How did China's Transitions Impact People's Welfare Benefits in the Reform Era?

Abstract

This article examines changes in China's welfare programs in the context of economic transition from planned economy to a market-oriented economy. Using the 1988 and 1995 Chinese Household Income Project (CHIP), we develop analytical models to study the critical impacts of institutional variables such as economic ownership types and economic sectors on key welfare programs in both rural and urban areas in China. Our findings show that the Chinese government drastically reduced welfare coverage for its citizens during the economic transitional period even though Chinese urban residents' welfare income was primarily determined by the type of their employment. Outperforming many other factors, work unit's ownership nature played a significant role in the provision of welfare benefits while the economic sectors largely failed to have any significant impacts. These findings indicate that China has been moving away from the active state model in welfare provision. Yet, an industrialization and resource-based welfare system has not been realized in China in the reform era.