Introduction

Over the past two decades, China has become one of the fastest growing economies in the world. Between 1978 and 1999, China's GDP grew at an average of almost 10% a year, and an average of 6-8% is expected in the coming decade. More significantly, according to the 1998 World Development Report of the World Bank, the per capita GDP of China has reached US$860. Therefore China now ranks for the first time as a middle-income country (the upper limit for low-income countries being set at US$785 per capita). While the phenomenal successes of the economic reforms are substantial and indisputable, they are accompanied by a wide array of mounting social problems and needs. Meanwhile, market-oriented economic reforms have made the traditional socialist social welfare system based on employment increasingly inadequate and inefficient. Indeed, China's accession to the World Trade Organisation (WTO) has further posed a formidable challenge to the traditional welfare system. In the context of a globalised economy, China is now actively in search of a pluralistic, effective and affordable social welfare system that will be compatible with a thriving market economy and a resilient socialist political structure.

China first officially used the term ‘social security’ in the 7th Five Year Plan (1986-90) to cover social insurance, social assistance, social welfare and preferential treatment. Social insurance refers to employment-based insurance schemes covering old age pensions, medical care, unemployment, work injury and maternity. Social assistance includes relief to those who are poverty stricken due to personal misfortune or natural disasters. Social welfare is services for vulnerable groups such as frail older people, disabled people and orphans. Preferential treatment is special care to disabled servicemen and family members of the revolutionary martyrs and servicemen, and jobs for veterans. The classification was reiterated in the ‘Decisions concerning the problems of establishing a socialist market economy’ of the Central Committee of the Chinese Communist Party in 1992. Accordingly, China tends to define social welfare from a narrow and remedial perspective. The major functions of social security are to support market-oriented economic reforms through enhancing productivity, and to maintain social stability through mitigating social tensions (Ministry of Labour and Social Security, 1999a).