China is nowhere near the "welfare trap": Zheng Gongcheng

The professor at Renmin University of China says China should change the mindset and treat social spending as an investment that can generate tangible returns.

For many years, the Chinese government has exercised a notably cautious approach to expanding spending on social welfare and public services.

In the recent Recommendations of the Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan for National Economic and Social Development, the policymakers called for:

Inclusive policies that directly benefit consumers should be strengthened, and the government should spend more on public wellbeing.

加大直达消费者的普惠政策力度，增加政府资金用于民生保障支出。

To this end, Zheng Gongcheng said bluntly that the primary obstacle is a matter of mindset. In his view, "China has treated social protection as a spending burden for a long time."

He advocates for a new philosophy, in which social spending should be regarded as an investment in the country's development, one that can generate tangible "returns."

Zheng Gongcheng郑功成 is a professor at Renmin University of China and president of the China Association of Social Security. He has long been engaged in exploring reforms in the field of people's livelihoods, including social insurance, anti-poverty efforts, employment promotion, and philanthropy.

Zheng further points to structural inefficiencies within the current welfare system. Using healthcare as an example, he notes that while coverage for major illnesses remains insufficient, massive surplus funds lie idle in medical insurance accounts. This paradox, he explains, leaves families financially vulnerable while simultaneously wasting precious public resources.

Last but not least, addressing the official long-standing concern about creating a "welfare trap," Zheng contends that China is "nowhere near that point." He states that China's overall welfare level remains relatively low and the system underdeveloped. Therefore, the immediate priority should be "enhancing public welfare, raising its standards, and optimizing its structure for greater efficiency — not worrying about a trap we are far from encountering."

Below is my translation of the full interview.

对话中国社会保障学会会长郑功成：加大民生保障投入是共同富裕必由之路

In Conversation with Zheng Gongcheng, President of the China Association of Social Security: Greater Social Protection Spending Is the Only Path to Common Prosperity

Focusing on "the elderly, children, and illness" to close key gaps

Beijing News: The Recommendations says "gaps and weak links still exist in our work to ensure public wellbeing." What would you say are the main shortcomings in China's social safety net?

Zheng Gongcheng: The deficiencies primarily lie in two areas.

First, universal welfare is still insufficient. Second, the development of basic public services remains unbalanced and inadequate.

On universal welfare, the central government has already sent a clear signal. For example, the introduction of childcare subsidies is a form of universal welfare and represents a major step forward. But universal benefits for the elderly, children, and persons with disabilities are still not adequate.

President Xi Jinping has stressed the need to put people at the center, to strengthen universal, basic, and safety-net social protection, and to address issues of greatest and most direct concern to the people. That means it's crucial to further enhance the universality of social welfare investments.

The second issue is basic public services, such as healthcare, education, eldercare and childcare services. The quality of these essential services varies significantly across regions.

If we look at the existing goals and roadmap set by the central government — achieving equitable access to basic public services nationwide by 2035 — the challenge is still considerable. That is why, during 2026-30, it is necessary to accelerate efforts to close these gaps.

Beijing News: Which specific gaps do you think should be prioritized over the next five years?

Zheng Gongcheng: I would highlight three priorities.

First, addressing the needs of the elderly. Among the elderly population, the need for nursing care for those who are severely or partially disabled, as well as for advanced-age empty-nesters, is absolute and presents a growing challenge. It is necessary to improve the eldercare service network and deliver targeted services to those in need. This is not easy, but it is a major livelihood issue that must be addressed.

A basic reality in China is that the vast majority of seniors still age at home. That makes the connection between home-based care and institutional care crucial, and it also calls for innovation in eldercare models.

For example, we can establish systems such as long-term care insurance, caregiver leave for children of disabled or empty-nesting seniors, housing incentives for children living near their aging parents, protections for the employment rights of the elderly, end-of-life care protocols, and ethical review mechanisms for aging-related industries. We can also develop community-based philanthropy.

While there is room for improvement in urban elderly care services, rural areas face even greater difficulties due to dispersed populations, insufficient manpower, and limited access to volunteers. It is therefore necessary to explore a new path for elderly care with Chinese characteristics and further refine current policies.

Second, addressing the needs of children. The current low birth rate in China is primarily due to the prohibitively high costs of child-rearing. For low-income rural families, the main burden is financial pressure, while for many urban families, it's more about the high time cost, though financial pressure also exists. Furthermore, shifting social attitudes and cultural changes collectively influence young people's willingness to have children.

A direct measure the government can take is to find ways to reduce these costs. Key approaches include increasing universal childcare subsidies and expanding the eligible age range. The central government has introduced a policy that provides a monthly allowance of 300 yuan per child — that is already a substantial benefit, especially considering that basic old-age benefits for rural and non-working urban residents are still below this level.

But this alone is not enough. At present, childcare subsidies mainly target children aged 0-3, but it needs to be extended to ages 4-6, which is expected to happen during 2026-30. At the same time, it is necessary to speed up the development of childcare services, especially for children under three. This cannot rely solely on kindergartens; it requires kindergartens to adapt and a sufficient number of qualified childcare professionals.

Third, addressing the burden of illness. While China's healthcare insurance system has advanced, the threat of critical and major illnesses remains a widespread concern for both urban and rural residents. This indicates that the health security system is still incomplete and that its financing and funding mechanisms are not yet sound.

Therefore, during 2026-30, it is imperative to strengthen the healthcare security system so that it can genuinely and fundamentally alleviate the worries of urban and rural residents regarding the financial burden of major illnesses.

"We have every condition to increase social protection spending"

Beijing News: The Recommendations calls for "the government should spend more on public wellbeing." What practical obstacles do you foresee in raising this spending?

Zheng Gongcheng: I see several main challenges.

The first obstacle is a matter of perspective. For a long time, China has viewed social safeguards primarily as a financial burden. In reality, however, investing in people's livelihoods — particularly by raising the level of social protection — not only improves quality of life but also helps boost consumption, thereby supporting long-term economic growth.

If China fails to raise social protection standards, the country will end up with a very large low-income population. Consumption will remain subdued, and it will be difficult to keep the economy growing at a relatively high pace. That is why China must adopt a new mindset: treat social spending as an investment in national economic and social development — an investment that can generate substantial "returns."

The second obstacle lies in adjusting the structure of public spending. In the past, much of China's public expenditure focused on economic development, including public facilities built during the poverty alleviation campaign — such as primary healthcare clinics and rural kindergartens — as well as infrastructure projects like village road access, highways, and high-speed rail. These have all achieved remarkable results.

But going forward, China needs a shift in emphasis: from prioritizing physical infrastructure to "investing in people." If this expenditure structure can be effectively adjusted, China is fully capable of adequately providing social safeguards.

The third issue is how to optimize existing institutional arrangements and spending structures within the current envelope of social protection funds. Take healthcare as an example. The coverage for major illness is not very generous in China, yet there are huge surplus funds in the medical insurance pool.

By the end of 2024, the cumulative surplus of China's medical insurance funds had reached 5.3 trillion yuan (approximately 740 billion US Dollars) — enough to cover reimbursements for more than 20 months. The common international practice allows for a reserve covering just 1.5 to 3 months.

The consequence of such a large surplus is twofold: on one hand, protection against major illnesses is insufficient, leaving people anxious; on the other, these idle funds depreciate, representing a huge waste. If these resources could be optimized — for instance, by reasonably utilizing two to three trillion yuan specifically for critical illness insurance — the problem of catastrophic health expenditure for the population could be largely resolved.

This shows that even at the current investment level, optimizing institutional arrangements and fund allocation can significantly enhance people's sense of benefit.

Finally, looking at the fundamentals of the Chinese economy, we must build confidence in stable development. China has a complete industrial system, a mega-scale market, and a stable economic foundation.

More importantly, we should believe that productivity and labor productivity will continue to rise, because each new generation will be better equipped to create wealth than the last. In the long run, this means we both can and should increase investment in social protection.

Safety-net protection is more than just "aid in time of need"

Essential Safeguards Are More Than Just a Stopgap

Beijing News: When we talk about the "safety-net" function of social protection, can we understand it as further strengthening support for low-income groups, people without family support, and migrant workers?

Zheng Gongcheng: Safety-net protection is not static; it evolves over time. We cannot equate "the safety net" simply with minimum livelihood guarantees. The safety net should rise in step with modernization and economic and social development. If the "floor" is viewed as fixed, the gap between low-income groups and middle- and high-income groups will only widen.

At present, the basic safety net for low-income and vulnerable groups is generally acceptable, but it's more crucial to recognize that this floor must rise with the tide — they should be provided with better, higher-level protection. Only then can the gap between them and societal progress be narrowed, allowing low-income groups to keep pace with common prosperity.

Take pensions, for example. Today, over half of all residents still receive pensions of only about 200 yuan a month — this clearly needs to be raised. Another example is workers in new forms of flexible employment; their access to social insurance is still incomplete and needs to be brought within the safety-net framework.

The term "safety net" used to be understood as "aid in time of need" — emergency assistance to keep people from falling below a basic line. Today, it should be understood as a "developmental bottom line": a dynamic line that is continually being raised.

Beijing News: You just mentioned the need for a societal consensus — that government investment in social safeguards is to better promote coordinated economic and social development. Some people worry, however, that expanding social welfare might create a “welfare trap” or encourage dependency. How do you respond to that?

Zheng Gongcheng: That concern is misplaced in China's current context. Social protection has at least three core purposes.

First, its fundamental goal is to promote social fairness and justice and enhance people's well-being. This is the starting point and ultimate aim of economic development and reform, and it is the value orientation that General Secretary Xi has repeatedly emphasized.

Second, only when social protection is sound — when people's worries about the future and their most urgent, immediate difficulties are properly addressed, and when the policy outlook is stable and clear — can we truly boost consumption and drive sustained economic growth, forming a virtuous cycle between economic development and social protection.

As for the "welfare trap" or fears of “breeding laziness,” China is still far from that point. Overall, China's welfare levels remain relatively low, and institutional development is still lagging behind. Therefore, the main task now is to enhance people's welfare, raise the level of protection, while simultaneously optimizing the design of welfare systems and improving their efficiency, not worrying about falling into a "welfare trap."

Third, we must always adhere to the principle of "doing our best while staying within our means." "Doing our best" flows from the Party's mission and the nature of socialism; at the same time, we must respect objective conditions and ensure the long-term sustainability of our systems.

That means social security institutions should be built rationally, developed step by step, and advanced in small, steady increments. Only in this way can they remain healthy and sustainable over the long run.