With mainland China’s compulsory social security contribution policy taking effect on September 1, an electronics factory in Huizhou, Guangdong, chose to deregister its business on August 31. (Online screenshot)
[People News] The Chinese Academy of Social Sciences has previously projected that by 2035, the national employee social security fund pool will face a significant deficit. To proactively tackle this impending social security crisis, the authorities have been scrambling to find funding through various measures, including delaying retirement, enforcing mandatory social security, and extending social security benefits to rural areas. However, these efforts are akin to quenching thirst with poison or killing the goose that lays the golden eggs.
As the economy continues to decline, the soaring unemployment rate and the glaringly unfair distribution of social security benefits have awakened many young people, resulting in an increasing number of urban young workers opting out of the social security system. To provide timely financial support to the social security fund pool, the CCP has adopted a three-pronged strategy involving public opinion manipulation, policy enforcement, and strict legal measures. On one hand, the authorities stress that "individuals are primarily responsible for their own retirement," while on the other hand, they are mobilising non-insured individuals to contribute to social security through "data-driven identification." Furthermore, starting November 1, a nationwide unified discretionary standard will be enforced, imposing fines up to three times for employers who fail to pay social security contributions.
With the integration of data from the Golden Tax Phase IV, individual income tax, social security bases, and bank transaction records will be cross-verified, effectively eliminating the previous discretionary options for paying at the minimum base or privately "voluntarily waiving" social security. This Chinese-style model of robbing the poor to pay the rich in social security, combined with big data and administrative penalties along with blame-shifting rhetoric, represents yet another financial blow to already vulnerable flexible workers, migrant workers, and small and medium-sized enterprises.
The Journal of the Party School of the Central Committee of the Communist Party of China has recently published an article that reveals the core issues of the Chinese Communist Party's social security system, which is a rare occurrence. The article acknowledges the significant pension disparities between employees of public institutions and enterprises, as well as between urban and rural residents. It notes that the replacement rate within the system (including occupational annuities) exceeds 80%, while it is approximately 50% for enterprise employees and extremely low for rural residents.
Additionally, the article compares the redistributive effects of OECD countries and Latin American countries: effective redistribution can significantly lower the Gini coefficient, whereas ineffective redistribution tends to funnel protections and fiscal subsidies towards relatively affluent groups. Surprisingly, the article points out that some current domestic redistributive arrangements are actually exacerbating income inequality. It calls for a substantial increase in the basic pension for farmers to address historical shortfalls, while also implicitly signalling the need to adjust the excessively high replacement rates within the system to more reasonable levels.
The Chinese government provides fiscal support to the social security fund amounting to several trillion yuan annually, and this support is rapidly increasing due to the accelerating ageing population. The high pensions and privileged medical care within the system have long caused the social security and medical insurance pools to approach their limits. In this context, the concepts of 'data-driven identification' and strict regulation have gained prominence. Whether the article from the Central Party School indicates that the substantial social security resources within the system will be reallocated by the Communist Party remains uncertain. However, the systematic design flaws of China's social security system, as analysed by netizens, can be summarised as 'eight original sins.'
The first original sin: a severe misalignment between high burdens and low benefits.
Pension insurance contributions from enterprises stand at approximately 16%, while individuals contribute around 8%, totalling 24%. This figure significantly surpasses that of the United States (about 12.4%) and Canada (around 11.9%). When factoring in medical, unemployment, work injury, and housing provident funds, the overall cost of the five insurances and one fund often exceeds 40%-50% of wages. Some analyses suggest that this is comparable to or even exceeds the levels found in certain high-welfare Nordic countries, yet the protections provided are alarmingly inadequate. By 2026, the national minimum standard for basic pensions for urban and rural residents is projected to be only about 163 yuan per month. Although the average for enterprise employees is somewhat higher, the overall replacement rate remains significantly below the 55% threshold recommended by the International Labour Organisation. High contribution rates lead to a low sense of return and considerable uncertainty; flexible workers may pay over a thousand yuan monthly without seeing corresponding future benefits, prompting a rational choice to 'avoid if possible', which starkly contradicts the official stance of 'paying all that should be paid'.
The second issue: imposing a 'death tax burden' on enterprises, particularly small and medium-sized enterprises.
With the long-standing 'unwritten rule' of paying based on the minimum base being dismantled, compliance costs could rise by more than 15%. Labour-intensive sectors such as catering, manufacturing, and construction already operate on thin profit margins, and mandatory full payments could hasten business closures. The outcome is not comprehensive coverage but rather the disappearance of more job positions and an increase in individuals being pushed into the harder-to-regulate gig economy. Enforcing social security during an economic downturn is akin to adding insult to injury for businesses that are already struggling.
The third issue: taxpayers and consumers are left to cover the costs for privileged groups, with redistribution exhibiting reverse characteristics.
Within the system, alongside basic pensions, there are occupational annuities that provide higher overall contributions and benefits, while state-owned enterprises offer their own corporate annuities. These exceptionally generous benefits are funded by fiscal subsidies, profits from state-owned enterprises, and contributions from society as a whole. Each year, the government injects substantial amounts of capital, with any shortfall ultimately passed on to ordinary taxpayers and consumers. Even more troubling is the expenditure structure: around 23 million retirees from government agencies and public institutions (making up about 6.5%-7% of all recipients) receive approximately 24%-38% of the relevant expenditures (with administrative and public institution pension expenditures nearing 40% under various calculations), averaging about 6,300-7,000 yuan per month. In contrast, around 180 million urban and rural residents (over half of the recipients) only receive about 8%-10% of the expenditures, averaging just over 200 yuan. Employees in enterprises find themselves somewhere in between.
Fiscal subsidies are also heavily biased: the per capita subsidy for retirees from government agencies and public institutions far surpasses that of enterprise employees and urban and rural residents, with differences reaching tenfold or even twentyfold. This situation represents not positive redistribution, but rather a classic case of reverse redistribution, where the majority subsidises a privileged minority. According to data from the X platform account 'Teacher Li is not your teacher', in 2023, Fan Zuxiang, 76, the secretary of the Party Committee of the Shanghai High People's Court, has been in the ICU at Shanghai Ruijin Hospital for four years, with public medical expenses totalling 73 million yuan. The medical costs for Fan Zuxiang alone would require over 3,000 ordinary workers to continuously pay social insurance for four years. Four years ago, Fan Zuxiang was rushed to the hospital for emergency treatment due to a cerebral infarction, unable to speak or eat, resembling a vegetative state; yet while receiving full free medical care, his family continues to collect a substantial pension.
The fourth issue: a severe distortion of the labour market and career choices.
The disparity in retirement benefits between those inside and outside the system is stark, leading to a surge in interest in public service exams and a frantic rush to secure positions within the system. Young people are striving to enter the system, not out of a passion for public service, but because social security and occupational pensions offer the most reliable certainty. According to a report by China News Network, the national civil service exam scheduled for 2027 aims to recruit 35,700 individuals, which is a reduction of approximately 2,400 from the previous year. As of 5 PM on the 24th, more than 3 million applicants have successfully registered for this national exam. The ten positions with the highest number of applicants have all surpassed 3,400 candidates. The most competitive position is the "Level 1 Police Officer and below" at the Yanbian Border Management Detachment of the Jilin Entry-Exit Border Inspection General Station, which is only recruiting one individual, yet over 6,000 applicants have passed the registration review.
On the other hand, flexible employment and private sector jobs are losing their attractiveness due to high costs and low security, resulting in a systematic distortion of labour allocation efficiency and stifling innovation and entrepreneurial spirit.
The fifth issue: Intergenerational injustice is being entrenched by the system.
In the current pay-as-you-go system, today's youth, particularly those who migrate to cities for work, are burdened with mortgages, raising children, and paying high social insurance premiums, all while supporting a segment of retired individuals who receive substantial pensions. The dependency ratio has fallen to approximately 2.6:1 and continues to worsen. Young people are not only tasked with supporting one generation but also face challenges such as delayed retirement, extended contribution periods, and significant uncertainty regarding their future benefits. This situation represents not intergenerational mutual support but rather intergenerational exploitation. Consequently, the marriage market on the mainland has developed a pronounced cyclical characteristic, where individuals within the system seek partners also within the system; the more family members employed within the system, the more they are regarded as high-end clients in the marriage and dating market.
The Sixth issue: A Multi-Track System Creates Systemic Inequity, with Historical Deficits Shouldered by Society
Prior to the integration of the three major social insurance pools in 2014, civil servants and employees of public institutions enjoyed high benefits with minimal contributions. Following the integration, the historical deficits are now borne by society as a whole, particularly through the so-called deemed contributions; this substantial deficit now rests entirely on the shoulders of young people. The reality after integration remains multi-track: employees in government agencies, public institutions, and enterprises, as well as urban and rural residents, face benefit disparities that can reach tenfold or even twenty to thirty times. The replacement rate for those within the system exceeds 80%, significantly higher than that of enterprises. Rural elderly individuals born in the 1950s and 1960s receive meagre basic pensions, while their children in cities pay high social insurance premiums and also need to support their parents. The emergence of such overtly identity-based welfare under the banner of socialism is the greatest irony.
The Seventh issue: Fund Insecurity and the Erosion of Trust
The social security fund has faced insecurity since its establishment. Instances of local misappropriation are frequent, and audit reports continue to uncover violations across multiple provinces. While the accumulated surplus may seem impressive, a significant structural gap becomes evident once fiscal subsidies are accounted for. The 2024 audit report indicates that the pension insurance funds across 25 provinces total approximately 4.14 trillion yuan, with various issues amounting to 60.161 billion yuan identified. Notably, 13 provinces misappropriated 40.626 billion yuan from the urban and rural residents' pension insurance fund for 'three guarantees'—ensuring basic livelihoods, wages, and operational continuity—as well as for repaying government debts. Additionally, there are widespread issues such as insurance fraud, illegal early retirements, and intermediaries falsifying insurance participation. Although some funds have been returned, the scale of the misappropriation remains staggering.
On October 19, 2026, the Central Commission for Discipline Inspection of the Communist Party of China reported that Wang Wenling, a former member of the party group and vice chairman of the National Social Security Fund Council, was expelled from the party and his public office due to suspected bribery, with his case referred to the procuratorial authorities for review and prosecution. Wang Wenling joined the Social Security Fund Council in 2002 and has served as vice chairman since 2015, holding the position for over a decade. This case exemplifies the recent downfall of high-ranking officials within the social security fund system. In 2025, Wang Wenling reportedly generated a net profit of 39 billion yuan through investments from the social security fund, achieving an annual return of 13%. However, rumours suggest he misappropriated over 1 trillion yuan. By the end of September 2026, the latest official figures indicated that the cumulative surplus of the three social insurance funds—basic pension insurance, unemployment insurance, and work-related injury insurance—stood at 11.2 trillion yuan, with Wang Wenling alone having moved 10% of the basic fund, demonstrating an unparalleled level of corruption in the officialdom, unmatched globally.
Young people are primarily concerned not about their current ability to pay, but whether the social security system will fulfil its promises decades down the line. The concurrent implementation of delayed retirement and extended contribution periods, coupled with the narrative of 'shifting obligations to the forefront while sidelining rights,' has intensified public distrust in governmental authority.
The eighth issue: during periods of economic downturn, the aggressive push for 'data to locate individuals' and administrative penalties essentially constitutes a transfer of wealth from the poor to the rich.
Authorities are utilising big data to accurately identify those who are uninsured, particularly over 200 million flexible workers, effectively criminalising 'voluntary abandonment' agreements. The underlying goal is to access a potential payment scale worth trillions. In the current climate of high unemployment, unstable incomes, and sluggish consumption, this approach resembles extracting resources from the most vulnerable individuals to benefit the retired population, which contradicts the objective of stimulating domestic demand. Forcing hundreds of millions into employee insurance could impose high additional costs on businesses and workers each year, potentially worsening the wave of bankruptcies among small and medium-sized enterprises, thereby jeopardising the overall economic foundation.
When a system, under the pretence of 'common prosperity,' systematically fosters identity disparities, intergenerational exploitation, distorted distribution, and economic contraction, it has effectively placed itself in a precarious blind spot of credibility. These eight deadly sins are interconnected and continuously spiral upward: high burdens lead to evasion, evasion prompts stricter enforcement; injustice breeds distrust, distrust accelerates the abandonment of contributions; fund pressures lead to coercion, coercion exacerbates injustice and burdens, and society's confidence in the future is persistently undermined.
The Chinese-style social security system has become a societal menace and is now a powder keg that could ignite young people's discontent and social unrest at any moment.
(First published by People News) △
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