SHANGHAI (Reuters) - Shanghai may be delaying the implementation of a new rule that requires foreigners in China to contribute to a state pension scheme they are not likely to collect on, in order to pacify foreign businesses, the South China Morning Post reported.
China announced in July that it would require foreigners to pay into its social security system, effectively instituting a further tax on each foreigner’s salary, on top of relatively high income tax rates.
The central government has so far given only basic details about the scheme, which all foreigners who work in China are supposed to have started paying into from October last year.
One of the concerns with the scheme has been that foreigners will not be able to access money from unemployment benefits or pensions because work visas are tied to jobs and become invalid when a person is no longer employed.
While Beijing has drawn up guidelines on how the money should be paid into pension fund accounts, Shanghai’s labor officials have yet to do the same, the SCMP reported.
This is apparently in response to a backlash by foreign companies, who are already nervous about the rising costs of doing business in China, the newspaper reported on Saturday quoting unnamed company executives whom it said were close to local regulators.
According to the newspaper, Shanghai’s mayor and party chief
have also privately expressed reservations about the policy, which could hit foreign investor sentiment in Shanghai, the country’s commercial capital.
Shanghai’s labor authorities cited technical difficulties for setting up a payment procedure as the reason for the delay, the South China Morning Post said.
Reporting by Melanie Lee; Editing by Jason Subler