The Chinese Welfare State in Transition: 1988-2007

Is China a welfare state? If so, how big is it and what does it look like? Further, how does the Chinese welfare state affect income inequality? Is it progressive or regressive? Using the China Household Income Project 1988-2007 data, this article provides updated empirical evidence on the size, structure and redistributive effect of the Chinese welfare state. We find that the Chinese welfare state is highly divided along urban-rural lines: the urban social benefit system, or the urban welfare state, stands among the more comprehensive and generous ones, similar to those in the western industrialised countries, while the rural system is minimal and residual, and similar to those in the least developed countries. The urban system has consistently reduced income inequality and has remained progressive over time. The rural system has had little impact on reducing income inequality and has been largely regressive. Social benefit for migrants has seen significant increases between 2002 and 2007 and has played an increasingly larger redistributive role. These results and recent policy changes suggest that the Chinese welfare state is likely to become more integrated, generous and progressive in the future.