BEIJING, Oct 29 (Reuters) - Chinese lawmakers have adopted a new legislation that could potentially extend basic pension and healthcare coverage to more people, especially rural residents and migrant workers who receive little coverage at present.
The changes to China’s fragmented pension system will take effect in July 2011, lawmakers said at a briefing on Thursday.
Insufficient social security in pension and healthcare is often regarded as a key reason for high saving and low consumption in the Chinese economy.
Xin Chunying, a member with the standing committee of the National People’s Congress, the lawmaking body, said a key aim of the changes to the Social Insurance Law was to include both rural and urban residents in a nationwide pension and healthcare system.
But the law, a product of three years’ discussion, lacks important details on how China will achieve the target, leaving the State Council, the cabinet, and even local governments to work out specific rules.
Xin said the law sets “big principals” only, making room for “further reform and development”.
Hu Xiaoyi, a vice minister of China’s labour ministry, said that China is likely to build a nationwide basic pension fund over the next five years.
Only urban residents currently have access to China’s state pension system, and funds contributed by employers and employees are managed at more than 2,000 centres across the country, causing problems of low efficiency, embezzlement and misuse of funds.
Dai Xianglong, the head of China’s $120 billion national pension fund, said inflation alone could pose a big risk for the 1.8 trillion yuan ($269 billion) in social security funds managed by local governments because the annual return of those funds was only 2.3 percent while China’s inflation was 3.6 percent in September. [ID:nTOE68D07R] (Reporting by Zhou Xin and Ken Wills)