The contesting quest for old-age security: institutional politics in China's pension reforms

Abstract

The overhaul of the existing pension institutions in China poses a serious governance challenge. This article argues that the ways in which the state responds to social problems are necessarily mediated by the political institutions in favour of continued bargaining between different government bureaucracies. Social policy outcomes are often subject to the contestation of diverse policy ideas and interest conflicts among the actors. Using the example of pension reforms in urban and rural China, we analyse how political institutions facilitate or constrain the diverse policy initiatives by competing bureaucratic ministries, thereby influencing the reform process. The main finding is that the inherent conflicts, compounded by the diversity of policy development at regional level, have considerably precluded coherence in the governance efforts of the central government. The distinct institutional politics revealed by the pension reforms is set to have profound implications for the future development of Chinese social policy.

Keywords:

• pension reform
• institutional politics
• social policy
• China

Notes

1. A growing body of literature has indeed dealt with both policy domains (see Wang 2006, Salditt et al. 2007). It is, nevertheless, clear that insufficient effort has been placed into the provision of any theoretical explanations. One notable exception is the study of Gong (2003).

2. Political scientists term this characteristic as ‘fragmented authoritarianism’, indicating that vested bureaucratic interests are often involved in Chinese politics. See Lampton (1987), Lieberthal and Lampton (1992) and Lieberthal (2004).

3. Noteworthy is the fact that not all the organs wield equal influences in the urban pension policy. While the IRC is a regulatory agency set up in November 1998 under the SC, with basically a minor role to play in the urban pension policy debate in the 1990s, SDP and SCRES were powerful constituent units of the SC with a much greater say in the policymaking.

4. This information was provided by a researcher of a central government research institute in Beijing in July 2008. Also see Gao (2006) and Gong (2003).

5. Both plans encompassed individual accounts and social pooling, albeit with different combinations. Plan I, based on the ideas of the SCRES, emphasized individual accounts, whereas Plan II, based on the ideas of the MoL, added more of the social pooling component than Plan I. The two plans also suggested a set of provisional arrangements for current employees not covered by the new scheme. In addition, both plans suggested the introduction of an automatic adjustment mechanism for pensions in payment in accordance with the rise in the local average wage rate; see World Bank (1997, pp. 17–18).

6. The SC document reduced the income replacement rate of pension benefits from 80% to below 60%, slashing the contribution burden of enterprises but increasing employees’ shares. Each enterprise should not contribute more than 20% of its total wage bill in social pension funding, while individual workers had to pay 11% of their wages into the personal accounts. See Leisering and Gong (2002, pp. 26–28).

7. This information was provided by an analyst of a policy research institute in Beijing in August 2008.

8. This information was provided by an analyst of a policy research institute in Beijing in September 2009. Refer also to the work of Lu (2008), which attributed the relative success of the Liaoning province to the sophisticated skills of the charismatic Liaoning leader, Bo Xilai, to garner the support of the central government.

9. Analysis in this part is based on a previous study by Shi (2006), supplemented with updated information on the policy development up to the reform of 2009.

10. This information was provided by an MoLSS official during an interview with the author in Beijing in September 2004.

11. This view was expressed by an official of the Beijing Bureau of Labour and Social Security during an interview with the author in June 2005.

12. The description is based on the document issued by the SC in September 2009 (http://www.gov.cn/zwgk/2009-09/04/content_1409216.htm).

13. This information was provided by an MHRSS official during an interview with the author in Beijing in September 2009.

14. Apart from this study, other research has also pointed out similar governance problems related to urban health insurance reforms (e.g. Duckett 2001, 2003) and urban pension reform (e.g. Frazier 2010).