Rules on mandatory social security payments spark worries in China

A ruling by China's highest court has made it impossible for workers and their employers to waive social insurance contributions, triggering a broader discussion about inequalities in the welfare system.

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BEIJING -

The decision by the Supreme People's Court bars informal arrangements between companies and their employees to opt out of mandatory social insurance payments from Sept 1.

If enforced, the rules are especially a threat to small and medium-sized businesses, according to Societe Generale (SocGen), which estimates they could increase costs to workers and employers by about 1 per cent of gross domestic product.

Alarm swept through social media in response to the verdict on Aug 1, as fears spread of layoffs and business failures if the ruling further disadvantages small companies and workers already struggling to make ends meet.

"Of course, that is going to cause anxiety and panic," Douyin user Tiandiren Zhuo Lawyer said in a video that was liked over 20,000 times.

How China manages its welfare system is key to restoring the confidence of households after the collapse of property prices, as the authorities pivot to building a consumption-driven economy. The government has pledged to strengthen the safety net to improve people's ability to spend more and save less, with outlays in the first half on social needs reaching the highest in almost two decades.