There are a lot of China bulls and bears out there today, but there is also a lot of misinformation. Many people have never even been to the country but have no problem prognosticating about its future.
I've been in China for the last two weeks, and based from my on-the-ground experience, I'd like to offer my reaction to some of the common myths I've heard making the rounds in the American press. (I've also posted some of my musings on China at Realmoney.com).
Myth: There is a lack of social security, health careand unemployment insurance that threatens the country's future growth.
The Chinese do have basic social support structures in place for retirement and health care. Indeed, that's part of their value-add to the populace; China is there to help them when they need it. However, it's certainly not a European cradle-to-grave type of program. It's correct that China (and Hong Kong) do not have unemployment benefits. If you get laid off, you're on your own.
The social security in China is one master account that citizens draw against. One can go online at anytime and see how much money he has to use for doctor visits or retirement. Some of workers' income is taken off to contribute to this account (similar to Social Security or FICA in the U.S.). Once the account is drawn down, it's gone, so there's an inherent incentive not to abuse it. If a citizen faces extended medical care needs, he would need to pay out of pocket very quickly.
Indeed, one of the very interesting growth areas I see in China over the next decade is private health care. As the middle-class grows in China, and as the baby boomers retire, people will need better health care. Isn't it ironic that China is speeding towards providing a much more beefed up private model of health care just as America is moving to governmentalize more of its model?
Another interesting point about benefits is that a Chinese citizen can only receive these in the Chinese province in which he was born. A person might move from Shenzhen to Beijing to take a job, which is fine to do, but if he gets sick or wants to retire he would have to return to Shenzhen to get the benefits. This discourages the type of mobility we think of as normal in the U.S.
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11/03/10 - 07:59 AM EDT
