Xi Yanchun:

Good afternoon, ladies and gentlemen. Welcome to the State Council policy briefing. This week’s State Council executive meeting studied policies regarding lowering enterprises’ social security and housing provident fund payments. To help you get a better understanding of the policies, we are glad to have Ms. Zhang Yizhen, vice minister of Human Resources and Social Security, and Mr. Lu Kehua, vice minister of Housing and Urban-Rural Development, to give introductions and answer your questions. Now, Ms. Zhang, please.

Zhang Yizhen:

Ladies and gentlemen, on April 13, the 129th State Council executive meeting passed a plan to lower social security insurance:

First, in provinces where enterprises pay over 20 percent of their workers’ endowment insurance, their payments will be temporarily reduced to 19 percent.

Second, the total rate of unemployment insurance was lowered 1 percent in 2015 and will be further reduced to 1-1.5 percent, in which individual rates will be no more than 0.5 percent.

Third, the plan will be implemented from May 1, 2016, and be fully in force in two years.

This policy is a major measure to advance supply-side structural reform, lower enterprises’ costs, and promote healthy economic development. So today we will give you a brief introduction about the plan and answer your questions.

Xi Yanchun:

Now, Mr. Lu, please.

Lu Kehua:

Good afternoon. First, let me take this opportunity to thank media friends for your long-term focus and care about the work of housing and urban-rural development. Now, please let me give you an introduction about the housing provident fund.

Implemented in 1994, the housing provident fund system is an important part of China’s urban housing system. In 1999, the State Council issued a policy regarding the housing fund management, which was amended in 2000.

Since the establishment of the housing fund system, 217 million people have joined the system, with 9.18 trillion yuan ($142 trillion) in deposits, 5.03 trillion yuan in withdrawals, and 5.54 trillion in loans. Currently, the balance is 667.9 billion yuan. One hundred million people solve their housing problem by using the housing provident fund. The housing provident fund system has played a vital role in improving people’s payment capacity and housing conditions.

More than 4.7 million employees used housing provident fund loan to purchase properties in 2015 after the Ministry of Housing and Urban-Rural Development, together with the Ministry of Finance and People’s Bank of China, adjusted the housing provident fund policy, simplified procedures and improved services and efficiency.

The Third Plenary Session of the 18th CPC Central Committee gave approval to establish an open and standardized system for the fund which has simplified the withdrawal mechanism and use and supervision of the money. Our ministry and relevant departments will work on the amendment of the rule on fund management. Last November, the Legislative Affairs Office of the State Council solicited public opinions on the amendment, which are currently under consideration as we work to modify the amendment.

The executive meeting of the State Council on April 13 decided to gradually lower social security rate paid by enterprises and the payment rate of housing provident fund in order to reduce companies’ burden, boost their vitality, and increase employment and workers’ cash income. Our ministry and other relevant ministries are currently working on the draft of rules on the deposit ratio of housing provident fund, which mainly contains three aspects:

First, every region should strictly implement the rules and guidelines on housing provident fund management which stipulate that those with the deposit ratio of housing fund over 12 percent will be adjusted to no more than 12 percent.

Second, local governments at every province, autonomous region and municipality should consider their own conditions to put forward specific measures to gradually reduce the deposit ratio of housing provident fund. Local governments will also take on the responsibility for the implementation of these measures to gradually reduce the deposit proportion. The rule will take effect from May 1, 2016, and temporarily remain in force for two years.

Third, as the housing provident funds management regulations stipulates, enterprises facing difficulties can reduce payment rate and can even apply for deferred payment. The request will take effect after it is discussed by the workers’ congress or the trade union, reviewed by the housing provident fund management center and approved by the city’s housing provident fund management committee. Enterprises can raise the payment rate or make a supplementary payment once their business sees improvement.

The meeting also requires every region to attach importance to and supervise the implementation of the rule.

That’s all for my introduction, thank you.

Xinhua News Agency:

My question is for Mr Lu. Just now you mentioned that the housing provident fund with payment over 12 percent of the average monthly salary of an individual staff member or worker in the previous year should be regulated. Could you please tell us the reason to regulate the housing fund deposit rate?

Lu Kehua:

According to the Article 18 of the Regulations on Management of Housing Provident Fund, the payment and deposit rates for housing provident fund of both staff and workers and units shall not be less than five percent of the average monthly salary of an individual staff member or worker in the previous year; in cities where conditions permit, the payment and deposit rate may be raised appropriately. The specific payment and deposit rate shall be worked out by the housing provident fund management committee, and upon verification by the people’s government at the same level, be reported to the people’s government of the province, autonomous region or municipality directly under the Central Government for approval. This article clearly defined the lowest proportion of housing provident fund deposit rate.

On the other hand, a guidance on the problems related to housing provident fund management, issued by the Ministry of Construction, the Ministry of Finance and the People’s Bank of China in 2005, said that the deposit rate of housing provident fund, paid by employers and employees, shall not be less than five percent and not higher than 12 percent. It defined the highest proportion of housing provident fund deposit rate. Meanwhile, a circular concerning reducing housing provident fund deposit rate clearly stated that for those who paid more than 12 percent should be adjusted and regulated. The Ministry of Housing and Urban-Rural Development will cooperate with related departments to strengthen supervision on its implementation.

China Radio International:

My question is for Ms. Zhang. Could you please explain why the State Council chose to reduce the deposit rate of social insurance in a step-by-step fashion at this moment? Is there any specific reason?

Zhang Yizhen:

Thanks for your question. First, reducing the social insurance rate is an important decision made by the CPC Central Committee and the State Council with a focus on the overall development of economy and society. Both the third and fifth plenary sessions of the 18th Central Committee of the Communist Party of China proposed to cut the social insurance rate. Therefore, it is also a specific measure to implement the CPC Central Committee’s decisions.

Second, lowering social insurance rate in stages will promote the current supply-side structural reform by reducing costs for enterprises, increasing their vitality and addressing overcapacities.

The related policies in 2015 was enacted to reduce the unemployment insurance, industrial injury insurance and maternity insurance. It proved to be a positive method for developing the economy and stabilizing employment. Practice showed that it is necessary to reduce the social insurance in a temporary manner.

CCTV

I would like to ask if the purpose of reducing the deposit ratio of housing provident fund is to meet the requirements for cutting down corporate costs that was raised during economic work meeting of 2015

Lu Kehua

What we can take the following three aspects into account when deciding to lower the deposit ratio of housing provident fund.

First, this policy is a part of our task for lowering corporate costs which was listed as one of the five major economic tasks during the economic work meeting, and is also a measure to push forward the supply-side structural reform.

Second, we want to relieve the burdens for the enterprises. At present, the five social insurances, including endowment insurance, medical insurance, unemployment insurance, work-related injury insurance, maternity insurance and housing provident fund account for 40 percent of the enterprise employees’ wages. The housing provident fund takes a larger proportion. So if we reduce deposit ratio of the housing provident fund, we can help reduce the corporate costs.

Furthermore, it will help stabilize economic growth. Enterprises are the pillars of economic development. Reducing deposit rates of housing provident funds will help stimulate their vitality and increase efficiency and jobs and stabilize economic growth.

China News Service:

Mr Zhang, what effects do you expect to see after the cuts in enterprises’ endowment insurance rate and the unemployment insurance rate? What specific measures will be taken by the Ministry of Human Resources and Social Security (MHRSS) to implement this policy?

Zhang Yizhen:

Thank you for your question. The enterprise costs will be remarkably reduced after the cuts in the enterprises’ endowment insurance rate and the unemployment insurance rate. Most of the provinces are qualified to reduce the enterprises endowment insurance rate. According to preliminary estimates, a total of 38.6 billion yuan will be reduced every year after the cuts are implemented in the qualified regions. If the unemployment insurance rate is estimated to be cut by 0.5 to 1 percentage points of the total rates in local areas, the costs for enterprises will be reduced by 30 billion to 60 billion yuan every year. A total of more than 120 billion yuan in enterprise costs will be reduced with related policies of cutting the unemployment insurance rate, work-related injury insurance rate and maternity insurance rate in 2015.

MHRSS will carefully implement the decision made by the State Council. Specifically speaking, first, the State Council executive meeting has approved the circular to cut the social insurance rate. The circular will be jointly issued by MHRSS and the Ministry of Finance.

Second, MHRSS held a meeting on the endowment insurance work yesterday. Related work has been arranged to reduce the basic endowment insurance rate for enterprise employees.

Third, we will guide local governments to take specific measures to cut the rates and records will be put on for the plan. We will encourage local governments to actively take measures to make both ends meet for the funds and ensure there will be no reduction in any social security benefit for the insurance personnel and the insurance fees will be fully paid in a timely manner. Meanwhile, we will strengthen communication to solve problems met by the local governments.

On the whole, the cut in the social insurance rate will be beneficial to reduce enterprise costs. We will make every effort to implement the policy in accordance with the State Council requirements.

China National Radio:

My question is for Mr Lu. You said that it is a provisional measure to lower the deposit ratio of housing provident funds. Can you brief us on the features of this move?

Lu Kehua:

Thanks for your question.

There are three main features of the provisional act this time.

First, this is a temporary measure that will last two years beginning May 1, 2016. The measure is taken to cope with the current economic situation. It will not serve as a long-term policy.

Second, the payment required will be lowered, and in line with local situations. The payment cut should help to reduce enterprises’ costs, while taking employee benefits into account.

Third, local governments will play a bigger role in the process. We are drafting a notice on regulating and temporally lowering payments required for housing provident funds.

It explicitly asks provincial governments, or those at the same level, to carry out specific measures in this regard based on the practical situation within the region. It requires municipal governments to implement them too.

Economic situations vary in different regions, so does the payment requirement for the housing provident fund. To increase local governments’ involvement will make the adjustment more effective.

Thank you.

China Daily:

Minister Zhang, with the rate cut in social security insurance, will citizens’ social security funds be affected? Thank you!

Zhang Yizhen:

This question is the concern of many. I can assure you that lowering the social security insurance rate, especially lowering it in a step-by-step fashion, will not affect benefits. First, the State Council clearly required that the priority of the reduction policy is to keep citizens’ treatment unchanged and their gains paid in time.

Second, the policy is based on a scientific calculation and fully proved evidence. Lowering the enterprises’ endowment insurance rate contains three conditions: it is aimed at those in provinces that see sufficient funds; the reduction will be materialized within two years, and the lowering amount was only one percentage point.

The provinces I mentioned just now are those in which enterprises pay over 20 percent of its workers’ endowment insurance and the fund accumulated balance by the end of 2015 can pay over nine months. These provinces have sufficient funds balance. Estimates showed that after being lowered one percentage point, many of those provinces can also make sure that their fund incomes are over the payment, and even though incomes in some provinces are less than the payments, their balance will be used to pay the funds.

Third, for some of the provinces that may have less incomes than expenses of the unemployment insurance after being reduced to 0.5 percent - 1 percent, they can use the accumulated balance or provincial-level adjustment funds to pay.

All in all, every social security benefit will not be reduced under the new rate cut policy.

People’s Daily:

Mr Lu, some enterprises are running into difficulties and cannot afford to pay the housing provident funds. Are there any special policies for those struggling enterprises?

Mr Lu:

The measure to temporarily lower the proportion of housing provident funds has taken the conditions of those enterprises into consideration. They can not only lower the proportion of housing provident funds but also apply for deferred payments. Such measures aim to help lift them out of difficulties.

According to the housing provident fund regulations, businesses having difficulties in paying the housing provident funds can lower the payment rate or defer the payment and raise the rate or make a supplementary payment after their businesses see improvement. But they need to go through three steps before making such decisions: first the decision to lower payment rate or defer payment must be discussed and passed by the worker representative congress or the trade union; second, it has to be reviewed by the housing provident fund management center; and third, it has to be submitted to the city’s housing provident fund management committee for approval.

Xi Yanchun:

That’s all for today’s policy briefing. Thank you all.