Beijing’s enforcement of social security contributions raises labor costs, potentially forcing small companies to cut staff or even shut down.
In Shanghai’s Putuo District, a community restaurant recently posted a Help Wanted sign on its door, encouraging men aged 60 and older and women aged 55 and older to apply for a job with “generous pay.” Younger people need not apply, it states.
The ad highlights a significant transformation taking place in Chinese cities that could negatively affect businesses. Chinese authorities say that, starting on Sept. 1, they will fully enforce long-standing social insurance contribution rules, wiping out a gray zone that allows many employers to evade payments and employees to opt out.
Retirees—who are largely exempt from those payroll costs—are suddenly in demand as a street-level workaround.
Economists are warning that the decision to enforce contribution rules could severely harm small and medium-sized businesses, which are already struggling with narrow profit margins. It also highlights deeper issues: a slowing economy, an aging population, and declining public trust in government systems.
The urgency in implementing the new rules, they say, stems from the regime’s need for new streams of cash after a real estate slump that crushed land-sale revenues and deepened fiscal stress on already indebted local governments.
“The Chinese regime is simply running out of money—it can’t keep propping things up,” said Henry Li, a Chinese economist and Tsinghua University graduate now based in Maryland.
“Imagine a small restaurant with four or five workers suddenly facing labor costs inflated by 40 percent,” he told The Epoch Times. “The only solution is business closure.”
What Changes on Sept. 1
China’s modern social insurance system dates back to the 1990s. Employers and employees are required to contribute to pension, medical, unemployment, work-injury, and maternity programs, as well as a mandatory housing fund.
According to current data from the Ministry of Human Resources and Social Security, contributions to the “five insurances and one housing fund” can add roughly 40 percent to 60 percent on top of wages, depending on the region, with pension and medical insurance taking the largest share.
By Sean Tseng
