by Tyler Prochazka | Nov 29, 2016 | Opinion
Europe has received a lot of attention for its recent moves toward experimenting with a basic income policy. What has been lost in this focus are the developments that are taking place in the rest of the globe, including the world’s second biggest economy: China.
Cheng Furui is one of the organizers of the China Social Dividend/Basic Income Network, and has done extensive research on China’s social safety net. In the interview below, she said a basic income would resolve many of the problems facing China’s current welfare program.
As the international economy faces increasing automization, Cheng said basic income is a potent answer to this issue in China.
“I believe that basic income and China’s status quo are aligned because it is in accordance with the essence of both socialism and the market economy,” she said.
The full length interview is below:
What is different between Universal Basic Income and China’s Minimum Livelihood Guarantee (Dibao)？
Dibao is China’s Minimum Livelihood Guarantee program. Anyone with an income below the minimum can receive a supplementary income up to the standard. In this way, Dibao is unconditional: no one can take away someone’s right to the Dibao income. The Dibao only provides a grant to those that are below the Dibao income standard. Thus, the government must conduct strict evaluations of recipients’ economic situations, which creates a lot of implementation problems and issues of abuse. By contrast, Universal Basic Income provides the grant to every person, regardless of income. Moreover, China’s Dibao benefit has a large discrepancy across different regions, consistent with the regional economic inequality that China already faces. Here is more information for reference: China’s MCA.
How do the Chinese view basic income? Do the Chinese generally understand about this policy?
Most Chinese don’t know about the basic income concept. Nonetheless, there are some places that are currently carrying out this policy, although they do not call it basic income. The areas that are implementing basic income all have different situations. The differences are not just regional, even neighboring areas have large differences depending on the community members’ organizational depth and shape.
Why should China implement basic income? What type of impact would it have?
The foundation for China’s implementation of basic income comes from China’s public ownership system itself. State owned enterprises, urban land, and mineral resources already exist, much like Alaska in the United States. Every person should have a share of public resources. This relies on the profit from the public resources being utilized as a basic income revenue, not only does everyone receive equal payment. This means the government does not have to collect more taxes from the rich only to give back to every person.
Chinese history applies the profit from publicly owned resources to supplement the country’s public finances, therefore lowering the private sector’s tax rate. In turn, conducting large scale investment in service sector and infrastructure development, including constructing railroads, and the systems that support the economy such as education and healthcare. These systems provide benefits to the vast majority of people. During China’s period of urbanization and gradual improvement of infrastructure and even completion of these projects, the profit of public resources perhaps can be used as a benefit to each person. Certainly, this will lower society’s overall wage rate or working hours. Simultaneously, some places have collective ownership of resources, and most of Chinese social dividends come from these resources.
What is the status of China’s basic income movement?
The basic income concept is currently only being discussed among Chinese academics and there are currently few researchers of the policy. However, the general public is already exploring implementation of basic income, also it is genuinely that every person in those areas can enjoy the local basic income. For example, much of the revenue for basic income programs is contributed by the collective organizations’ dividend bonus.
Since the founding of the People’s Republic of China, rural China has implemented collectivization of land, the household farm quota system allows the individual to use the land for production, but they cannot sell the land to others. During the movement toward urbanization, one part of the land was acquired by the government. Some of these collective resources that were taken were compensated with urban-based resources, in turn producing new benefits. From there, it produced social dividends within these communities. Looking at the entire country, this was not a rare case.
In BIEN News, I recently introduced these types of cases. China is putting into effect the policy of ‘separation of three land rights’ (ownership, contracting right, and operating right), which will promote the land right equity investment Recently, our main work has focused on excavating the essence of these cases, evaluating the likelihood of wide-spread promotion of this policy. Under the recent pessimistic economic environment, we want to offer a feasible path forward.
Does basic income suit China currently? Does it fit with Chinese culture?
I believe that basic income and China’s status quo are aligned because it is in accordance with the essence of both socialism and the market economy. However, Chinese culture encourages labor and looks down upon laziness. With the development of automatization, machines will continue to replace human labor. As a result, Chinese people will start to rethink this issue. If a basic income is put in place, after it is implemented it is feasible that the entire country will uniformly cut down on the weekly work schedule. Previously China had a six-day work week, and now it has been cut down to five days. In the future, it is possible it can be reduced to a four-day work week.
Additionally, China’s various regions have had drastically different levels of development, and the cost of living differences are also quite large. The social security system has not yet achieved nationally uniform administration. Public resources and financial data also need to be gradually made more transparent. This lack of transparency has impeded the ability to evaluate the potential impact of basic income.
About the interviewee:
Cheng Furui is doing her Post-doctoral program in Chinese Academy of Social
Science. She got her PhD in Tsinghua University. Her research interest is social
policy. “Social Assistance and Poverty Alleviation Divergence: A Capability
Approach” is her $rst published book based on her doctoral dissertation,
which explores Chinese social safety net in details. She is a voluntary news
editor of BIEN now. She is also one of organizers of China Social
Dividend/Basic Income Network: bienchina.com
by Furui Cheng | Nov 10, 2016 | News
Written by Cheng Furui
In the process of Chinese industrialization and urbanization, more and more rural villagers have been transformed into urban citizens. Decades of industrialization have left China with a typical dual economic structure: people who make wages live in the cities, and peasants make a living on the land in villages around them. With the rapid expansion of city suburbs, there are always some villagers in the transition zones. As they change from crop growers to wage earners, villagers will lose their land and be accustomed to a totally new way of life. An important question is how to make these large-scale unnatural transitions as smooth and successful as possible.
China provides many examples. One of the most common and successful strategies has been the establishment of cooperatives. Huaidi, one of the many successful cooperatives in China, demonstrates the effectiveness of this approach to the challenges of urbanization.
Huaidi [1] is one of the urban villages in Shijiazhuang, the capital of Hebei province in China. It has a population of around 6000. Unlike most villages around the city, Huaidi villagers initiated a deep “one-villager-one-share” cooperative from the beginning of the urbanization process. In China’s countryside, land is collective owned and privately used by villagers, in an equal fashion, as long as their households are registered in that village. In the process of urbanization, local government compensates villagers for the land which has been taken from them, paying them a single value and a specific transition fee for several years. The value partly depends on the market, and partly on the bargaining power of villagers. Under the leadership of Chen Yuxin [2], Huaidi villagers received very good compensations for their lost land in 1996, 1998 and 1999.
The success of the cooperative has come from these big compensations. In a weak organization, as is common in surrounding villages, villagers will get their money individually and make their living in the city on their own, abandoning the collective at that point. But Chen Yuxin persuaded the villagers to give up the first cash compensation, and bought back the land development rights in the future. In 1996, the Huaidi villagers collected a total of 10 million yuan [US $1,475,797] [3] compensation to build a new shopping mall. In 1998 and 1999, according to the urban plan, Huaidi land was taken by the government to build a road and a big park, respectively. In 1998, they got future development rights on both sides of the road. In 1999, they gave up a land compensation of 200,000 yuan [US $29,516] per mu (equivalent to US $44.3/m2, which is much lower than current land price) and bargained for a 33,350 m2 land patch, for their own future development. Most local governments are happy to accept this kind of exchange because of fiscal implications.
In this way, Huaidi villagers pursue their own urbanization pattern: self-demolition, self-transformation, and self-development. Under this process, villagers get more autonomy and create their own future city life, not becoming the sorrowful victims of social policy. Their core ideal is serving the city, influencing its development, and assuring a smooth transition between city and countryside. With these development rights, Huaidi villagers have amassed billions in assets, including famous and prosperous shopping centers, a decorative empire, food street, private schools, a cultural center, and other attractions. The current annual profit is about 100 million yuan [US $14.76 million]. As shareholders, Huaidi citizens now benefit from a very good welfare system.
First, every family gets identical, well decorated houses. In rural China, besides the arable land each person tends, every family has a house on a separate patch of land. In remote areas, there is also forest land per person. After the land is taken away, families get the transition fee [4] for several years, which is mainly used to rent the house they just lost, before moving into the new one. But many people have no ability to buy their own houses in the city in their lifetime. So after the transition period, every Huaidi family is placed into three or four houses, with a total area of 330 m2. They are given two choices. Under the first choice, they have three houses of 140 m2, 110 m2, and 80 m2 respectively. Under the second, they have four houses of 82.5 m2 each. All the 6000 citizens are very happy to own new houses in the city. These houses are more than enough for the whole family to live, and most can rent one apartment for several thousand yuan [more than US $400] per month. [5]
Second, every child is free to enjoy education. Huaidi villagers have built a famous private school [6], which has facilities from kindergarten to high school. The high quality of this school attracts students from outside of Huaidi, who are accepted in exchange for high fees. Every year, the school organizes various kinds of activities and interaction with other famous schools throughout the world. Teachers are proud of working there. Across the country, China has nine years of compulsory education, from primary to middle school, but Huaidi offers 15 years of free, high-quality education. This private school is one part of the villagers’ collective assets, and all their own children are exempt from tuition fees.
Third, every person benefits from healthcare. Huaidi has had a universal healthcare system since 1996. China, on the other hand, has employee healthcare only since 1998, and universal healthcare just since 2008. Nowadays, Huaidi citizens have double protection. All people are expected to participate in the national healthcare system, and the community pays the medical insurance premium for all collectively. Additionally, everybody can benefit from community healthcare if they choose. It only costs 10 yuan [US $1.48] per year, and supports the beneficiary with another 60% compensation for the money paid by oneself above 1000 yuan [US $148], up to 60,000 yuan [US $8,855], after national medical insurance reimbursement.
Huaidi citizens discussing their new apartments
Fourth, every person of age has a pension. Since 1996, every woman in Huaidi older than 50, and every man older than 60 years, have benefitted from pensions of at least 2000 yuan [US $296] per month—with larger pensions for older people. Currently, the Chinese pension system requires a minimum 15 years of contribution, whether a person is employed or not. Huaidi integrated its own pension system with the national one in 2010. People who are employed participate in the pension system via their employers. For those who are not employed, the community pays three quarters of the total annual contribution, and citizens only pay one quarter. The minimum contribution is 20% of the local per capita income in the previous year.
Fifth, every person gets a whole set of benefits in kind. Everything from rice, flour, edible oil, beans, salt, eggs, beef, pork, vinegar, soy sauce, chicken powder, milk, mineral water, to all kinds of vegetables, tooth paste, toothbrush, tea, sugar, washing powder, soap, toilet paper, cleanser, towel, etc. are distributed regularly in specific quantities, enough for everybody’s consumption, all with good quality.
Finally, all Huaidi citizens have had a basic income of 1500 yuan [US $221] per year since 1995, which is directly transferred to their bank accounts in shares of 125 yuan [US $18.5] per month. For children under 18, this money is kept in parents’ accounts. This amount money was significant in 1995 (Chinese cities’ nominal per capita annual income was about 5000 yuan [US $738] in 1995), but not as much now, due to the rapid rise of GDP in the last 20 years (in 2015, the nominal per capita annual income in Chinese cities was about 50,000 yuan [US $7,379]).
One might wonder why the people of Huaidi get some cash regularly, and unconditionally, after receiving so many benefits in kind. The answer is that the basic income gives people more freedom, especially for those who are unemployed, even though they get enough distributed food and very good social security system. Additionally, this basic income acts as prevention of social ills, reducing crimes, fights and other hurtful behaviors.
Huaidi’s welfare system is much higher than Chinese average social security level, so nobody in the community applies for social assistance. Moreover, there are a lot of other benefits, such as free newspaper, free cable, public utility subsidy, university subsidy, and so on. These welfare benefits come from their original rural collective assets, especially land. Land reform is the biggest achievement from the Mao era. This kind of basic income–often called a social dividend–comes from assets, not tax. It is more likely to be universal for a highly populous country like China.
Notes:
[1] Baidu map, “Location of Huaidi“, 2016
[2] Chen Yuxin, “Leader of Hebei Huaite Group“, 2016
[3] At October 2016 exchange rates.
[4] The transition fee and the compensation for the land, are both paid by the government to the villagers, but the real land taker (future developer) should pay to the government first. Huaidi only keeps one part of this land development rights, and the other part is sold to the developer, who is the real payer of the compensation and transition fee. It is very difficult for single individuals to make good bargains during the land taking process.
[5] It is not very common for urban families to own multiple houses. So Huaidi citizens are richer than most of their neighbours.
[6] The Private School, “Shijiazhuang Foreign Language Education Group“, 2016
More information at:
(in Chinese)
Ge Jizhong, “People’s trust“, YanZhao Evening News, February 6th, 2015
Jiang Hongjie, “An interview with Chen Yuxin“, Hall of Fame Home Online, August 14th, 2012
Other information in this article comes from the author’s field research.
Article reviewed by André Coelho and Kate McFarland
by Andre Coelho | Oct 15, 2016 | News
(Photo credit to: Lonely planet – Taroko Gorge, Taiwan)
A political party in Taiwan, called the Basic Welfare Party (formerly known as the Taiwan Republican Party) includes the basic income as a core policy. The groundwork for the party is still being established as of January 2017. The BWP was initiated by members of Taiwan Global Basic Income Social Welfare Promotion Association and Yu Hua Zhai charity vegetarian restaurants in Taiwan. The party’s goal is to promote constitutional, legislative and judicial reform. With these goals, the BWP hopes to contribute to the realization of a country that acknowledges the importance of social welfare and the law, ensuring the right to a minimum livelihood through the establishment of an unconditional basic income for all people. As of January 2017, the BWP does not yet have a chairperson and is seeking individuals to fill the role.
One important figure in Taiwan is Dr. Tien-Sheng Hsu, Taiwan’s Family Medicine and Psychiatrist medical doctor as well as the Seth mental and physical clinic president. On June 5, Dr. Hsu spoke about Switzerland’s movement for the referendum on a basic income in a public speech. When discussing the basic income policy, Hsu said that hypothetically if he were the president of the Republic of China, he would give every citizen 30,000 New Taiwan Dollars (NTD) per month. In the same speech, he claimed that independence and reliance must forever be actively interwoven. In some ways, reliance allows our creativity to flourish. Because of this, Hsu said that if everyone’s basic security was taken care of with 30,000 NTD, then people would be more willing to take risks to achieve their ideal careers or life.
Dr. Tien Sheng Hsu
On June 8, Dr. Hsu and a doctor of international relations, Dr. Xinyi Ma, hosted the talk show “Voice of A-Sheng” which discussed international and domestic Taiwanese news from the perspective of mental and physical health. This program also brought up the Switzerland referendum on basic income. Dr. Hsu and Dr. Ma discussed the possibility of the people of Taiwan launching its own basic income referendum.
Dr. Hsu and Ma wondered whether such a referendum would pass in Taiwan, but Hsu said he approved of the essence behind Switzerland’s proposal, which was to guarantee a basic standard of living for every person. Dr. Hsu also said an important consideration is how such a basic income would be funded in Taiwan.
On several occasions, Hsu seemed to joke that he should become the President of the Republic of China so he could give 30,000 NTD to every citizen. It us unclear if Hsu is serious about his presidential aspirations or if the comments were meant to illustrate the effects of a hypothetical basic income.
During the program, Dr. Hsu and Dr. Ma also analyzed the topic of unconditional basic income from a psychological perspective. They maintain that “You create your own reality.” They defend that, when people go back to their inner state of grace, with their basic survival guaranteed, they feel protected by love, wisdom, mercy, creativity and the magical power of the universe. Dr. Hsu and Dr. Ma begin with the premise that every person’s existence is loved, every person in the universe is cherished. From here the whole society is then built, letting our humanity gain greater degree of freedom within. They say that if most people move in this direction, perhaps the social system we desire could really be built. Take the people from Switzerland, Finland and Holland: these are regions from which the Taiwanese people can learn from.
According to Dr. Hsu and Dr. Ma, if the idea of the basic income does not bring in our inner-selves, but rather employs the violent power of government, then it has again been distorted. Thus we must create the basic income from within, rather than from extrinsic pressure that makes everyone adhere to a certain system. So, Dr. Hsu and Dr. Ma urge, let’s use our intrinsic nature to embark on this endeavor. We can then achieve the feeling of inner richness and, in a state of grace, the proper external reforms will follow.
Editors note: The above article was revised on January 23, 2017 to add context about the nature of Dr. Hsu’s comments and included links to the original speeches. The article was also updated to reflect the current status of the Basic Welfare Party and to reflect the name change of the group from the Taiwan Republican Party.
Written by Juku Shenguang: Founder, Vice-president and Secretary-General of Taiwan Global Basic Income Social Welfare Promotion Association
Translated by Tyler Prochazka
Reviewed by André Coelho and Kate McFarland
by Furui Cheng | Aug 31, 2016 | News
In order to share the fruits of economic development with the general public, the government of the Macao Special Administrative Region (SAR) in China has given an annual state bonus to its all citizens since 2008. This so-called “Wealth Partaking Scheme (WPS)” is mainly funded by the revenue of local lottery industry. Permanent residents received 5,000 patacas [US $627(1)] in 2008. This amount has risen continually up to 9,000 patacas [US $1,128] in recent years. Non-permanent residents receive 60% of the amount received by permanent residents.
In addition to the WPS state bonus, the Macao SAR government has injected more capital into all qualified Provident Fund Individual Accounts since 2010. Provident fund individual accounts are provided to Macao SAR residents of the age of 18, and they used to receive the “incentive basic fund” and “special allocation from budget surplus”.
The incentive basic fund is a one-time monetary payment of 10,000 patacas [US $1,253]. All owners of provident fund individual accounts are entitled to this payment during the first calendar year after they have reached the age of 22, provided that they have been permanent residents of the Macao SAR during the preceding calendar year (and stayed in the region for at least 183 days out of the year).
The special allocation from budget surplus is an extra fund injected into the qualified accounts annually after the incentive basic fund. This extra fund was 6,000 patacas [US $752] in 2010, and now it is 7,000 patacas [US $877].
In 2016, Macao citizens’ average monthly income is 15,000 patacas (US $1,880) and the minimum wage is about 6,000 patacas per month. More than half of Macanese think the above two polices are the most important contributions of SAR’s administrative program.
Notes:
(1) – At August 2016 exchange rates.
More information at:
Governo da Região Administrativa Especial de Macau [Special Administrative Macao Regional Government], “Plano de Comparticipação Pecuniária no Desenvolvimento Económico do Ano 2016 [Wealth Partaking Scheme]”, 2016
Governo da Região Administrativa Especial de Macau [Special Administrative Macao Regional Government], “Fundo de Segurança Social [Social Security Fund]”, 2016
Karl Widerquist, “Macau: Government Distributes Temporary Basic Income”, Basic Income News, August 23rd, 2014
Karl Widerquist, “China: Macau residents to receive annual basic income”, Basic Income News, June 30th, 2015
Article reviewed by André Coelho and Kate McFarland.
by Tyler Prochazka | May 16, 2016 | Opinion
Back in the 1990s, China started experimenting with a minimum income guarantee that topped off incomes to a minimum level set by local governments. China called the program dibao, meaning minimum livelihood guarantee, expanding the program nationwide in 2007.
In Beijing the urban monthly dibao standard is 1050 RMB ($161.50 USD) and the rural standard is 800 RMB ($123.04 USD). For urban residents, this is about five dollars USD a day.
However, even this paltry amount often does not make it to those in poverty.
A report by the World Bank found that for every 10 RMB spent on the dibao, only 1 to 2.4 RMB reached individuals in poverty (cited by the Economist). The World Bank also found the dibao program only lowered the poverty gap by 6.5 percent.
Corruption and inability to determine households’ poverty status have plagued the program. According to Lu Yang in the Indian Journal of Labour Economics, based on 2010 survey data only 21 percent of poor households were able to receive the dibao, while more than half of dibao recipients were above the poverty line.
Many local governments go to great lengths to investigate whether dibao households are secretly hoarding wealth, visiting recipients’ homes and observing whether the household has too many “high quality” products to qualify.
Others are concerned with the dibao’s effect on the poor’s effective marginal tax rate. Higher effective marginal tax rates lower the likelihood that a household member will seek work.
If a household’s average income per person goes above the dibao standard, they could sacrifice the entirety of the benefit. Each household member raises the household’s dibao standard by 100 percent. For example, in Beijing where the standard is 1050 RMB per month, a two-person household would face a 2100 RMB dibao standard. In turn, larger households are more susceptible to the problem of high effective marginal tax rates.
In some instances, it is possible that a household will have a 100 percent effective tax rate due to the dibao benefit. In these cases, the household will have the same income regardless of whether a household member chooses to work or not. Based on data from an essay in Population and Development a family of three in Tianjin with one household member employed would have the same income as an identical family that does not work at all. Clearly this has the potential to undermine labor participation if the drop off is this steep in reality.
China plans to lift 70 million people out of poverty by 2020. Such a massive undertaking requires a robust social welfare system. As it stands, the dibao program is not equipped to do this heavy lifting.
However, the dibao does provide a starting point for China to experiment with universal coverage.
The 2014 World Bank report conducted economic simulations that demonstrated expanding dibao coverage was more effective than increasing the benefit size at lowering the poverty gap.
Like the dibao, the central government of China could initiate pilot programs that universalize the dibao cash transfer, eliminating the income and wealth requirements to qualify for the dibao benefit.
Universalizing the program would potentially address many of the issues plaguing dibao, such as the high effective marginal tax rates and low rate of impoverished individuals that receive the dibao.
China’s economic miracle successfully lifted the most individuals out of poverty in world history. To do so, China undertook some dramatic reforms that completely reshaped Chinese society. Now in order to completely eradicate poverty, China may want to take yet another drastic step with a universal basic income guarantee.
