Social protection policies

Until the middle of the 2000s, the provision of basic social security, access to social services, as well as old-age income protection for rural households was the responsibility of the communes. However, with the deepening of land reforms, changes to rural taxation, and the expansion of market-based economic activities in the countryside, the communes increasingly lost their role as guarantors of basic social protection.6 Government programs funded with budgetary transfers from higher levels of government took on greater importance. A significant part of this expansion was direct cash transfers to the poor in the form of social assistance to protect those who are left behind in the process of economic development. The major programs expanding social protection to rural areas are listed in table 4.1.

By the mid-2000s, old-age poverty emerged as a new policy concern given the rapid aging of China’s rural population, and subsidized universal pension schemes were started as pilots and then expanded nationwide. Between 2009 and 2013, China tripled the number of people covered by the old-age pension system (ILO 2015). The urban and the rural resident pension schemes were unified beginning in 2014. However, the benefit level of the rural resident pension remains below half the value of the rural poverty line (table 4.1). By 2020, almost all of the eligible rural population received a basic pension and universal medical insurance package.7 This provided basic income security to the rural population.

After a series of pilots, the minimum income guarantee program (Di Bao) for rural areas was launched nationwide in 2007 and expanded rapidly, reaching over 52 million beneficiaries by 2010, but falling in coverage to 34.5 million by 2019. Di Bao was a fundamental change—for the first time the government offered a minimum income guarantee to the eligible population whose income was below the Di Bao line (set at the local level). Di Bao eligibility was checked with the help of a registry of the population using a multidimensional definition of poverty (income, assets, housing condition, education, health, employment). However, local fiscal conditions often dictated that the rural Di Bao income eligibility line was set very low, reducing its coverage of the extreme poor. Thus, in 2015, the Di Bao line was below the rural poverty line in about half of the poor counties (Wang, Qu, and Jia 2017). In subsequent years, in conjunction with the targeted poverty reduction strategy, Di Bao lines in all counties were adjusted to be above the official rural poverty line. In practice, however, eligibility for the scheme remains determined by local rules that de facto exclude most of the able bodied from receipt of the Di Bao, even if their household income falls short of the minimum standard (Golan, Sicular, and Umapathi 2017). Once a household gets accepted in Di Bao, it typically receives multiple other social assistance benefits listed in table 4.1 under social assistance, such as education and medical assistance (Wang, Qu, and Jia 2017).

The effects of some of these programs on poverty reduction have been studied and documented using survey data. For example, Li, Zhan, and Shen (2017), using data from the 2013 Chinese Household Income Project survey, find that public transfers reduced rural poverty by 4 percentage points (from 12.3 percent to 8.4 percent).8 Within public transfers, contributory pensions and the new (largely noncontributory) rural pension scheme accounted for half of this effect, while the Di Bao social assistance transfers contributed about 0.6 percentage points, and various other subsidies contributed another percentage point. More narrowly focusing on rural Di Bao, Golan, Sicular, and Umapathi (2017) arrive at estimates of similar orders of magnitude. The greater coordination of Di Bao with the targeted poverty reduction campaign has improved the coverage of the rural poor in recent years, but information platforms and administration remain fragmented (Wang, Qu, and Jia 2017; Westmore 2017). Some groups, such as young rural migrant workers and informally employed workers, fall outside the coverage of China’s Di Bao system and are also less likely to be covered by other forms of social protection (table 4.1). For instance, in 2017, only 17 percent of migrant workers were covered by an unemployment insurance scheme (World Bank 2020). Low-wage migrants tend to receive no or very little support when they fall below the urban local low-income threshold (Di Bao line)9 because the urban-rural binary social aid system provides inadequate protection for them.