China grapples with new social safety net

By Lucy Hornby

BEIJING (Reuters) - When China marks the 30th anniversary of its economic reforms this month, it will pass another milestone -- the Communist Party will have spent as many years trying to unwind a Marxist economy as it did imposing it.

Nowhere has this played out more starkly than in Beijing's crowded brick hutongs, or alleys.

There, migrants from northern China, seeking their fortune in the big city, live side-by-side with workers from bankrupt firms who can no longer count on the cradle-to-grave security that was a bedrock of the socialist system.

Creating a new social safety net for millions of workers cast adrift in the past 15 years has emerged as a key challenge for the Communist Party -- especially given the global economic downturn could create waves of more unemployed.

The government has only slowly begun building a modern welfare state despite three decades of rapid growth that has made China the world's fourth-largest economy.

Yang Chaomei, who has two years to go before she can claim 200 yuan ($29.08) a month in old-age payments, is like millions of urban workers still teetering between the disintegrating socialist system and plans to build a new safety net.

She survives on sales of padded slippers in the absence of routine welfare payments. Her son, who claims to have a job but who spends afternoons smoking by her stand, also helps out.

"Sometimes a stipend comes, sometimes it doesn't," said Yang, whose neighborhood work unit went bankrupt long ago. "Apply for welfare? Hah! I wish I knew how."

IRON RICE BOWL NO MORE

Under the socialist system, state-owned enterprises completely regulated the lives of their workers. The social compact was called the "iron rice bowl."

All that changed in the 1990s, when many urban Chinese lost their jobs as state firms went bust.

Those workers are now covered by a patchwork of pensions, early retirement schemes and one-off handouts designed to keep unhappy jobless off the streets.

For those in utter poverty, China's version of welfare is the "minimum livelihood insurance" program called dibao -- which carries a stigma because it identifies them as the poorest of the poor.

It boosts recipients' monthly income to a level equivalent to just over 20 percent of average disposable income in their cities. In all, about 23 million city dwellers nationwide are covered.

The minimum varies from 169 to 344 yuan a month in larger cities, but most recipients don't get the full amount because they have other, tiny sources of income.