China is attempting to walk a fine line between lowering corporate burdens to boost economic growth and making the country's pension scheme more sustainable amid an aging population.
In its latest step, the government vowed to roll out a nationwide pilot program announced in 2017 that transfers stakes in state-owned firms to social security funds.
This comes as the 2-trillion-yuan (about US$291.55 billion) reduction of tax burdens and social insurance contributions of enterprises helped lower corporate burdens but raised concerns over the sustainability of the country's pension system.
The government lowered the share borne by employers for urban workers' basic age-care insurance down to 16 percent starting from May 1, with other policies on improving social security benefits being intensively introduced, said You Jun, vice minister of human resources and social security.
In the first half of 2019, companies saw their spending on workers' basic pensions, unemployment insurance and work-related injury insurance decreased by over 128.8 billion yuan.
Effects of the policy will be more obvious in the second half of the year, You said, expecting the full-year 310-billion-yuan reduction to be achieved or surpassed.
To improve people's livelihoods, the government maintained a 5-percent rise of basic pension this year, the 15th consecutive year of pension increase, which is set to benefit 118 million retirees across the country.
However, these incentives add pressure on the government and the pension system as the country's population ages and obligations are set to rise. According to a report issued by the Peking Union Medical College and Chinese Aging Well Association, more than 14 percent of China's total population are expected to be aged 65 and above by 2026.
The ratio of the financial subsidies for workers' basic pensions to the government's fiscal expenditure is projected to be up 0.3-0.5 percentage points annually and may surge after 2030, according to China International Capital Corporation Limited (CICC).
To ease the pressure of pension payments, the government has been working to expand the resources of its pension funds.
The country broadened the investment scope of the social security fund, a strategic reserve to support future social security expenditure, from low-yield bank deposits and treasuries to stocks and other assets.
The latest plan would see social security funds directly hold more shares in state-owned enterprises (SOEs), allowing the funds to benefit from dividends generated by government-owned assets.
Under the plan, large and medium-sized state-owned and state-controlled enterprises at both central and provincial levels, as well as financial institutions, will see 10 percent of their state-owned equity transferred to the National Council for Social Security Fund and relevant local receiving entities who shall, as financial investors, enjoy the right to yields from the transferred equity.
Some 24 central SOEs have completed the transfer while another 35 will join the program soon, and the state capital transferred by the 59 enterprises is expected to reach 660 billion yuan, said Lu Qingping, an official at the Ministry of Finance.
The state asset transfers would help develop a more fair and sustainable pension system, and make it easier for the government to implement the tax and fee reduction plan, the CICC said.
"We have confidence in achieving the two 'guarantees,' guaranteeing the solid implementation of the reduction in tax burdens and social insurance contributions, while guaranteeing that pensions will be paid on time and in full," You said.
