China tries a pension for farmers

Matt Abud

Last Updated: Thu, 13 Aug 2009 12:23:00 +1000

China is launching a universal pension plan for farmers, which could have immense effects on their wellbeing, the wider economy, and some rural traditions.

Nationwide trials begin next month on the enormous reform aiming to stem resentment caused by the gap between higher urban incomes and poorer farm workers.

Millions of farmers are the focus of the reform.

Dr Li Ping, of the Rural Development Institute in Beijing, told Radio Australia's Connect Asia: "Even though farmers' income has increased over the past 30 years, the level of increase is far behind urban dwellers."

With such disparity increasing, "it definitely casts a very serious threat to the social stability of China."

Three times

City workers still earn about three times more than rural people, and already have pension schemes.

Farmers, too, have been able to pay into a retirement fund since the 1990s, but most are so poor they just gave up.

This time, the money will come from three sources - the government, farmers themselves, and collective institutions.

Farmers will get the pension after turning 60 - about 55 yuan ($US8), with that sum varying greatly between provinces.

Yvonne Sim, a China expert with consultants Watson Wyatt, says: "By introducing this type of system, the central government is changing the historic tradition for how farmers will be taken care of.”

One concept: "For thousands of years farmers have operated on the principal that you need to raise a son to protect your old age."

There was also the idea that the plot of family land was all that could sustain you.

Socialised

So out goes the idea of "filial piety", Ms Sim says. China is "very gradually moving towards socialised old-age support."

Further, while the system appears affordable now, she wonders how it will fare once ageing "really hits the rural area."

Rural China is also in line for better medical care and land ownership reform.

One possible consequence of all this could be a broad boost to the domestic economy.

If farmers feel more secure about their health care and retirement, they may spend more - leading to a sustained surge in domestic consumer demand.