New Delhi, Feb 2 (IANS) While a top Chinese court has made it mandatory for employers and workers to contribute to social insurance schemes for workers, in practice, only around one-third of companies in the country are following the order, according to a media report.
The reason for the social welfare measure not taking off is that the companies see such payments as leading to an increase in costs that reduces their profit margins, while workers say that they do not have enough money to make their contribution, the report on The Japan Times news portal said.
From September 2025, the court made it illegal for workers and employers to avoid social insurance payments, setting the stage for a long-term redistribution of resources from producers to consumers via the welfare system.
Economists see the Supreme People's Court ruling as a pivotal test of Beijing's efforts to improve household finances and rebalance an export-reliant growth model that causes trade tensions and fuels disinflationary pressures, the article stated.
However, six months on, workers, employers, and economists say compliance remains partial, raising questions over China's ability to pursue structural economic shifts, it pointed out.
"Interviews with over a dozen workers and factory owners show firms responded to the ruling mostly in ways that minimise their own payments, in some cases even by lowering wages," the article said
Most make payments based on a lower base wage rather than the full salary, having restructured the balance as bonuses or other benefits. Some workers and one factory owner said they still don't pay at all because they cannot afford the contributions, the article points out.
Such examples "encapsulate the policy dilemma facing China's leaders: Can you accept short-term pain for long-term gain? The answer, in this instance, seems to be no," said Nick Marro, an Asia analyst at the Economist Intelligence Unit.
"This could be instructive when thinking about other difficult market-based reforms."
By making the contributions mandatory — roughly 25 per cent of income for employers and about a tenth for employees — the ruling aims to bolster the social safety net, a key step toward encouraging workers to spend more now, rather than save on their own for rainy days. But it also raises labour costs.
Avoiding such contributions historically has strengthened China's competitiveness, turning exports into a major growth driver, the article observed.
--IANS
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