regional, and municipal party committee organizations established two duties for assistant deputy secretaries, excepting the individual regions, which reduced 91 people over last time. 79.4% of cities and 84.4% of counties realized the goal of establishing two duties for assistant deputy secretaries, and the actual populations of assistant deputy secretaries established in the party committees of cities, counties, villages, and towns were respectively reduced by 806 persons, 5,165 persons, and 41,476 persons over the previous session. The national provincial regional municipal party committee organizations have reduced 21 positions and the actual populations of city, county, and village third-level party committee organizations were reduced by 149 persons, 859 persons, and 34,368 persons during the previous session.

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After the election of new leadership, 83 people held concurrent posts in the provincial regional municipal party and the government, which was an increase from 2.3 people per province in the previous session to 2.7 people. Concurrent posts at the city and county-level of the party and the government were increased by 311 and 1,588 persons, respectively, during the previous session. Of these, cities in which at least three people held concurrent posts in the party and government accounted for 80.5% and counties with these circumstances accounted for 57.4%. This phenomenon has created an advantage in the reduction of overlapping work between the party and government organizations. Ultimately, this cadre system measure of “Better Officials and Simpler Administration” has been effective in reducing administrative costs. 3. Prevention of Corruption through an “Open Public Affairs” (阳光公务) Measure On January 17th, 2007, the 165th executive meeting of the State Council approved the “Regulation on the Disclosure of Government In­formation” 《政府信息公开条例》, it will come into force on May 1, 2008. This document made detailed provisions to the scope and main body, method and procedure, supervision, and protection of opened government information. The implementation of this important administrative regulation addressed a gap in China’s laws and regulations concerning the transparency of government information, and provided support for anti-corruption efforts through important laws and regulations. Since the 16th National Congress of the CPC, the disclosure of government affairs, factory affairs, and village affairs has been comprehensively promoted; this is an important step towards the overall disclosure of government affairs. Statistics indicate that 43 departments and units of central and national organizations, 31 provinces, regions, and cities, and the Xinjiang Production and Construction Corps released standardized documents to implement the disclosure of government affairs and made explicit provisions addressing the disclosure of government information. Additionally, the central and national organizations’ 75 departments and units, 31 provinces, regions, and cities, and 96% of prefecture-level municipal governments and 77% of county-level governments have established their own government

   Please See: http://vip.chinalawinfo.com/newlaw2002/slc/slc.asp?db=chl&gid= 90387.



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websites. 74 departments and units in the central and national organizations and 31 provinces, regions, and cities have also set up a system of press releases and news spokespersons. 19 departments and units in the central and national organizations and 14 provinces, regions, and cities have made catalogues for the disclosure of government affairs. B.  Simultaneous Prevention and Punishment, with Emphasis on Prevention “Simultaneous prevention and punishment” is another major act in China’s anti-corruption efforts, which symbolizes that anti-corruption efforts are gradually emphasizing prevention instead of punishment. 1.  Making Joint Efforts to Prevent Corruption Promoting the construction of a corruption prevention system is a complex and arduous engineering process, and requires the entire party and various trades and occupations to make joint efforts in preventing corruption. For example, as a result of the coordination of the Party’s Central Committee and the national government, the Ministry of Land Resources has strengthened the construction of a standardized land management and internal control mechanism and has strengthened the investigation and prosecution of breaches of principles and regulations. The Ministry of Construction has made a change in its engineering project transactions from public invisibility to visibility, from concealment to disclosure, from decentralization to centralism, and from disorder to order through the development of a mechanism and system for standardized management. The State-owned Assets Supervision and Administration Commission of the State Council has strengthened supervision and administration, standardized business management and operations, dissolved corruption risks, discovered more than 3 billion yuan involved in regulation violations from 2003 to 2006, and retrieved 5.125 billion yuan in economic losses. 2.  Specializing in Corruption Prevention After preparation of more than four years, the National Bureau of Corruption Prevention of the People’s Republic of China was ­officially established on May 13, 2007. The bureau’s main responsibilities were to control the organization and coordinate anti-corruption work, the unified plan, policy formulation, and inspection and guidance of national of corruption prevention work. It also coordinates and guides corruption prevention work in businesses, institutions, social groups, intermediary

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organizations, and other social organizations. Finally, it takes charge of international cooperation and international assistance in corruption prevention. The National Bureau of Corruption Prevention has been listed as the department directly under the State Council and it handles official business in the Ministry of Supervision. The leading posts in the bureau are one chief position and two deputy posts and the ­organization employs 30 people. The bureau has established its office as an administrative entity for the handling of routine work. This bureau is not a case handling institution and it is not endowed with the coercive power to freeze citizens’ assets. The bureau enacts compulsory measures for citizens, though it may also study and establish an official property declaration system after meeting the related requirements. The first director general to hold a concurrent post of assistant deputy secretary of the Central Committee for Discipline Inspection and Minister of the Ministry of Supervision is Ma Wen, and she has stated in a press conference that the establishment of the National Bureau of Corruption Prevention is a major act taken by the Party Central Committee and the State Council to promote corruption prevention work based on scientific judgment of the situation. The bureau is required in order to fulfill the United Nation’s Convention on Corruption, and it is a necessary requirement for China to effectively develop the institution of an anti-corruption system. As the next step, the existing work experiences of various regions and departments in corruption prevention should be summarized and international experience should be applied in order to expand the corruption prevention work. National procuratorial organizations have all established specialized agencies for the prevention of job abuse offenses in order to specifically manage the work of preventing job abuse offences. For example, the Supreme People’s Procuratorate has established a national inquiry system for bribery crimes using technical methods, which has been highly focused on and supported in international society. This system began accepting inquiries on January 1, 2006, and had accepted 7,319 inquiries by the end of December of same year. In total, inquiries of 35,172 units and 23,663 individuals were handled by the system. According to the degree of seriousness, those unit and individuals with records of bribery crimes can be awarded disqualification, have their prestige rank reduced, or their business relations stopped until they are cleared.



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3.  Indicators Are Decided by “Honest and Clean” Government Conditions An indicator system that reflects honest and clean government conditions was established according to information gathered by the National Bureau of Corruption Prevention and through collection and analysis of related information in order to improve the pertinence of science in the prevention of corruption. The actual contents of this system include the establishment of a coordinated mechanism of corruption prevention, organization of related departments in gathering, researching, and analyzing corruption conditions as well as other related information, and the use of an analysis and discrimination in high risk areas and instances of corruption in order to establish an indicator system which reflects the conditions of an honest and clean government. Additional aims of this system are to encourage the establishment of an early warning mechanism for corruption, improve inspection and guidance, and promote the implementation of anti-corruption efforts. C.  Comprehensive Administration and Emphasis on System Construction Establishing a “comprehensive administration” is a consistent policy goal of China in anti-corruption efforts. However, this has recently changed from a focus on the functions of special organizations to an “emphasis on the construction of a system” of strategic decision and work deployment. 1.  Punishment and Prevention of New Corruption: Promoting New ­ Administration Criteria Along with current economic and social development, corrupt officials developed new corrupt methods to dodge laws and to escape punishment. For example, they bought low and sold high, obtained shares for free, made fake joint capital and fictitious capital operations, used askers’ and entrusting party’s property in irresponsible ways, amassed money through drawing salaries by sinecure, amassed money by letting others profit on it, and made “option transactions.” With these changes, corruption became more secretive and complex. The difficulty of discovery, determination, and treatment was increased to a certain extent, objectively presenting new and serious challenges to current anti-corruption strategies and measures. The Central Committee for Discipline Inspection, the Supreme People’s Court, and the Supreme People’s Procuratorate conducted extensive research on applicable disciplines and laws to address these

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new forms of bribery. On May 30, 2007, the Central Committee for Discipline Inspection issued “Several Provisions of the CCP Central Committee for Discipline Inspection on Forbidding Seeking of Illegal Benefits by Taking Advantage of Duty”《中共中央纪委关于严格禁止 利用职务上的便利谋取不正当利益的若干规定》, (hereafter refers to as “Provision”), and proposed eight outlawing provisions to the Communist Party members in the national staff. On July 8, the Supreme People’s Court and the Supreme People’s Procuratorate issued “Opinions on Certain Issues concerning the Applicable Laws for handling Criminal Cases of Bribery”,《关于办理受贿刑事案件适用法律若干 问题的意见》(hereafter refers to as “Opinion”), and further stipulated the issues concerning the qualitative handling methods for ten actions through judicial interpretation. Namely, the issues of receiving bribery through trade; receiving shares for free; accepting bribes in the name of cooperation and investment, including establishing a company; accepting bribes by investing the negotiable securities and stocks of investors, or using other entrustments in the name of administering financial transactions; determination of the crime of accepting bribes through gambling; receiving a salary “only in name” through an individual or relation; specific relations accepting bribes; accepting goods received without registering changes of ownership; sending back or handing in property after receiving it; seeking profits in office for investors and entrusting parties; and receiving property after leaving a job. The “provisions” and “opinions” have provided effective operating conditions to punish and prevent new power or money deals according to regulations and laws, and resulted in the organic joining of laws and regulations to form a formidable combination of forces capable of punishing corruption. 2.  Dealing with Foreign Corruption: Integrating International Legal Advancements In October of 2006, the International Association of Anti-Corruption Authorities (IAACA), initiated and prepared by the Supreme People’s Procuratorate, was established in Beijing. This was the first international organization in the world whose members include various countries’ anti-corruption organizations, and the Supreme People’s Procuratorate’s Chief Prosecutor Jia Chunwang was elected as the first chairman of the association. In recent years, the procuratorial organizations of China have strengthened international cooperation with related nations and regions according to the ideals of international conventions and treaties,



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such as the “United Nations Convention Against Corruption”; these efforts have resulted in improved rates of capture and extradition for corrupt officials fleeing to foreign countries and has had a marked effect on corruption within China. International cooperation against corruption has appeared via different methods; for example, a cooperation mechanism adopted international conventions, including the “United Nations Convention Against Corruption,” as the foundation and depended upon other member nations to voluntarily fulfill the convention. Other mechanisms include the cooperation mechanism outlined by the International Criminal Police Organization, the cooperation mechanism among regional countries (such as among EU members and inter-American alliances), or bilateral cooperation between nations. However, because the foreign legal system of China has different requirements from the above listed cooperation mechanisms, its cooperation mechanisms have varying limitations. Therefore, thorough study and application of the prevailing general international due process of law is imperative. China must scientifically design and establish its own due process of law according to the related provisions of the constitution, an act that would be advantageous in reducing difficulties and removing obstacles in instances of international legal cooperation against corruption. Primary References Documents of the 17th National Congress of the Communist Party of China, Edition 1. (The People’s Publishing House, 2007). Educational Reader on Socialist Legal Ideology. Compiled by the Committee of Political and Legislative Affairs, CCCPC. (China Chang’an Press, 2006). Theoretic Focus (2006). Compiled by the Theory Bureau of the Publicity Department, CCCPC. (Learning Publishing House and People’s Publishing House, 2006).

   Please See: UNODC and corruption at http://www.unodc.org/unodc/en/corruption/ index.html.

Investigation of the Quality of Life in China in 2007 Yuan Yue and Zhang Hui Key words: overall living satisfaction, influencing factors on living satisfaction, influence of factors, degree of satisfaction with social security, continued price fluctuation, confidence in government management, security of society, food and drug safety

I.  Urban and Rural Resident Satisfaction Regarding Their Overall Quality of Life Rose in 2006 Urban residents’ degree of satisfaction regarding their personal economic position, social security, and the continued price fluctuation experienced a drop. Rural residents expressed renewed confidence in the power of social competition, though they also expressed a marked drop in their confidence regarding the future security of society. Urban and rural residents also generally expressed decreased concern about old-age care and lowered confidence in government management throughout 2006. The mean value was arrived at by a 5-criteria evaluation method; Chinese residents’ overall satisfaction in quality of life was 3.48 points in 2007 and 3.47 points in 2006. In comparison with the investigation results regarding urban and rural residents’ overall living satisfaction in previous years, we discovered that, from 2000 to 2006, the rural residents’ overall living satisfaction was higher than the urban residents’. Urban residents’ overall living satisfaction experienced an increase in 2006, and was more than the rural residents’ for the first time. However, in 2007, the rural residents’ overall living satisfaction rose while the urban residents’ satisfaction decreased greatly, and the overall living satisfaction of urban residents’ dropped once more to be lower than rural residents (See Figure 8.1). By comparing urban and rural residents’ appraisal of various factors, it was discovered that the urban residents’ degree of satisfaction regarding personal economic position (3.26→3.15 points), social ­security

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yuan yue and zhang hui Urban Residents

3.70 3.60 3.50

3.5 3.44

3.40 3.30 3.20 3.10 3.00

3.27 3.22

3.25

2000

3.56 3.5 3.33

3.28

2001

2002

Rural Residents

3.48 3.42

3.59 3.53 3.38

3.46 3.4

3.52 3.47 3.44

2004

2005

3.53 3.48 3.35

3.28

3.26

2003

Total

2006

2007

Note: The data in the Figure is score based on a 5 criteria scale: 5-points is extremely satisfied and 1-point is extremely unsatisfied. Data From: Horizon Research Group. Report on Quality Index of Life in China. All previous years.

Figure 8.1: Fluctuations in Urban and Rural Residents’ Overall Living ­Satisfaction in 2000–2007

(3.33→3.13 points), occupational condition (3.45→3.32 points), and endurance of price fluctuations (3.4→3.25 points) all experienced a drop. However, concerns about old-age care decreased (3.04→2.86 points; the more points, the stronger the worry), while rural residents’ degree of satisfaction regarding social security (3.18→3.0 points) and the security of society (3.63→3.21 points) all experienced decreases. Additionally, confidence in future personal social competitiveness (3.01→ 3.24 points) rose greatly, their degree of satisfaction regarding sparetime amusement (3.26→3.36 points) experienced a slight rise, and worry regarding old-age care (3.1→3.0 points, the more points, the stronger the worry) experienced a slight decrease (See Table 8.1). Both urban and rural residents’ confidence in government management, including confidence in the government administration of international affairs, economic affairs, and social affairs, were all comprehensively increased; in particular, confidence in government administration of social affairs experienced an obvious rise (3.46→3.76 points). II. Quality of Leisure Activities Has Become a Primary Factor Influencing Urban and Rural Residents’ Living Satisfaction While the economic factors of price and future income expectation increase their influence on overall public living satisfaction, ­expectations

3.36 3.33 3.23 3.00 3.24 3.76 3.84 3.08 3.21 3.00 3.36 3.30 4.00 4.14 3.77

3.67 3.77 2.95 3.48 2.86 3.26 3.25 4.06 4.10 3.75

Rural residents

3.51 3.32 3.15 3.13 3.35

Urban resident

3.76

4.13

3.04 3.31 2.95 3.32 3.28 4.02

3.73 3.81

3.42 3.33 3.20 3.05 3.28

Total

3.51

3.92

2.89 3.46 3.04 3.25 3.40 3.91

3.60 3.73

3.49 3.45 3.26 3.33 3.31

Urban resident

3.42

3.74

2.96 3.63 3.10 3.31 3.29 3.84

3.70 3.80

3.26 3.37 3.26 3.18 3.01

Rural residents

Year 2006

3.46

3.8

2.93 3.57 3.08 3.29 3.33 3.87

3.67 3.77

3.34 3.4 3.26 3.23 3.12

Total

investigation of the quality of life in china in 2007

Note: The score of the data in the table above is based on 5 criteria. Regarding the indicators for the worry about the old-age care, the more points, the stronger the worry is; regarding other indicators, the more points, the higher the level of satisfaction or confidence. Data From: Horizon Research Group. Report on 2006 Quality of Life in China, Report on 2007 Quality of Life in China.

Degree of satisfaction regarding spare-time amusement Degree of satisfaction regarding occupational condition Degree of satisfaction regarding personal economic position Degree of satisfaction regarding personal social security Degree of satisfaction regarding future social competitiveness Degree of satisfaction regarding national economic position Degree of satisfaction regarding national international standing Degree of identification with consumption opportunities Degree of satisfaction regarding the security of society Concerns about old-age care Confidence in consumption Endurance of price fluctuations Confidence in government administration of economic affairs Confidence in government administration of international affairs Confidence in government administration of social affairs

Indicator

Year 2007

Table 8.1: Primary Indicators Affecting Urban and Rural Residents’ Overall Living Satisfaction in 2006 and 2007

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of future personal social competitiveness, as well as confidence in government management, have begun to have an outstanding influence on feelings of satisfaction. Through the investigation of various factors that affect urban and rural residents’ overall living satisfaction and its influences, it was ­discovered that the most important factor affecting living satisfaction in 2007 was the degree of satisfaction regarding spare-time amusement, which indicates both urban and rural residents paid great attention to their spiritual cultivation after their material standard of living reached a certain level, though personal economic and occupational conditions were still important factors affecting urban and rural residents’ degree of living satisfaction. In regards to rural residents, the factors of the ability to endure price fluctuations and the ability to achieve future income expectations and consumption opportunities further strengthened their influence over living satisfaction. In regards to urban residents, exempting the fact that the influence of the factors of ability to endure price fluctuations and the ability to achieve future income expectations were continually expanded, the influence of expectations regarding future personal social competitiveness and confidence in government management had a remarkable influence on the degree of resident satisfaction. Additionally, the influence of the national macroeconomic condition on urban and rural residents’ degree of living satisfaction experienced a drop from 2006 (See Table 8.2). Through the comprehensive investigation of the influence of primary indicators as well as of the residents’ degree of satisfaction, it was discovered that “overall living satisfaction is more influenced by microscopic environmental indicators, and only slightly influenced by macroscopic environmental indicators.” Additionally, certain microscopic environmental factors caused a lower degree of satisfaction, and the factors of personal economic position, occupational condition, endurance of price fluctuations, and personal social security had a greater influence on living satisfaction (See Figure 8.2). III.  Difficulties Encountered in Meeting Urban and Rural Residents’ Demands for Growth in Culture, Sports, and Amusement Rural areas seriously lack activity facilities, small towns lack cultural activities, although they have some facilities, and the standard ticket prices in city theaters have limited the residents’ abilities to realize their amusement demands.

Personal social security

Endurance to price fluctuations

National economic position Pressure from educational expenses for children Personal housing condition

0.46

0.35

0.30

0.27

Confidence in the administration of social affairs↑

Degree of identification with consumption opportunities

0.29 Expectation regarding future competitive power↓

0.29 National economic position↓

0.30 Degree of identification with consumption opportunities↑ 0.29 Natural environment↓

0.53 Spare-time amusement ←→ 0.52 Personal economic position←→ 0.44 Occupational condition←→ 0.44 Endurance to price fluctuations↑ 0.42 Expectation regarding future income changes↑ 0.30 Interpersonal relations↓

Indicators affecting living satisfaction

0.18

0.18

0.18

0.20

0.23

0.30

0.34

0.36

0.37

0.38

2007

2006

0.21

0.23

0.26

0.31

0.32

Expectation regarding 0.20 future competitive power Expectations regarding 0.18 future income changes Concerns about old0.17 age care

Personal social security 0.20

Natural environment

Personal economic position Working or occupational condition National economic position Interpersonal relations

Spare-time amusement 0.35

Indicators affecting living satisfaction

Rural residents

investigation of the quality of life in china in 2007

Note: The data in this table is the correlative coefficients between various factors and overall living satisfaction. The arrow direction indicates the changes of place in comparison with 2006. “↑” is the rise of place, “↓” is the drop of place, and “←→” is no change. Data from Horizon Research Group. Report on 2006 Quality of Life in China, Report on 2007 Quality of Life in China.

0.27

Personal housing condition↓

0.28

0.29

Expectations regarding future income changes

Spare-time amusement

0.50

0.50

Personal economic position Occupational condition

0.51

Spare-time amusement↑ Personal economic position↓ Occupational condition↓ Endurance to price fluctuations↑ Expectation regarding future income changes↑ Personal social security↓ Expectation regarding future competitive power↑ National economic position↓

Indicators affecting living 2006 satisfaction

2007

Indicators affecting living satisfaction

Urban residents

Table 8.2: Primary Indicators Affecting Urban and Rural Residents’ Overall Living Satisfaction in 2006 and 2007

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Management of International Affairs

International Standing of the Country

Confidence in Economic Management

Living Convenience

Identification with Consumption Opportunities

Environmental Protection

Management of Societal Affairs

Direction of National Development

Interpersonal Relations

International Economy

Future Competitiveness

Individual Security in Society

Expectations for the Future

Adaptation to Commodity Price Fluctuations

Professional Situation

Personal Finances

Spare-Time Amusement

Degree of satisfaction Strength of influence 4.30 0.51 0.50 0.50 4.10 0.60 4.06 4.10 3.98 0.46 3.88 0.50 3.77 3.90 3.70 3.76 3.67 0.35 3.70 3.51 0.40 0.30 3.35 0.28 0.28 3.50 0.27 0.27 3.50 3.32 3.25 0.30 3.15 0.22 3.45 3.13 3.30 0.29 0.26 3.10 0.20 2.95 0.21 0.19 0.08 2.90 0.16 0.10 2.70 2.50 0.00

Note: The score of the data in the Table above is based on 5 criteria; influence data is correlative coefficients between various factors and overall living satisfaction. Data from Horizon Research Group. Report on 2007 Quality of Life in China.

Figure 8.2: Primary Indicators Affecting Urban Residents’ Overall Living ­Satisfaction in 2007 and their Level of Influence

The investigation results regarding environmental conditions for urban and rural residents engaged in cultural, sporting, and ­ amusement activities indicated that existing environmental conditions for cultural, sporting, and amusement activities are experiencing difficulties in meeting the residents’ demands for the swift growth of spiritual cultivation. Systematic investigation was conducted in libraries, movie theaters, cinemas, concert halls, gymnasiums, parks, and science museums in both urban and rural areas regarding their convenience for residents, the rationale behind their charges, and the richness of their content. The data results indicate that rural residents were distressed about the lack of cultural amusement facilities in their area (this was in response to questions such as “whether it was convenient for them to find libraries locally”). In regards to the six cultural institutions listed above, 76.3%,



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Table 8.3: Urban Residents’ Evaluation of the Usage Charges and Content Quality of Cultural, Sporting, and Amusement Institutions Libraries Cinemas Theaters/ Gymnasiums Parks Science concert museums halls Rationality City of charging Town Content quality

City Town

3.50 3.28

2.93 3.12

2.83 2.95

3.09 3.04

3.74 3.65

3.13 2.83

3.76 3.58

3.76 3.38

3.41 3.15

3.38 3.19

3.57 3.38

3.46 2.94

Note: The score of the data in the Table above is based on 5 criteria. The higher the score, the more satisfied the resident. Data from: Horizon Research Group. Public Evaluation Indexes for 2007 Public Services of China.

77.7%, 82%, 83.9%, 75.1%, and 89.5% of rural interviewees expressed that “they could not be located at all.” Small town residents were dissatisfied with the quality of cultural, sporting, and amusement activities provided by these institutions, as well as the rationale behind the ticket prices of science museums, theaters, concert halls, and gymnasiums. Although residents generally have these institutions in their areas and have taken advantage of the relatively rich cultural, sporting, and ­ amusement activities provided, the high charges for movie theaters, cinemas, concert halls, and gymnasiums have affected the abilities of urban residents to satisfy their desires in this realm, to a certain extent. A comprehensive survey of the various indicators of degrees of satisfaction and influence indicated that in comparison to the factors of personal economic position, social security, and price fluctuation, urban and rural residents’ degrees of satisfaction with their spare-time amusement is not low, but rather their demands for a high-quality cultural life are growing in number (See Table 8.3). At present, regardless of whether one lives in the cities or the rural areas, the demands for culture, sports, and amusement in daily life are not being met, which has restricted the possible rise in overall living satisfaction. IV.  Price Levels Become the Primary Focus of Urban and Rural Residents From 1999–2005, the problems of employment and social security were the focus of public attention. In 2007, urban and rural residents felt the

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Table 8.4: Town Residents’ Evaluation of Commodity Prices in 2007 Water, Grain, Meat Traffic Clothing, Education Housing Medical Culture, electricity, cooking and shoes, services sports and gas, and oil, foods and socks amusement heating vegetables City Town Total

3.99 3.52 3.82

4.21 4.05 4.15

4.47 4.36 4.43

3.51 3.37 3.46

3.30 3.35 3.32

4.21 4.00 4.13

4.62 4.30 4.50

4.41 4.28 4.36

3.58 3.21 3.45

Note: The score of the data in the Table above is based on 5 criteria. The higher the score, the more expensive the residents think the price of the commodity to be. Data from Horizon Research Group, Report on 2007 Quality of Life in China.

pressure of a general price rise. The issue of higher prices became a primary focus of urban and rural resident attention; 66.5% in the cities and of 57.5% in rural areas were concerned. Additionally, the problems of housing reform and prices and the problem of food and drug safety became the second primary focus of urban and rural residents. Measurement of the results of town residents’ price perceptions indicated that housing prices were a primary concern with 4.5 points, meat costs followed with 4.43 points, and in third place was medical costs (4.36 points). Additionally, the price scores for grain, cooking oil, vegetables, and education were also above 4.1 points. Of these scores, in addition to the commodities of clothing, shoes, and socks, the price pressure from the other eight classes of commodities (or services) was stronger for the city residents (城市居民) than for the town residents (城镇居民) (See Table 8.4). After further investigation of the influence of the price changes in commodities on residents with different household incomes, it was discovered that the influence of price changes on medical services and education, as well as water, electricity, gas, and heating did not differ by income differentials among residents. However, price changes for housing, grain, cooking oil, and vegetables had remarkably different influences on families with different incomes. The influence of price changes for grain, cooking oil, and vegetables on low-income residents was obviously higher than on the high-income residents, thus it also had a greater affect on low-income family residents. Conversely, high-income residents’ attention to housing prices was markedly higher than that of low-income residents. Low-income families with average monthly incomes of 1,000 yuan and below had an attention rate of 46.6% for price changes in grain, cooking oil, and vegetables, and these price



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Table 8.5: Level of Residents’ Attention to Commodity Prices Unit: %

1,000 yuan and 1,001–3,000 yuan 3,001–5,000 yuan 5,001 yuan and below above Attention Influence Attention Influence Attention Influence Attention Influence Cost of grain, cooking oil, and vegetables

46.6

45.9

32.1

37.7

29.5

32.5

20.1

26.6

Housing prices

  9.5

  8.6

20.7

13.9

23.8

16.9

24.7

17.0

Meat costs

13.4

16.6

11.0

11.5

11.9

13.2

13.6

15.8

Cost of medical services

10.2

  8.5

  9.2

  9.0

  8.0

  8.5

10.6

  7.7

Educational costs

  9.1

  9.0

  9.2

  8.5

  8.8

  7.4

  8.3

  7.5

Water, electricity, gas, and heating costs

  8.5

  7.7

  6.8

  7.4

  6.3

  7.4

  5.6

  4.9

Other commodity costs

  2.7

  3.7

11

12.1

11.7

14.2

17.1

20.5

Note: The data in the table is the mention rate and the sum of mention rate of the attention and influence to the price of commodities is 100%, respectively. Data from Horizon Research Group, Report on 2007 Quality of Life in China.

changes had an influence of 45.9% on their lives. The attention rate and influence on residents with an average monthly income of 5,001 yuan and above respectively dropped to 20.1% and 26.6%, and the residents in this income bracket paid more attention (24.7%) to housing prices than to the costs of grain, cooking oil, and vegetables (20.1%). (See Table 8.5). V.  Urban Residents’ (Town Residents) Sense of Security in Society Develops Steadily and that of Rural Residents Reaches its Lowest Level in Six Years In researching the quality of life indexes in 2007, not only was urban and rural residents’ sense of security regarding society investigated, but

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yuan yue and zhang hui Urban residents

3.80 3.70 3.60

3.71

3.40 3.30

3.71

3.55

3.50

Rural residents

3.54 3.56

3.44

3.48

3.52

3.63 3.48 3.46

3.20 3.10

3.21 2002

2003

2004

2005

2006

2007

Note: The score of the data in the Table above is based on 5 criteria: 5-points indicating an extremely high sense of security, and 1-point extremely low. Data from Horizon Research Group, Report on Quality of Life in China.

Figure 8.3: Urban and Rural Residents’ Sense of Security Regarding Society in 2002–2007

the people’s sense of security in specific areas of life, including food and drink, medicine, home furnishings, and children’s toys etc. were also researched. These domains were particularly focused on because they were tied up with people’s lives. A.  Rural Residents’ Sense of Security Regarding Society Was Lower than that of Urban Residents’ for the First Time in Six Years From 2002–2006, urban residents’ sense of security regarding society (3.44 points →3.56 points →3.48 points →3.52 points →3.46 points) was lower than that of rural residents’ (3.55 points →3.71 points → 3.71 points →3.54 points →3.63 points). However, rural residents’ sense of security regarding society in 2007 dropped significantly, and was lower than that of urban residents (See Figure 8.3) for the first time in 6 years. B. An Imbalance in Police Resources and Services in Urban and Rural Areas Apart from negative life experiences, which can seriously influence an individual’s sense of security regarding society, the obvious imbalance of police resources and services between urban and the rural areas also had a substantial influence on rural residents’ sense of security



investigation of the quality of life in china in 2007 Urban

75.0

71.1

65.0

63.0

Rural 71.5

69.8

70.0

61.6

135

69.4

61.6

61.0

60.0 55.0

Attitude towards the public

Quality of staff

Police conduct and discipline

Standard law enforcement

Note: The data in the Figure is based on a 100-point system. Data from Horizon Research Group, Public Evaluation Indexes for Public Services of China in 2007.

Figure 8.4: Urban and Rural Residents’ Evaluation of Police Services in 2007

regarding society. 60.2% of rural interviewees indicated that no police presence was visible in their area, 48.7% of people indicated that no public security safety slogans could be seen in their locality, such as slogans regarding fire protection, protection against theft, and safety consideration. However, these two populations dropped to 11.7% and 10%, respectively, in urban areas. Apart from the fact that the number of personnel was seriously insufficient, the quality, service attitude, conduct, discipline, and law-enforcement standards of policemen in the rural areas was also far worse in rural areas than in urban areas (See Figure 8.4). C. An Increase in the Attention Paid by Urban and Rural Residents to Food and Drug Safety In 2007, the problem of food and drug safety became an important public focus. Of the “social problems of largest concern,” urban residents ranked it in third place after cost increases, the problem of housing reform, and housing prices, and before the problems of medical reform, medical expenses, social security, and employment issues. Rural residents ranked it in second place after concerns regarding cost increases (See Table 8.6). In 2007, urban and rural residents’ focus on the problem of food and drug safety was affected on the one hand by the case of the original chief of the State Food and Drug Administration, Zheng Xiaoyu,

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Table 8.6: Social Problems of Concern to Urban and Rural Residents in 2007 Unit: % Urban residents Problem of price increases Problem of housing reform and housing price Problem of food and drug safety Problem of medical system reform and medical expenses Problem of social security Problem of employment

Rural residents 66.5

Problem of price increases

57.5

24.6

Problem of food and drug safety Problem of social security Problem of farmer income increases

26.6

Problem of polarization between the rich and poor Problem of agricultural policy

15.1

21.9 21.1 21.1 18.8

19.6 19.5

14.3

Note: The data in the Table is the attention rate, which was calculated using three options according to the attention degree; the social problems of the top-6 mention rate are given. Data from Horizon Research Group, Report on Quality of Life in China.

and on the other hand, by concerns regarding problems of food and drug safety. The measurement results of urban and rural residents’ sense of security in certain life domains (including food and drink, medicine, home furnishings and children’ toys indicated that, apart from rural residents’ sense of security regarding home furnishings and the expenses of home furnishings, urban and rural residents’ sense of security regarding other areas were awarded less than 3 points; in particular, their sense of security regarding food and drug safety was generally very low. City, town, and rural residents’ sense of security regarding drugs was respectively 2.46, 2.32, and 2.37 points and their sense of security regarding food quality was respectively 2.39, 2.37, and 2.58 points (See Figure 8.5). VI.  Urban Residents’ Concerns Regarding Old-Age Care In preparation for future old-age care, rural residents still mainly depended upon their children and themselves, and urban residents pinned their hopes on society and certain specialized old people’s homes.



investigation of the quality of life in china in 2007 Cities

3.10

Towns

Villages 3.02

2.90 2.80 2.70

2.68

2.50

2.42

2.30

2.39

2.10

Hygienic food and drink

3.07 2.86

2.97 2.92 2.89

2.71

2.58 2.39

137

2.68

2.46 2.37

2.37

2.32

Food

Medicine

Household amenity safety

Household amenity costs

Children’s toys

Note: The score of the data in the Table above is based on 5 criteria; 5-points being the highest sense of security and 1-point the lowest. Data from Horizon Research Group, Report on 2007 Quality of Life in China.

Figure 8.5: Security of Urban and Rural Residents’ Quality of Life in 2007

A.  A General Decrease in Urban and Rural Residents’ Concerns Regarding Old-Age Care While a perfect retirement insurance system is still being constructed, the problem of retirement insurance is not only a focus of senior citizens, but also of young people planning for their futures. Since “the problem of retirement insurance” was integrated into the “Horizon Indicator System on the Quality of Life in China” for the first time in 2005, investigation findings have shown that both urban and rural residents were worried about the problem of retirement insurance; the point value of concern regarding old-age care was 2.51 points (5-points was extremely worried, 1-point was not worried at all). In 2006, urban and rural residents, and in particular urban residents’, concerns regarding their futures were further deepened, and the point value of concern regarding this issue reached 3.08 points. However, in 2007, urban and rural residents’ concerns about old-age care had declined, and the awarded point value was 2.95 points. Comparatively speaking, the concerns of urban residents from small towns regarding old-age care (2.68 points) were lower than those of urban (2.97 points) and rural residents (3.0 points).

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B.  Basic Retirement Insurance in Urban Areas Had High Coverage, although Residents Were still Unfamiliar with the System Since the State Council issued its “Decision on Establishing a Unified Basic Retirement Insurance System for Business Staff ”《关于建立统一 的企业职工基本养老保险制度的决定》in 1997, the basic retirement insurance system for urban employees has been officially implemented for ten years. How many urban residents have actually enjoyed this protection? To what degree do urban residents understand this system on which their future benefits and living security rely? What attitudes and feelings do they have towards this system? What influence does this system have on their expectations regarding their futures? In researching indexes of quality of life in 2007, these questions were a focus of investigation. In this investigation, 53% of the urban residents interviewed have enjoyed basic retirement insurance for urban resident employees, and the percentage of covered city residents (65.8%) was far higher than that of the town residents (30.5%). However, of those groups covered by this type of insurance, the degree of understanding among town residents regarding this system is higher than among city residents. Of the town residents that have been covered by this insurance, respectively 74.8%, 68.3%, and 59.2% of people have known the base payment amount, the individual payment rate, and the future pension standard guidelines stipulated by this system. However, among urban residents, these three amounts were 59.1%, 57.7%, and 51.4%, respectively. C.  Town Residents Have High Levels of Confidence in the Long-Term Stability of the Basic Retirement Insurance System Investigation findings indicated that town residents who participated in this insurance system had higher confidence (80.3% for urban residents and 87.5% for town residents) in the long-term execution of this system and in their future ability to collect their pensions according to the provisions. According to the present basic retirement insurance system, employee pensions are connected to the amount of basic retirement insurance premiums paid each month before retirement. If the influence of price fluctuations is not considered, it is beneficial for the payer to increase the amount paid on their basic retirement insurance premiums. However, the payment of pension is prompt and the drawing of pension is delayed (for example, one individual started to work after 1998



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139

and has paid basic retirement insurance premiums for more than 15 years, while another individual started to work before 1998 and paid basic retirement insurance premiums for more than 10 years, but only one is eligible to draw their monthly pension according to the provisions); thus, after investigating whether urban residents were willing to pay greater basic retirement insurance premiums, their confidence in the long-term execution of this security system could also be indirectly examined. The findings indicated that 68.6% of city residents and 74.1% of town residents were willing to increase the basic retirement insurance premium paid every month. Thus, it can be seen that the town residents had higher confidence in the long-term stability of the basic retirement insurance system for urban employees. D.  The Retirement Insurance System Does Not Cover Rural Areas In regards to the source of future pensions, rural residents mainly pinned their hopes on their children, the younger generation (51.6%) and their own savings (27.7%). The urban residents relied on retirement pension wages (43.2%) and basic retirement insurance (32.4%) as important future sources of pension funds. In preparation for future old-age care, rural residents similarly believed their children and the younger generation would care for them (66%) or they would have to care for themselves (18.8%). However, urban residents have certain expectations regarding the functions of the old people’s homes of the department of civil affairs (24.7%), commercial old people’s organizations (7.9%), and the housekeeping organizations (11.1%), in addition to being cared for by their children and the younger generation (33.3) or themselves (14.7%). In short, in regards to their expectations for future old-age care, rural residents are still mainly dependent on their children and themselves, and urban residents tended to pin their hopes on society and specialized old-age care organizations. Comparatively speaking, the traditional idea of “raising sons to support one in one’s old age” (养儿防老) has become common in the urban areas, but it is still quite prevalent in rural areas, and this is an inevitable reflection of the fact that the social security system network is unable to cover the rural areas (See Figure 8.6).

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Live at home and depend on the younger generation for care

33.3 66.0 14.7

Completely rely on self care

18.8

Live out retirement at the Ministry of Civil Affairs Retirement Home Live at home dependent on the care of persons sent by social organizations or the village committee Live at home dependent on the care of home management personnel Commercial retirement home

0%

24.7 5.2 4.3 3.1 11.1 2.4 Rural Areas

7.9

Urban Areas

1.2 10%

20%

30%

40%

50%

60%

70%

80%

Data from Horizon Research Group, Report on 2007 Quality of Life in China.

Figure 8.6: Urban and Rural Residents’ Possible Future Old-Age Care Methods

VII.  A Rise in Confidence Regarding Central Government Management in 2006, One of the Primary Factors Influencing Living Satisfaction Urban and rural residents’ confidence in central government management experienced a comprehensive rise in 2006. Findings regarding quality of life in 2007 indicated that the evaluations of urban and rural residents in regards to the central government were improved, and as much as 92.4% of the interviewees expressed satisfaction with the central government’s work (a rise of 12 percentage points over 80.5% in 2005). Simultaneously, in 2007, urban and rural resident confidence in the future management of central government management was also comprehensively improved. “Confidence in government management” has been an important index in the horizon research measuring quality of life, and this type of confidence is composed of three sublevel indexes of “confidence in government administration of economic affairs,” “confidence in government administration of international affairs,” and “confidence in government administration of social affairs.” This category also includes confidence in the government management of social order, including



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Management of economic affairs Management of international affairs Management of societal affairs 4.20 4.10 4.00

4.10

4.00

4.08

3.70

3.66

3.60

3.88 3.75

2001

2002

3.74

3.66 3.56

3.50 3.40

4.10 4.04

3.95

4.04 3.85

3.75

4.11

4.09

3.95

3.90 3.80

4.11

4.09

4.09

2003

2004

2005

2006

2007

Note: The score of the data in the Table above is based on 5 criteria; 5-points expressing the most resident confidence. Data from Horizon Research Group, Report on Quality Index of Life in China.

Figure 8.7: Urban Resident Confidence Regarding Government Management from 2001–2007

increasing employment opportunities, a more transparent cadre group, and improving social ethos. The statistical results indicate that, in 2007, urban and rural residents’ confidence in the central government’s future development of the state economy and management of international and social affairs rose greatly compared to 2006. However, it can also be seen that, in comparison with increased confidence in the government management of economic and international affairs, urban and rural residents’ confidence in the government management of social affairs was decreased (See Figure 8.7). A.  Recognition of the Government’s Basic Service Performance and Work Efficiency Findings in previous years also indicated that although the belief that “the lower the level of government, the lower the degree of public satisfaction” has not changed, the degree of public recognition regarding the basic job performance of the government and work efficiency has increased yearly. In 2007, 61% of interviewees expressed satisfaction with the work of village and town governments, which was a

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rise of 5 percentage points over the rate of 55.7% in 2005. 74.8% of ­interviewees expressed satisfaction with area and county governments’ work, which was a rise of 13 percentage points over the rate of 61.3% in 2005. 11.4% of interviewees stated that they had direct contact with their local government departments in the past year; of these interviewees, the percentage that expressed satisfaction with the response of government departments (57.9%) was higher than the percentage that expressed dissatisfaction (41.7%). Additionally, the satisfied portion increased in comparison with the rate in 2006, while the dissatisfied portion experienced a drop (the dissatisfied portion was 52.7% in 2006, and the satisfied portion 46.7%). After contacting government ­departments, 39.3% of people expressed their belief that the problem had been thoroughly settled, a rise of 10 percentage points over the rate of 29.2% in 2006, 37.1% of interviewees believed that the problems were only partially solved, and 20.2% of interviewees expressed the belief that their problems were not completely solved. It can be seen that urban and rural residents’ confidence in central government management was comprehensively increased that year, and in particular, confidence in central government management of social affairs experienced visible increases. However, public confidence regarding the resolution of the increasingly serious problem of differentiation between rich and poor was relatively low. The increase in rural residents’ perceptions regarding their quality of life has surpassed urban residents; however, perceptions of problems concerning economic position, working and occupational conditions, and old-age care have not yet improved. As a result of the fact that the public degree of satisfaction with social security and the overall sense of security both experienced an obvious drop, the increase in rural residents’ perception of their quality of life was based more on high confidence in the government and high expectations for the future. Although the level of social security coverage and the degree of satisfaction with social security both experienced a rise and concerns about old-age care experienced a decline, certain negative factors, including price increases and demands for culture, sports, and amusement, were still quite high. A decline in feelings of security regarding food and drug safety restricted the overall living satisfaction of urban and rural residents.

The Beijing Public’s Perceptions of Food Safety Risks Zhao Yandong, Zhang Wenxia and Ma Ying Key words: food safety, risk perception, Beijing public, risk society, fake food, pesticide residue, chemical additive, deterioration, expiration

Food safety is an important problem that involves not only public health and the national economy, but also the people’s livelihood and it is an important symbol of the level of state economic development and the quality of the people’s life. In any country, the control and management of food safety is a very complex and difficult problem, involving policy, management, science, technology, the media, and the public’s understanding. In order to fully understand the public’s real views and subjective feelings regarding the food safety, the National Research Center for Science and Technology for Development of the Ministry of Science and Technology undertook an “investigation of the public’s perceptions regarding food safety” in September of 2007 in Beijing. This article will conduct a thorough analysis of the Beijing public’s perceptions regarding food safety risks and the factors influencing these perceptions according to the findings of this investigation.

   This research was financed by the project “Research on Technical and Social Harmonious Development” under the supervision of the Ministry of Science and Technology, and was assisted by the Beijing Meilande Information Company in the process of investigation and implementation. We hereby express our thanks to them. The investigation was carried out through a multi-stage random sample questionnaire as part of a household survey. 50 out of 2,018 communities in eight districts of Beijing, including Dongcheng District, Xicheng District, Xuanwu District, Chaoyang District, Chongwen District, Haidian District, Fengtai District, and Shijingshan District, were sampled at random and then 50 households were sampled at random in each community. Finally, one person in each of those households was sampled at random by a Kish table as the object investigated. In total, 987 effective questionnaires were obtained, and the effective returns-ratio was 46%.

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zhao yandong, zhang wenxia and ma ying I.  The Beijing Public’s Perceptions Regarding Food Safety Risks

A.  Definitions and Viewpoints on the Perception of Risk As the German sociologist Beck stated, in tandem with the swift development of modern society and science and technology, the risks people face have undergone an essential change in comparison with the past and human society has entered an unprecedented “risk society” stage. In recent years, a series of events that occurred in China have caused policy-makers and researchers to realize that China, in fact, must face many challenges as a “risk society.” A characteristic of modern risk is its “construction characteristic,” namely that there is no pure “objective” risk—the people’s subjective perceptions of the risk “shapes” modern risks to a great extent. Just as the mental measurement paradigm of risk investigation demonstrated, risk is subjectively defined by an individual being influenced by psychology, society, systems, and culture and it is inevitably related to the individual’s age, amount of knowledge, experiences, customs, economic and social status, personality, and personal beliefs. In this article, a centralized discussion will be made regarding the Beijing public’s perceptions of current risks of food safety in China, as well as the social and individual factors that influence this risk perception. B.  The Beijing Public’s Position on the Current Problem of Food Safety As a first step, it is important to ascertain the overall risk of food safety in public perception and how this positioning stands relative to other risks. The interviewees in this investigation were requested to rate the potential hazard and probability of 15 types of risk events with a 5 criteria evaluation method (1-point being the lowest and 5-points the highest). The findings of this investigation yielded the following results:

  Beck and Ulrich. World Risk Society, Chinese edition (Yilin Press, 2003).   Paul Slovic. The Perception of Risk, Chinese edition (Beijing Publishing house, 2007).  



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Table 9.1: Beijing Public Opinion Regarding Food Safety Unit: % Questions What is your belief regarding the hazard that “food safety incidents” pose for the entire society? Do you believe “food safety incidents” could possibly occur in our city in the near future?

Score Total 1 point 2 points 3 points 4 points 5 points 0.0

  0.2

 3.5

16.9

79.4

100.0

2.4

12.2

18.2

32.7

34.4

100.0

Note: The point ranking of 1 to 5 points in the table represents scores based on a 5-criteria system. They represent the level of hazard posed to the society: 1-point represents “basically non-hazardous, while 5-points represents “a huge hazard.” In regards to the probability that such events will occur in the near future, 1-point represents a “basically impossible occurrence” and 5-points represents a “possible occurrence.” The criteria for Table 2 are the same.

1.  Public Opinion Regarding the Hazardousness and Probability of Food Safety Incidents The data in Table 9.1 showed that nearly 80% of the public marked the highest score 5 points (to represent the largest hazard) for the social hazard of food safety incidents, nearly 17% of the public marked 4 points, and the total of both these groups was more than 96%. In other words, the Beijing public nearly unanimously believed that food safety incidents posed very big or relatively big hazards for the entire society. Regarding the probability that food safety incidents will occur locally in the near future, nearly 35% of people marked 5 points (to represent a very big probability), and nearly 33% of people chose 4 points. This data indicated that more than 2/3 of the public believed that food safety incidents could possibly occur in Beijing in the near future, and only 14.6% believed this was an unlikely occurrence. Through the analysis of further statistics and different groups, it was indicated that the influence of age, sex, educational level, income, and marital status was not obvious. In other words, at that time, the Beijing public’s opinions regarding the social hazard and probability of food safety incidents occurring in the near future were nearly unanimous.

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2.  The Hazard of “Food Safety” Was Ranked Highest among 15 Different Types of Risks According to the public’s rating of the social hazard and probability posed by 15 kinds of risk events (See Table 9.2), the public’s average given value of the social hazard and probability of 15 types of risks was 4.4 points and above, which approaches the category of “huge hazard.” Of these, “nuclear spills,” “unidentified infectious diseases,” “earthquakes,” and “terrorist attacks,” as well as those events resulting in major centralized casualties, were all ranked high in social hazard levels, and opinions regarding these hazards were relatively centralized (the standard deviation was relatively low). It is interesting to note that, although the public believed these risks posed enormous hazards, their probability of occurrence was actually ranked relatively low, and nearly all interviewees believed these risks had a very low probability of occurrence in Beijing (the score was less than 3 points). The Beijing public’s evaluation of the hazardousness of “food safety incidents” is 4.75 points on average; though their rating of the probability of occurrence is 3.85 points on average. As can be seen in Table 9.2, the hazardousness of food safety incidents for the entire society was ranked in 6th place of 15 types of risks, after “nuclear spills,” “unidentified infectious diseases,” “earthquakes,” “environmental pollution,” and “terrorist attacks.” Additionally, the probability of a food safety risk occurring in the near future is ranked in 5th place after “incessant rises in housing prices,” “an increase in the gap between the rich and poor,” “traffic accidents,” and “environmental pollution.” It is worth noting that the hazardousness and probability of “food safety incidents” and “environmental pollution” were both ranked highly. According to traditional views on risk analysis, the size of the risk is equivalent to the belief of consequence multiplied by its probability. Considering this, food safety and environmental pollution are currently two of the most severe risks in the public’s mind. However, “traffic accidents” and “production safety accidents,” which cause yearly death tolls and have an extremely high probability of occurring, were ranked after the environmental pollution and food safety problems, which indicates that people have greater risk perception regarding those risk events involving their own health and daily lives and which they have no control over.



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Table 9.2: Public Opinion Rankings of Disaster Probabilities Social hazardousness Ranking

Probability of occurrence in the near future

Mean Standard value deviation

Ranking

1 Nuclear leakage 4.93

0.35

2 Unidentified infectious diseases 3 Earthquake 4 Environmental pollution 5 Terrorist attacks

4.89

0.38

4.89 4.83

0.45 0.44

4.79

0.55

6 Food safety incidents

4.75

0.52

7 Convulsions

4.72

0.60

8 Traffic accidents 4.7 9 Vicious crimes 4.69 10 Energy shortage 4.65

0.61 0.63 0.62

11 Economic turbulence 12 Production safety accidents 13 Incessant rises in housing prices 14 Increasing difficulty in obtaining medical advice 15 Increase in the gap between the rich and poor

4.65

0.63

4.63

0.62

1 Incessant rises in housing prices 2 Increase in the gap between the rich and poor 3 Traffic accidents 4 Environmental pollution 5 Food safety incidents 6 Increasing difficulty in obtaining medical advice 7 Production safety accidents 8 Vicious crimes 9 Energy shortage 10 Economic turbulence 11 Unidentified infectious diseases 12 Convulsions

4.47

0.80

4.45

4.45

Mean Standard value deviation 4.42

0.81

4.35

0.83

4.33 4.03

0.85 1.10

3.85

1.10

3.69

1.33

3.62

1.04

3.00 2.93 2.89

1.17 1.35 1.20

2.64

1.32

2.31

1.29

13 Terrorist attacks

1.99

1.22

0.85

14 Earthquakes

1.56

0.83

0.87

15 Nuclear leakage

1.49

0.88

Note: The figures in the “Mean value” columns in the Table are average scores based on 5-criteria.

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C.  The Beijing Public’s Overall Degree of Satisfaction Regarding the Current Food Safety Situation 1.  Low Satisfaction Regarding the Current Food Safety Situation In this investigation, the Beijing public’s overall degree of satisfaction regarding the current food safety situation was measured by a 5 criteria system (1 point meaning they were “very unsatisfied,” and 5 points meaning they were “very satisfied”). The findings indicated that the Beijing public’s mean value for degree of satisfaction regarding the food safety situation was 2.80 on average, tending towards dissatisfaction. 0.9% of the public expressed they were very satisfied, 19.3% were quite satisfied and 45.8% were generally satisfied; however 6.8% and 27.1% of the public expressed explicit feelings of being “very unsatisfied” and “not very satisfied,” and the total of these two responses was approximately 34%. In other words, about 1/3 of the public is dissatisfied with the current food safety situation. Further analysis indicates however, that when divided along differentials of age, educational level, and household consumption levels, the public expressed definite differences in their degree of satisfaction with the present food safety situation (all reached 0.05 points statistically). Through investigation, it was discovered that age has obvious influence on the individual’s degree of satisfaction. The group of those below 25-years-old reached the highest mean value at 2.96 points. In the 26–35 year-old group, the 36–55 year-old group, and the above 55 year-old group, the mean values of degree of satisfaction dropped gradually, and were 2.89, 2.74, and 2.75 points, respectively. The overall tendency was that the older the age, the lower the degree of satisfaction with the present situation of food safety. In the following analysis, it was discovered that the older the person, the more they paid attention to information regarding food safety. Apparently, people begin to pay more attention to the health and the food safety problem as they age; therefore, it becomes increasingly difficult for them to be satisfied with the present situation. The overall tendency is that the degree of satisfaction regarding food safety situation gradually decreases in accordance with an increase of educational level. Judging from the mean values of degree of satisfaction among groups of different educational level, the mean value of junior high school groups and below was 2.91 points, the mean value of high school groups dropped to 2.84 points, technical college group’s awarded the lowest mean value, at 2.64 points, and the university and



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above group also scored a relatively low mean value of 2.71 points. From this, it can be deduced that, along with the increase in knowledge, people’s feelings of safety were strengthened and expectations regarding food safety also rose. On the other hand, the improvement of educational level also enabled the individual to access information from more channels and, thus, they were more inclined to be dissatisfied with the present situation. After separating the levels of household consumption according to the international general Engel’s coefficient method, it was discovered that families at different consumption levels expressed distinctly degrees of satisfaction. It is interesting to note that, “subsistence level” families had the lowest degree of satisfaction in regards to food safety (averagely 2.62 points), and most wealthy families expressed an obviously higher degree of satisfaction than other families. Additionally, the wealthy families’ degree of satisfaction had the highest mean value at 3.08 points, while “impoverished” and “well-off ” families’ average degree of satisfaction was in the middle (2.79 and 2.81 points, respectively). Obviously, there is not a simple linear relationship between economic consumption level and degree of satisfaction. The most impoverished families were not the most unsatisfied group with the present situation of food safety, while the families at the subsistence level were the most unsatisfied with food safety. This could possibly have been because the latter, lacks the resources to guarantee food safety and have expanded their consciousness of food safety more than the most impoverished social stratum; this contradiction has caused dissatisfaction with the present situation. 2.  The Belief that the Primary Problem with Current Food Safety Management is Insufficient Government Management In recent years, food safety management has been a focus of concern in society, and is one of the primary difficulties of government management. What is the main problem of current food safety management    The grouping standard proposed by the UN Food and Agriculture Organization states that the “impoverished” group is decided by a rate of above 0.6 Engel’s coefficient, 0.5–059 for the “subsistence level” group, 0.4–0.49 for the “well-off ” group, 0.3–0.39 for the “wealthy” group, and below 0.3 for “wealthiest” group. Because the “wealthiest” group has few cases in this research, it has been merged with the “wealthy group”.   In regards to differences between the different consumption level groups’ degree of attention paid to food safety information, the “subsistence level group” had the highest degree, although this difference is not statistically noticeable.

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in public opinion? From the investigation one can see that 10.9% of the public believed the primary problem was that “current safety standards, laws, and regulations are not strict enough,” 40.5% of the public believed the problem did not rest with standards, laws, and regulations, but rather with the fact that “management is behind,” moreover, nearly half (48.6%) of the public believed there were very serious problems in the above listed areas. In compiling these figures, one can see that the overwhelming majority of the public, nearly 90%, believed problems in the current food safety management system were associated with insufficient strength of management. These results indicate that the public unanimously wished the government would further increase its management scope in regards to the food safety control problem and implement more powerful measures to crack down on illegal acts. D.  Public Perceptions of the Risks Involved in Food Safety In reference to the UN Food and Agriculture Organization’s related provisions on food hazards, this research divides food risks into several categories: food deterioration and expiration, fake food, pesticide residues in food, and chemical additives in food. After integrating the former research findings, research was conducted to investigate public perception of the risks of food safety from five angles and eight different levels. The five angles were: one, possible consideration of the consequences of the risk events (including the influence and social consequence to individual); two, the time needed for the risks to effect possible hazardous consequences; three, the public’s emotional response to the risks (for example, “fearful” and “worried”); four, the public’s confidence and understanding on how to settle the problems of food safety (including confidence in whether the risks of food safety have been fully researched scientifically, as well as whether society actually has the ability to solve these problems); five, the individual’s level of acceptance after considering all possible risks and benefits.

 UN Food and Agriculture Organization and the World Health Organization. Guide on Ensuring the Food Quality and Safety —Strengthening the State Food Control System. Compiled by the Agricultural Processing Research Institute of the Chinese Academy of Agricultural Sciences, 2003. 



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1.  The Public Has Strong Feelings Regarding the Consequences of Food Safety Risks Judging from the average scores of the A and B domains in Table 9.3, public judgment towards the tangible impacts and the social considerations of food risk consequences shows strong consistency regarding four types of food safety risks. The issue of fake food was believed to have the largest influence on individual interviewees and society at large, the influence of pesticide residues was in second place, and deterioration and expiration and chemical additives were next. Four types of risks to individual and society were ranked more than 4 points; moreover, the risks of fake food, pesticide residues, and deterioration and expiration received nearly or more than 4.5 points in consideration of consequence, with the mean value close to the level of “serious influence or consequence.” These results indicate that the influence (especially the psychological influence) of the food safety problem on the public in China has been visible; in particular, the hazards of the fake food issue and pesticide residues. The related government departments should take note of these problems. 2.  The Public Belief that the Possible Consequences of Four Types of Risks Vary Regarding the question of how long a time period it would take for possible harmful consequence of the risks to occur, the public expressed great judgment differences regarding the four types of risks (See score of Option C in Table 9.3). From the statistical results, one can see that the public believed that harmful consequences of food deterioration and expiration would occur most quickly, with the consequences of fake food occurring next, and the consequence of pesticide residues and chemical additives taking the longest time to appear. Obviously, in the public opinion, the consequences of pesticide residues and chemical additives have some invisibility and time delay and cannot be discovered immediately. 3.  The Public Expresses High Levels of Concern Regarding Four Types of Risk and Expresses the Most Concern about the Risks of Fake Food In responding to the risks presented, the public believed that the question of whether a risk was terrible and whether it merited concern were related but ultimately different two dimensions. In comparison with concern, judgment as to the degree of terror that the risks reflected was a type of objective judgment of social facts, while the degree of

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zhao yandong, zhang wenxia and ma ying Table 9.3: Public Perception of the Various Dimensions of Different Food Risks

Questions

Deterioration Fake and expiration foods

Pesticide Chemical residues additives

A.  . . . . . . tangible impact to oneself and one’s family (1 = nearly without impact, 5 = serious impact)

4.48 (0.98)

4.62 (0.84)

4.54 (0.82)

4.06 (0.96)

. . . . . . consequence for the entire society (1 = slight consequence, 5 = disastrous consequence)

4.48

4.65

4.58

4.04

(0.81)

(0.65)

(0.70)

(0.98)

2.24

2.65

3.32

3.71

(1.48)

(1.31)

(1.15)

(0.97)

4.77

4.80

4.80

4.34

(0.57)

(0.53)

(0.48)

(0.91)

4.80

4.82

4.81

4.38

(0.51)

(0.49)

(0.48)

(0.86)

4.62

4.52

4.44

3.95

(0.66)

(0.77)

(0.76)

(0.99)

4.25

3.73

3.56

3.59

(1.03)

(1.41)

(1.32)

(1.31)

1.33

1.31

1.59

2.08

(0.88)

(0.83)

(0.98)

(1.10)

B.  . . . . . . length of time of consequence (1 = appear at once, 5 = appear after a long time) C.  felt . . . . . . terrible degree (1 = not formidable, 5 = terrible) D. Degree of worry about . . . . . . (1 = indifferent, 5 = extremely anxious about) E. Consideration of the degree of hazard . . . . . . by scientific knowledge (1 = have no knowledge of, 5 = have knowledge of  ) F.  The degree of control society has over the hazard . . . . . . (1 = uncontrollable, 5 = controllable) G. Your acceptance of the risks . . . . . . (1 = unacceptable 5 = acceptable)

Note: The figures in the table are averages based on a 5-point scale and the figures in the parenthesis are the standard deviations.



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concern was more subjective and reflected the individual’s real concerns regarding the risks. Judging from the figures of options D and E in Table 9.3, the public expressed a greater rate of terror and anxiety in response to four types of risks. Apart from the fact that the score of degree of terror and anxiety regarding chemical additives is about 4.3 points, the scores ranking the degree of terror and anxiety felt towards all other three options were about 4.8 points, which is very close to being “very fearful” and “very anxious.” In addition, the public’s ranking of the degree of terror and anxiety felt towards the four types of risks was also very consistent, ranging from fake food (high), pesticide residues, deterioration and expiration, to chemical additives (low). An analysis of the data also indicated that the degree of terror felt was inseparable from the degree of anxiety felt, which indicated that these two types of mood are consistent in their risk perception. 4.  The Public Has Greater Optimism Regarding the Ability of Science and ­Technology to Identify Food Risks than in the Ability of Society to Resolve These Food Risks The scores of options F and G in Table 9.3 reflect public opinions as to whether the risks in food safety can be fully understood by modern science and whether society has the ability to fully resolve the problem of food safety. The findings indicated that the public has faith in the ability of science and technology to identify food risks, especially in regards to the identification of the hazards of deterioration and expiration, fake food, and pesticide residues. The public as a whole awarded this option about 4.5 points, which is quite close to the score of “knowing completely.” In regards to the identification of chemical additives, the public showed a slightly lower confidence in science, at less than 4 points. In relation to the higher confidence placed in the scientific understanding of risks, the public showed slightly less confidence in the ability of society to control these food risks. In addition to the fact that the mean value awarded for the ability of society to resolve the problem of deterioration and expiration was more than 4 points, the scores of the other three options were all are below 4 points, though close to the degree of “more confidence” as a whole. Overall, the public had greater confidence in society’s ability to resolve the problem of deterioration and expiration, followed by fake food and pesticide residues, while interviewees exhibited the lowest confidence in society’s ability to resolve the problem of chemical additives.

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5.  The Public Had a Comparatively Low Acceptance Level Regarding Four Types of Food Safety Risks, and a Comparatively High Acceptance Rate of the Risks of Chemical Additives and Pesticide Residues Judging from the score of option H in Table 9.3, the public exhibited very low levels of individual acceptance regarding four types of food safety risks. The acceptance of deterioration and expiration and fake food was less than 1.5 points, which was close to being “totally unacceptable,” while the acceptability of the risks involved with fake food was the lowest. The acceptability of the risks involved with chemical additives was slightly higher, with the mean value more than 2 points. Generally speaking, the Beijing public had a more tolerant attitude towards modern risks caused by technological development, including risks involved with chemical additives and pesticide residues. Contrarily, acceptance of the risks involved with fake food and the deterioration and expiration of food, which should be normally easier to control through government management, was low. 6.  The Public Had the Most Adverse Reaction to Risks Associated with Fake Food After summarizing public perception on the various dimensions of food safety risks, it was discovered that the public had the most adverse reaction to the overall risks of fake food. The consideration of ­consequences and the degree of terror and anxiety felt towards this risk were all ranked first among all of the risks, while, simultaneously, its acceptance rate was the lowest. When formulating related policy, the government should take note of this situation and make corresponding adjustments in the work of managing food safety, information dissemination, and education. The social and individual factors associated with the food risk perception were also analyzed. In regards to tangible impact, groups of different economic status exhibited noticeable differences. After dividing the interviewees into five groups according to income levels, it was discovered that the lowest-income group and the highest-income group felt food risks had the biggest influence on them, while the middle-income group believed the influence was less. However, it is interesting to note

  For convenience in analyzing the data, we totaled the scores of perception to the four types of risks in the above eight areas. Namely, we obtained the total scores of food risk perception in each dimension. We then carried on a correlation analysis to the relationship between the risk indexes in different dimensions and the variables of personal background.



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that there were actually different conclusions made in the different groups according to their consumption level. The “impoverished” group still believed food risks posed the greatest influence on them, and the medium “well-off ” group also believed they were the most significantly influenced. It can be affirmed from these results that the group with the worst economic position felt the most tangible impact of the risks, while the perception of the medium-level and high-level groups regarding the tangible impact of food risks merits further analysis. Judging from the perceived social consequences of food risks, age and marital status are the most obvious influencing factors. Older people and married people were similar in that they perceived the social consequences of the risks as serious. This could possibly be explained by the fact that people’s points of view concerning these issues expand as they age; therefore, the older groups were more concerned about the social consequences of food safety. However, in regards to married persons, different perceptions of social consequences varied according to age. Many factors can influence the degree of terror felt by the individual in regards to these risks. Middle-aged persons believed food safety risks were more terrible than the young or elderly, while married persons believed the food risks were more terrible than the unmarried, which could be because middle-aged persons and married persons bear more family and social responsibilities. People of different-incomes expressed obvious differences in their perceptions of the degree of fear they felt towards these risks. In comparing the highest-income group and the lowest-income group, the three groups of middle-income (the medium low-income group, the middle-income group, and the medium highincome group) all believed food risks were more terrible. This result is very interesting in comparison with the related results in regards to the perception of the connection between income and risk influence. The people at the two opposite ends of the spectrum believed food risks posed the greatest threat on their group, but they did not believe this risk was particularly terrible. In contrast, although the middle-income group believed food safety has correspondingly low influence on them, they actually believed the risk of food safety was quite terrible. Regarding the problem of society’s ability to control food risks, the only noticeable differences in perception were expressed by people of different educational levels. This type of difference was a type of “U” curve, with two high ends and a low middle. The two groups at the lowest and highest educational levels (“junior high school education and below” and “university education and above”) were more inclined

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to believe that the society could control the hazard of food risks, while the people at the undergraduate educational level and above expressed the most confidence. However, people at the secondary education level had less confidence in society’s ability to control these risks. Aside from the areas mentioned above, the different social groups did not express noticeable differences in the other areas related to food risks. Even if the above factors exhibited noticeable differences, the correlative coefficients were also lower. These findings indicate that in a modern metropolis like Beijing, the distribution logic and the traditional social level logic of the risk and its perception (such as the logic of wealth distribution) have been inconsistent to a certain extent, and perceptions of risk have become a relatively independent standard from social standing. Berk once proposed that a basic feature of a risk society was that “the logic of risk distribution replaced the logic of wealth distribution;” from this point of view, Beijing has exhibited certain features of a “risk society.” II.  Public Understanding of Information Concerning Food Safety The public’s risk perception is always formed based on certain knowledge and information; therefore, the public understanding of available knowledge and information concerning food safety was specially investigated in this research. Attention paid by the public to information regarding food safety and their mastery of this knowledge and awareness of resultant events was also analyzed. A.  More than 90% of the Public Expressed Interest in Information Related to Food Safety The findings of this investigation indicated that Beijing residents paid high levels of attention to information concerning food safety; 39.7% of residents stated that he/she “pays great attention to” the related information, 54.1% of residents stated that he/she “pays some attention to” the information, and a total of 94% of the public expressed interest in information related to food safety.

  Berk. World Risk Society, Chinese edition (Yilin Press, 2003).





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Table 9.4: Food Safety Awareness According to Age and Educational Level Unit: % Age group Attention

Very attentive More attention No attention (N)

Educational level

25 years 26–35 36–55 56 years Junior Senior Technical University old and years years old and high high college and above below old old above school school and below 32.8

37.1

38.6

49.3

38.0

35.5

48.5

42.4

56.9

56.3

58.5

43.3

56.5

60.5

44.4

49.5

10.2

  6.6

  2.9

  7.4

  5.4

 3.9

  7.0

  8.2

(137)

(197) (412)

(217)

(276)

(332)

(171)

(184)

X2 = 25.41, df = 6, p < 0.001

X2 = 21.08, df = 8, p < 0.01

After further interactive analysis, it was discovered that there are some group differences in the degree of attention paid to food safety information. These outstanding differences are: 1.  Gender Difference 35.5% of women stated they were “very attentive” to food risk related information, which was 8 percentage points higher than men. Obviously, women paid more attention to food safety information than men. 2.  Age Difference From Table 9.4, we can see that along with an increase in age, the proportion of interviewees who stated they were “very attentive” towards information regarding food safety continues to rise. For example, while only 32.8% of people in the 25 year-old and below group expressed this sentiment, but that rate was almost doubled in the 56 year-old and above group. Judging from the rate of people of “not paying attention” to related information, the rate in the groups of 25 year-olds to 55 year-olds is regressive, though it rose in the 56 year-olds and above group. The overall tendency could be stated as the older the age, the more attention paid to food safety information.

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3.  Educational Level Differences People with different educational levels have obvious differences in the degree of attention paid to information regarding food safety. (See Table 9.4). The majority of people at the high school educational level and below expressed a medium amount of attention paid to the related information; the rate of “more attention” was the greatest. Comparatively speaking, people at the technical college educational level and above increased the degree of attention paid, and the rate of “very attentive” was markedly higher for this group than for the group at the high school educational level and below. However, along with the enhancement of the educational level, the proportion of “no attention” answers also rose, and it seems that the people with a higher education degree assumed a kind of polarized tendency in the degree of attention they paid to food safety, being either “very attentive” or paying “no attention.” B.  Public Awareness of the Food Safety Issue 1.  The Public Has a Higher Awareness of Traditional Food Risks than the Risks of Pesticide Residue and Chemical Additives Interviewees were requested to rate their knowledge on questions related to food safety on a 1–5 point scale, 1 point representing “no ­knowledge,” and 5 points representing “high level of knowledge.” Through the findings, it was discovered that the public has the highest amount of knowledge concerning the deterioration and expiration of foods, with a mean value at 3.96 points, which is close to the level of “much knowledge.” The levels of knowledge concerning fake food and pesticide residues were in second place, with mean values of 3.44 points and 3.22 points, respectively. However, the level of knowledge concerning chemical additives was the lowest, with a mean value of 3.14 points. Generally speaking, the public has better risk knowledge concerning the more traditional risks of deterioration and expiration and fake foods, but they are still somewhat unacquainted with the atypical problems of pesticide residues and chemical additives in foods that have begun appearing in an industrial society. 2.  Overall, Middle-Aged and Young People with a High-School Educational Level and High-Income Groups Have a Better Knowledge of Food Safety In order to further understand differences in knowledge among the different social groups regarding food safety, awareness scores regarding



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different risks were totaled and averaged, an overall average of knowledge concerning food safety was calculated, and the different groups’ scores were investigated. Finally, it was discovered that the following groups exhibit quite noticeable differences. In tandem with an increase in age, the degree of knowledge concerning food safety also drops gradually; this phenomenon is most visible in the elderly. The average degree of knowledge of youths and the middle-aged was about 3.5 and 3.6 points, while the score of the elderly was only 3.2 points. Although one can see from the former that the older demographic paid more attention to the problem of food safety, the learning capacity of this group dropped and their energy declined, so they encountered more barriers when obtaining this related knowledge. The higher the educational level, the higher degree of knowledge obtained concerning food safety. From the above results, it was discovered that the higher the educational level the individual had, the more attention was paid to information regarding food safety. Additionally, the higher the education level, the stronger the individual’s learning capability and the more channels available to them to obtain this related knowledge. Whether grouping by the five equation of income or by Engel’s coefficient, an obvious common tendency was discovered; namely, that the better the family’s economic position, the better their degree of knowledge concerning food safety. This is probably because these people had a stronger economic strength to aid in the accrual of related information. 3.  Primary Channels Used by the Public to Gain Knowledge Concerning Food Safety From the results shown in Figure 9.1, the television and newspaper are the two media channels most commonly used by the public to gain knowledge concerning food safety; nearly 97% of the public acquired knowledge concerning food safety from television. The internet has replaced the traditional media of broadcasts, books, and magazines to become the third most commonly used channel (23.5%) for the Beijing public to gain knowledge concerning food safety. After further analysis, it was indicated that the groups who used the internet to access related information exhibited quite specific features; in the group of 25 yearolds, those with an undergraduate course educational level and above, coupled with 20% of the highest-income bracket, utilized the internet at a rate of 50%.

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zhao yandong, zhang wenxia and ma ying 96.6

100.0 90.0 80.0

71.0

70.0 60.0 50.0 40.0 30.0

23.5

20.0

sse s lR ela tio ns hi ps

0.6

Pe rso

na

C la

ts Vi si

ne t eI

nt

er

sio n Th

vi Te le

ca

sts

0.3

Br oa d

az ag M

N

ew

sp

ap

er

in es

s

0.0

10.0 2.2 Bo ok s

5.5

10.0

21.6

Note: Because this is a multiple-option question, the total percentage of every item is more than 100%.

Figure 9.1: Information Channels Used by the Beijing Public to Access ­Information Concerning Food Safety Unit: %

Although modern media technology has developed to a quite high level, word of mouth is still an important channel for people to gain information regarding food safety. 21.6% of people used this method, making it fourth place among all the various information channels. Through further interactive analysis, it was also indicated that the use of interpersonal communication channels was not observably associated with variables in personal background, which explained why this method was widely used by people of different ages, different educational levels, and different economic social status. C.  The Degree of Public Knowledge Concerning Food Safety Incidents 1.  The Beijing Public Has a Higher Awareness Rate Regarding Food Safety Incidents, Particularly Local Incidents Five influential food safety incidents of recent years were investigated to determine the residents’ degree of awareness of these incidents. These incidents were the Beijing “Amazonian snail” toxicosis incident in 2006, the “Sudan red-yolk duck egg” incident, which occurred in



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Hebei and Beijing in 2006, the Hunan “Yueyang domestic water pollution” incident in 2006, the Shanghai “lean meat flavor” pork toxicosis incident in 2006, and the Anhui “Fuyang false powdered milk” incident in 2004. Judging from the findings of the investigation, one can see that the public’s degree of awareness regarding these incidents was generally high. The “red-yolk duck egg” incident was widely known about, with an awareness rate of 96.5%. The “Fuyang false powdered milk” and the “Amazonian snail” incidents had awareness rates of 87.9% and 87.2%, respectively; “the lean meat flavor” incident had a 74.9% awareness rate; and the “Yueyang water pollution” incident, which had the lowest awareness rate, still reached a rate of 66.6%. Overall, Beijing residents had a comparatively higher awareness rate regarding locally occurring food safety incidents. 2.  Men, the Middle-Aged, and People with a High Educational-Level and a High-Income Have a Higher Degree of Awareness Regarding Food Safety ­Incidents According to a comparative analysis of the total scores regarding awareness and personal background factors, the following group differences in awareness were discovered regarding food safety incidents. First, male awareness was higher than that of females; the male awareness score was 4.22 points, which was about 0.2 points higher than the female score. Next, the degree of awareness differed according to different age phases. In terms of age, awareness tended to be low on both ends and high in the middle, with the younger age groups’ and the older age groups’ average awareness score at 3.87 and 4.01 points, which was markedly lower than the youth group’s 4.11 points and the middle-aged group’s 4.28 points. Third, people with a high educational level had a higher degree of awareness. The elementary school group and below had the lowest awareness score, at only 3.30 points, and the university group and above has the highest awareness score, at 4.38 points. The lowest 20% had an awareness score of 3.76 points, which was lower by 0.6 points than the group of the highest 20%. In short, men, the middleaged, and people with a high educational-level and high-income level had a greater awareness of food safety incidents. This phenomenon is influenced by the greater amount of attention paid to food safety information and better access to this information.

   The total score of knowing degree is the composite knowing degrees of 5 food safety incidents.

162 5.00 4.50 4.00 3.50 3.00

zhao yandong, zhang wenxia and ma ying

4.44

4.27

4.09

3.93

3.48

3.40

3.50

3.52

3.43

3.31

3.28

Very Unsatisfied

Not Very Satisfied

Generally Satisfied

Very Satisfied

3.82

2.50 2.00

Awareness Attention Understanding

1.50 1.00 0.50 0.00

Figure 9.2: Attention, Understanding, and Awareness of Food Safety Information Among the Beijing Public Unit: Mean Value

D.  The Relationship between Public Attention, Degree of Understanding, Degree of Awareness, and Risk Perception Regarding Food Safety 1.  Public Satisfaction with the Current Food Safety System Is in Negative Correlation to the Level of Attention and Awareness of Related Information In this study, the average scores of the public exhibited varying degrees of satisfaction in regard to the present situation of food safety in the areas of understanding and awareness. See Figure 9.2. Judging from the findings in Figure 9.2, we can see that the degree of public satisfaction in regards to food safety basically assumed a declining trend in correlation with an increase of attention, understanding, and awareness regarding the related information. Taking the degree of awareness of food safety incidents as an example (the topmost curve in Figure 9.2), in the group that was “satisfied/very satisfied” with food safety, the awareness score is lowest (3.93 points); as the degree of satisfaction is reduced, the degree of awareness rises. Of the group that was “very unsatisfied,” the degree of awareness reached its highest rate, at 4.44 points; there was also a similar tendency in the degree of attention and understanding. These findings indicated that, comparatively speaking, the interviewees who expressed satisfaction were primarily those people who paid little attention to certain information concerning food safety, rarely understood the related knowledge, and rarely understood the details of the related incidents. This could mean that public dissatisfaction with the present food safety problems might possibly increase



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Table 9.5: Pearson’s Correlation Coefficients Regarding Degrees of Attention, Understanding, and Awareness Regarding Food Risk Perceptions Unit: R Tangible Social Time Degree Degree Scientific Social Acceptance impact conse- delay of of fear of knowledge control­lability quence conseanxiety level quence Attention Degree of understanding Knowing Degree of awareness

– 0.24

0.16 0.07

– –

– 0.12

0.10 0.17

– –

– –

–0.12 –

–

–

–

–

0.08

0.12

–

–

Note: The coefficients in the table are Pearson’s correlation coefficients “r.” All reach 0.05 significances, while “–” expresses it does not reach 0.05.

after improving their degree of awareness, a phenomenon that should be considered by policy-makers in the future. 2.  Public Attention, Understanding, and Awareness of Knowledge and Information Concerning Food Safety Further calculations were made as to the dependency relationship between the degree of attention, understanding, and awareness of the various dimensions (total scores) of food risk perception and the following rules were discovered (See Table 9.5). Attention to food safety information directly correlates to the ranking of the social consequence of risks and the individual’s degree of anxiety, but it is in negative correlation with the individual’s acceptance of the risks. Namely, the more attention paid to food safety information, the more serious the perception of the social consequences of food risks, the more anxiety about food risks, and the more these risks are perceived as unacceptable. The degree of understanding of the information concerning food risks is strongly dependent on the individual’s perception of the risk. The higher the individual’s understanding of the related knowledge, the greater the possibility they believed food risks have a huge influence on the individual and society and the greater their inclination to have concerns and fears about the food risks. The degree of awareness regarding food safety incidents is primarily associated with the degree of anxiety regarding the risks and the level of scientific knowledge and judgment of the risks. Additionally, the

164

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more the individual knows about the food safety incidents, the greater the possibility of concern regarding the food risks, and the greater the possibility the individual believes current scientific knowledge has fully identified the hazardousness of food risks. III.  The Actual Distribution of Food Safety Risks A.  20% of Beijing Families Experienced Food Related Health Problems in the Past Two Years The results of this investigation revealed that 22.3% of the Beijing public interviewed stated that they, or their family, had had health problems as a result of eating questionable foods in the past two years (including diarrhea, dizziness, and other serious problems). After having these problems, the overwhelming majority of victims (90.7%) did not take any action, and tolerated it; 4.2% of families initiated contact with the factory or the business, 2.3% of families chose to sue the departments concerned, and 2.8% of families took other actions. The question of which social groups were most affected by the food safety problem was divided by three indexes: “monthly family ­consumption per person,” “Engel’s coefficient of the family,” and “subjective identity regarding the social economic status of own family.” The statistical results indicated that the food safety problem is indistinctively associated with the Engel’s coefficient (p > 0.05), but observably associated with the monthly consumption per person and their subjective social strata identification. As shown in Table 9.6, the subjective identity of social position and the occurrence of food safety problems are not linearly related. Families that consider themselves part of the “substrata” encountered food safety problems at a rate of 21.6%, which was a slightly higher incidence rate than that of families who consider themselves part of the “middle substrata,” and lower than families who are part of the “middle class.” Judging from the statistical results, although the families that consider themselves a part of the “upper class” have the lowest incidence rate of food safety problems (only 4.8%), there is a cautious attitude regarding this conclusion because there are only a few cases involving “upper class” families, only 21 people. In 20% of families with the lowest monthly expenditures per person, the portion that experienced food safety problems was 20.7%; in



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Table 9.6: Correlation between Food Safety Problems, Monthly Family Expenditures Per Person, and Subjective Social Strata Identification Unit: % Whether Subjective social strata identification Monthly expenditures per person or not experienced Substrata Middle Middle Middle Lowest Lower Medium Higher Highest substrata class upper 20% 20% 20% 20% 20% a food safety class/ problem upper class Yes

21.6

20.4

26.5

4.8

20.7

16.4

23.4

20.8

33.2

No

78.4

79.6

73.5

95.2

79.3

83.6

76.6

79.2

66.8

(N)

(185)

(445)

(317)

(21)

(140)

(286)

(145)

(202)

(193)

X2 = 7.87, df = 3, p