Basic conditions in China determine that the construction of a new rural endowment insurance system of should adhere to the principles of fairness and efficiency. A "cradle to grave' social welfare system is not appropriate for today's China, says Hu Xiaoyi, vice minister of human resources and social security.

The population of China can be characterized as aging quicker than it is achieving prosperity. This process is rapid and likely to endure over a considerable period of time. These factors mean that the country will have to face the challenge of an approaching aging population peak.

The establishment of a new rural endowment insurance system is therefore a crucial step towards a comprehensive social security system that covers both urban and rural areas, a goal set to be achieved in 2012.

China's current level of economic performance requires that the social security system should retain a living wage as its first priority. The preferred path is to start right from the beginning, featuring both government provision and public contribution. This will obviously take time to achieve.

During the process, however, the urban-rural discrepancy should not be ignored, said Hu. "On the one hand we should have the long-term objectives in mind, thus seeking to diminish the gap between urban and rural areas, and on the other hand we must respect variances in development patterns and grant a degree of flexibility to local governments."

According to Hu, the rural pension system is "new" because the government must provide the necessary financial support; in future the combination of basic pension and individual contribution will create a funding pattern which can facilitate the link between urban and rural pension systems, and the transition from one to the other.

Hu also said that under the commission of the State Council, the Ministry of Human Resources and Social Security is drafting policies for piloting the new system at the national level.

(China.org.cn by Fan Junmei September 13, 2008)