The social insurance law, adopted recently by the Standing
Committee of the National People's Congress, will take effect
on 1 July 2011. It governs five categories of social insurance:
pension, medical, unemployment, work-related injury and maternity.
The first three categories are funded by employers and employees,
while the latter two are financed by employers alone.
In principle, both Chinese and foreign staff employed by Chinese
enterprises were already required to participate in the local
social insurance system. In practice, however, most foreigners did
Now, the new law stipulates that foreigners are entitled to
social insurance benefits that are equivalent to those granted to
Chinese nationals. This represents a milestone, as up to know only
certain local regulations (e.g., in Shanghai for medical, pension
and workrelated injury insurance) provided voluntary options for
foreigners to participate in the Chinese social insurance
The new law is silent on which social insurance categories will
be available to foreigners, whether participation is compulsory or
optional and which consequences non-compliance with social
insurance obligations may trigger. Also, it remains to be seen how
contributions will be treated if foreigners permanently leave China
before being entitled to draw a pension. (Currently, these benefits
can be drawn by females starting at the age of 55 and males at 60,
provided a minimum contribution period of 15 years was achieved.)
The current understanding is that foreigners can only claim
reimbursement of contributions made to their personal social
insurance accounts. (Contributions are allocated between a personal
account for each individual and a pooled account for the entirety
of the insureds.) Given these uncertainties, more detailed
regulations governing these matters are expected.
Another implication arising from the new law is that China will
probably enter into new bilateral social insurance agreements with
other countries in order to avoid the necessity of dual
participation in social insurance programs in China and the
foreigner's home country. Thus far, only a few such bilateral
agreements exist, for example, with Germany and South Korea.
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