Social insurance law progressive but lacks teeth

The new PRC Social Insurance Law sends a positive signal, but faces many hurdles in implementation. By Matthew Durham, senior consultant, Barlow Lyde & Gilbert, Shanghai

The new PRC Social Insurance Law was finally passed by the Standing Committee of the National People’s Congress on 28 October 2010 amid considerable media coverage. It will become effective on 1 July 2011. The headline message from the government is that the new law creates a detailed framework for a comprehensive and inclusive nationwide social insurance scheme. Certainly, on its face, the new law appears to be a major step forward. Some commentators, however, argue that the Social Insurance Law is compromised and that in practice it will be a huge challenge to implement it and achieve its stated aims.

Social considerations

The government has been concerned for some time about how to provide support for a large and ageing population, with an increasing burden likely to fall on the state. Article 1 of the Social Insurance Law states that one of its purposes is “promoting social harmony and stability”. This generic wording is a feature of many PRC laws, but stability is nevertheless a primary concern for the government, and the promotion and passing of the Social Insurance Law seems to send a generally positive message regarding the government’s efforts to provide benefits and coverage for individuals.

Like the passing of the PRC Labour Contract Law in 2007, the Social Insurance Law comes at a time when labour unrest around the country has been on the rise. Also like the Labour Contract Law, the Social Insurance Law was under discussion for a long period. There was talk of delays, and many drafts, and the new law was passed amid rumours of differences of opinion that affected the clarity of the final provisions – in particular, the provisions regarding the necessity and viability of a country-wide system given the differences in financial and developmental status between the different regions of China.