Chinese Government Cuts Unemployment Insurance in Bid to Reduce Employment Costs

(YicaiGlobal) Feb. 17 — The Chinese government issued a document to lower the unemployment insurance rate from 1.5 percent to 1 percent, as part of efforts to lighten the burden on companies and promote employment.

As of Jan. 1, provinces (autonomous regions and municipalities directly under the central government) where the unemployment insurance rate is set at 1.5 percent can temporarily drop the rate to 1 percent until April 30, 2018, the Chinese Ministry of Human Resources and Social Security (MHRSS) said in a document today. All local governments are required to decrease the rate to 1 percent at some point this year.

China enacted the Unemployment Insurance Regulations in 1999. The regulations are enforced as part of social security legislation and aim to ensure that centrally funded financial assistance and reemployment services are provided to workers whose employment is involuntarily terminated resulting in a loss of earnings.

As of November, approximately 180 million Chinese were covered by unemployment insurance, according to government data. The unemployment insurance fund’s total income was CNY104.9 billion (USD15.3 billion), and its total expenditures were CNY80.5 billion.

Chinese corporate profits declined amid the economic downturn in recent years. To take weight off companies, the MHRSS and the Ministry of Finance lowered the unemployment insurance rate from 3 percent to 2 percent in 2015. It was reduced further to a range (from 1 to 1.5 percent) in May 2016. Local governments were allowed to decide the exact rate within the range. Sichuan and other provinces chose the minimum of 1 percent.

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