Reality of China's aging society(2)

A focus on the social care and well-being of senior citizens (as opposed to more narrowly focused healthcare) is almost a necessity given the rise of the 75-plus age group and the "empty nest" phenomenon resulting from migration and the strict family planning policy.

But it is necessary to ensure that that provision is software focused - on the human side of daycare, stimulation and attending to personal needs such as help with cooking and cleaning rather than just adoption of construction programs for old people's homes. Some institutional care will also be needed in rural areas and to address growing problems of dementia and Alzheimer's disease. The nature of care, however, must be driven by the needs and desires of the elderly, not by GDP calculations of local officials.

This expansion of care will cost money and while China may experiment with long-term insurance for its younger workers, there is little choice but for the State to dig deeper into its pockets to meet the needs of the retired and close-to-retirement people.

A key proposal of the plenum is to expand the contribution of retained profit of State-owned enterprises to the government social security, although the 30 percent limit seems too low. Still this proposal should have multiple benefits - a better return on the State's investment in State-owned enterprises, less money sloshing around to be wasted in unwarranted expansion of non-core businesses and more resources for social security. Whether this extra funding will be paid to the general budget or to the National Social Security Fund and whether it will only be used to finance pensions or other health and social care benefits is one of the details still to be answered.

Indeed while almost every policy change is to be welcomed, "the devil lies in the detail". For example, the plenum talked about integrating social planning and individual accounts in the basic pension system (which has been de facto the policy for the last few years) but at the same time it said inputs into personal investment accounts would be increased to get higher annuities. These propositions are not necessarily contradictory but do not clarify whether the government is opting for funded or notional individual accounts, a long-standing contention between the Ministry of Finance and the Ministry of Human Resources and Social Security.

The plenum report also talks about the integration of health and social security rights between urban and rural areas. But this could mean nationalizing, as opposed to merely "coordinating", the local-governments-controlled pools of social security across the country and taking the management of rural healthcare insurance away from the Ministry of Health. Only three years ago, the MOH fought a successful battle to keep rural health insurance outside the ambit of the social insurance law. On that and on many other issues, defeating long-standing institutional "interest" in the maintenance of the existing order will represent a formidable challenge.

The plenum recognized that the economic and social development model developed 30 years ago for a vastly different China was no longer "fit for the purpose". But translating the right policy directions into concrete and quick actions will not be easy.

In November 2007, China Daily published an article on the problems of healthcare reform with the headline, "Policy debate hinders reform". There have literally been thousands of pieces of research producing many different policy options on all aspects of demographic changes, urbanization and the aging society. The time for debate and analysis is over; the time for the senior leadership to make and implement concrete choices has arrived.

The author, based in Kuala Lumpur, is an international financial consultant and former fund management expert on the EU-China Social Security Project.