Risks and Coping Practices: formal and informal social safety net in rural China

1. introduction

• Historically only the state employed groups: “Guojia Zhigong”, not those unemployed and rural population, were under the formal social protection.

• In rural area: formal “ Three No Persons” “Five Guaranteed House”, and land approach.

• Physical, economic and social risks are increased to lead to vulnerability in rural area of China

According to the two poverty lines in China, 683 RMB absolute poverty and 958RMB relative poverty, there still 21.48 million rural absolute poor and 35.50 million relative poor in rural area.

Up to 2006, 24 provinces， 2400 counties set up minimum rural social security system covering 13 million with 650-1500RMB annual standard in different areas, at same time, in urban area 22.33 million covered with 2000RMB

risks

Physical and Natural

biological economic

social

When risk takes place, usually both formal and informal measures can prevent the affected to be vulnerable, some can reduce the degree of the vulnerability during crisis, and some can cope with after the crisis, all those forms social safety net in a broad sense.

2. Social safety net in China: general

formal informal comments1. Social help: minimum living standard; Five Guarantee; disaster relief; health help; housing help; legal assistance and poverty reduction through development assistance

Living standard, Five Guarantee; disaster relief, and poverty reduction

Housing legal assistance Minimum living standard only partly

2.Rural insurance: pension and health insurance

Cooperative insurance Pension and health Cooperative health insurance only partly

3. Social welfare public health, education, house and other social services

Poor area and household education program

Health, house

4. Military welfare All formal

3. Formal system: Minimum Living Standard: policy and targeting

• 1996 began to set up the system and gradually expend.

• Finance comes from state, province, county and township, mainly from province and county, depend on different situations.

• Standard: different from different provinces, Fujian: 1000yuan: gap compensation

Sha County, Fujian MLS finance project 1997-2004

1424. 2 20

26. 2 28. 2 31. 3 36. 4

76. 3

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1997 1998 1999 2000 2001 2002 2003 2004

• Targeting: – Poverty line;– Different target groups– Insufficient fund– Leakage and mis-targeting– others

Cooperative health insurance

2. Cooperative Health Insurance Program: all villagers covered 40Yuan from the state,10 yuan from villager per year. Reimbursement: 1000yuan”45%,1000-3000yuan: 50%, above 3000Yuan,65%, ceiling to 8000yuan.

4. Type of risks in the villageRanks Type of risks in the community and defined by it

1 Drought

2 Grazing ban policy

3 Lack of drinking water

4 Lack of loan

5 Lack of agricultural input

6 Risk of mono-cropping

7 Lack of animal feed

8 Crop pest and disease

9 Lack of training

10 Low technical skill

11 High interest rate of informal loan

12 Health probelm

13 Market difficult for animals

14 Education cost

15 Earlier frog

16 Marketing difficult to sell crops

17 Land conversion program change

18 People get old

19 Delayed payment for migrant labour

5. Informal risk coping practices

The villagers cope with the risk in following ways:

• Mutual help;• Mobilize saving;• Sell sheep• In formal loan 20-30%

interest rate, 75% villagers use

• Brow money, no interest rate• Shift income alternatives

immediately• Sell crops

Rank of coping practices: the measures are taken according to the degree of risk seriousness.

Most villagers first look immediate income alternative, until to sell stored crops during the very serious situation. Usually, villagers first

chose borrowing than using saving as borrowing does not need to pay interest.

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ser i ouness of r i sk

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Expressive and instrumental support

• Expressive support is widely practiced by most villagers, but only in the cases of urgent occurring, health problem, children’s education difficult, marriage difficult and house-building etc. it confines with family members, relatives and close friends expressed by contribution in cash or in kind. One villager’s son was enrolled in university in Beijing, but he had difficulties for tuition fee, then one of his brothers contributed 1000yuan, another brother contributed 1000yuan,and neighbors and friends contributed 1000yuan. Expressive support can be divided into two kinds, pure present or gift or help in cash or in kind, and borrowing which is usually a bit larger, however with no interest rate charged, still as the help.

• Instrumental support is also often practiced, but only within the activities which does not directly lead to emotional reactions among family members, friends and relatives. Those are usually as shortage of immediate cash low, business failure and other kind risk of economic activities. The main instrumental support is informal loan with 30% interest rate.

Sheep: material asset for safety net

• Sheep is served for all villagers the most important material asset for preventing, relieving and coping the risk. High number of sheep holding associates with less risk experience presented in the projection.

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numer of sheep

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Safety net for the elder • 1. for those who has children: only one

son: lives together; many sons: live with the one with good relation, others contribute in cash or in kind; no son but daughter: live alone, daughter contributes

• 2. for those who have no children: step a son from the families with same surname or relatives, then child is stepped during young age and nurtured by stepped family, he will look after the stepped parent when they are old. He keeps the family name of the stepped in his surname and still keep his original family name as part of his full name, but his children will resume his original family name. eg: the informant for this case, his name is Yang and Li, his children are all Li.

Combined practices

Case one: the wife of the family had Venter tumor in 2005. the family spent 3500 Yuan for treatment. The husband thought to sell sheep, but the price of the sheep was very low, he decided to get informal high interest loan from the village to pay the hospital fee. Afterward he went to off-farm labor and got 1200 yuan. One month late, the price of sheep increased 1 yuan per kg, then he sold 14 sheep and got 540yuan more comparing to the price when he needed money, then he only paid interest rate 102 Yuan during the time he was dealing with the risk.

• Present and gift

• Borrowing and loan

• Sell and buy

• Save and use saving

Thank you for your attention!

Dr. Li XiaoyunProf. of Development Studies, Dean of College of Humanitiesand Development/ School of Public Administration, ChinaAgricultural University, Beijing 100094 ChinaTell: 0086-10-62733094Fax:0086-10-62731027E-mail:xiaoyun@cau.edu.cn