China Mandates Employer Contributions to Social Benefits Amid Widespread Concern

From September 1 onward, every employer in China is obligated to contribute to employee benefit schemes, encompassing pensions, healthcare, maternity leave, and additional social protections.

While this expansion of the social safety net might seem like positive progress for many Chinese citizens, the response across the country has been marked by anxiety and dissatisfaction rather than optimism.

Owners of small businesses warn that this mandate will drastically increase their labor expenses. Employees worry that these new costs could lead to layoffs or reduced wages. Economists caution that the policy might accelerate a shift toward gig work, potentially decreasing formal employment figures and leaving workers with fewer protections.

Yan Xuejiao, who manages a family-owned rice noodle shop in Beijing, expressed concern: “If we’re forced to pay, we may have no choice but to shut down and go home.”

She added, gesturing toward the empty eateries lining the downtown street, including her own, “Given the way business is this year, ask around — which small business owner can afford this? Many of us are on the brink of giving up our leases and closing shop.”

The apprehension surrounding this policy highlights the difficulties the Chinese government faces in strengthening its fragile social safety net. Experts agree that addressing the urgent need to replenish the state pension fund, which could be depleted by 2035, is critical. Additionally, alleviating the financial burdens of housing, education, and healthcare remains a priority. Such reforms aim to reduce the need for excessive personal savings, encouraging consumer spending to help invigorate China’s slowing economy.