China’s unemployment insurance was officially established in 1986. That year, the State Council of the People’s Republic of China issued the Provisional Regulation on the Unemployment Insurance for Employees of State-owned Enterprises. The Regulation stipulated clearly that unemployment insurance systems should be implemented for employees of state-owned enterprises (SOEs). One of the main goals in establishing the unemployment insurance system was to accord with the reform of SOEs and the reform of labor systems.

The years from 1986 to 1993 were the formation and trial period of China’s unemployment insurance system. In Apr. 1993, the State Council of the People’s Republic of China issued Regulation on the Unemployment Insurance for Employees of State-owned Enterprises. The issuance and implementation of this Regulation symbolized that China’s unemployment insurance started its normal running. In recent years, some local governments broadened the scope of the unemployment insurance according to their particular circumstances. These broadened scopes included urban collectively owned enterprises, foreign-funded enterprises, private enterprises and their employees. Some governmental organizations, social groups, public institutions and their employees were also included. To strengthen the unemployment insurance fund, some provinces and cities required personal payments. By the end of 1998, the unemployment insurance covered 79.28 million people. The number of those covered by year-round unemployment insurance was 1.58 million. There were additional 1.49 million employees having received relief once and for all.

It has been 13 years since the establishment of unemployment insurance system in 1986. In these 13 years, China’s unemployment insurance system has played positive roles in many aspects. First of all, it effectively protected the basic needs of the unemployed. Through unemployment insurance, the unemployed received funds to help them pass difficult times. Especially in recent few years, the unemployment insurance fund each year helped over 3 million people and contributed a positive role to social stability. Secondly, the unemployment insurance system helped the unemployed to find new jobs. In accordance with relative regulations, part of the unemployment insurance fund was used to help the unemployed in occupation training and job introduction. Through these measures, over 50% of the unemployed found new jobs. Thirdly, the unemployment insurance supported enterprise reform. By guaranteeing the basic living of the unemployed, the unemployment insurance system relieved enterprises of their pressure and smoothened the way for introducing and implementing reform measures. Many local governments also used the employment fund to help the settlement of the unemployed from “closed, stopped, merged, and transferred” enterprises. From last year, the local governments implemented the “Three-thirds” principle--i.e. one third from budget, one third from the enterprise, and one third from social funding (mainly from the unemployment insurance fund)—and used part of the unemployment insurance fund on re-employment centers of SOEs. This measure guaranteed the basic living of laid-off workers, and paid the social insurance fees on their behalf. It deepened the SOE reforms, and created favorable conditions for realizing the three-year reform goals of SOEs and getting them out of difficulties. Although the original unemployment insurance system made great achievements, it still could not fully answer the needs for establishing a socialist market economy, for deepening the SOE reforms, and for establishing modern enterprise systems. Its major defects were: 1, its scope was too narrow. Only SOEs and public institutions run by corporate management were covered. Employees of non-SOEs and a majority of public institutions were left out. They “had no insurance facing a crisis”; 2, the unemployment insurance fund in monetary terms was simply not enough. Because of its narrow scope, and the one-sided payment from employers, and collected amount of unemployment insurance fee was limited; 3, its level of comprehensive management was not high. Unemployment insurance fund was mainly managed by cities and counties. Only a small number of areas established the relief fund system. The function of the unemployment insurance as a social protection was not fully realized.

Unemployment insurance system is an important part of the social security system. It is also a necessary condition for establishing a market employment mechanism. The Ministry of Labor and Social Security was set up to fully develop unemployment insurance’s functions and further reform and improve the unemployment insurance system. It took advantage of its heritage and closely cooperated with other governmental offices to speed up the creation of new administrative laws for unemployment insurance. After wide opinion-seeking and regular research and verification, the Ministry delivered the Unemployment Insurance Act (Draft) to the State Council. The act was approved by the standing conference of the State Council on Dec. 16, 1998. The Unemployment insurance Act was promulgated by the State Council’s Order No. 258 on Jan. 22, 1999.

The Act absorbed the practical experiences of the establishment and development of China’s unemployment insurance. It adopted good foreign examples. Its many adjustments reflect the requirements by a socialist market economy. It manifests its mission as a service to reform and to a stable social environment. It has laid a firm foundation for establishing a complete unemployment insurance system with Chinese characteristics.