Hello viewers, welcome to “Century Truths.”
In 2025, when many Chinese people opened their September pay stubs, they were shocked and discussions erupted on social media platforms.
In a WeChat video, someone in Liuzhou, Guangxi shouted, “My salary was reduced by 1600 Yuan.” Netizens commented, “It’s not just Liuzhou, this is happening everywhere.”
A netizen in Nanning who works in telecom outsourcing said, after deducting social security and other compulsory insurance, they were left with only 1700 Yuan in hand, barely enough to live on.
Small business owners complained, “If this continues, the factories won’t be able to survive.”
Within a few days, anger, resentment, and panic spread among the people.
Why did a seemingly “labor protection” compulsory social security policy become a “shockwave” for the ordinary Chinese people?
The issue runs deeper than you think. Let’s start from the beginning.
On August 1, 2025, the Supreme People’s Court of the CCP issued a judicial interpretation stating that any agreement to “voluntarily waive social security contributions” in China would be null and void from September 1. Regardless of previous agreements with employers, any agreement involving “waiving social security” would not be recognized by the law.
On the surface, it sounds good – “protecting workers.” If a company fails to pay social security contributions as required, employees can terminate contracts at any time and demand economic compensation. However, what shocked companies was not just the mandatory payment of social security, but also the second requirement behind it: companies must fully compensate employees for social security contributions. Any underpayment would require full compensation plus a daily penalty of 0.05%.
Let’s talk about the CCP’s social security system, also known as “five insurances,” which includes pension insurance, medical insurance, unemployment insurance, work injury insurance, and maternity insurance. While paying social security is mandatory according to existing laws, strict enforcement has been lacking.
Now, companies not only have to compensate employees for social security contributions, but they also have to deal with accumulating penalties, multiplying the pressure severalfold.
As a result, as soon as the new regulations came into effect, consequences immediately emerged.
Many companies saw their cash flow severely strained, forcing them to slash budgets hastily. Some positions that were about to be filled were canceled, and some factories had to lay off workers early, trying to minimize social security costs.
Even ordinary workers didn’t benefit much from the situation because while the company compensated for social security, employees also had to contribute, resulting in reduced take-home pay.
The specific impacts on companies and workers will be discussed in detail in the program.
Now, the most pressing question for people is: how are social security contributions deducted, and is it reasonable? Does paying social security really provide security for me?
Next, we will uncover the dark side of this system.
In China, social security contributions are not trivial. The combined contributions from companies and employees amount to over 40% of individual incomes, ranking the highest among 181 countries worldwide. According to calculations by Professor Bai Chongen from Tsinghua University, this figure is twice the average of the other three BRICS countries, three times higher than the Nordic countries, 2.8 times higher than the G7 countries, and 4.6 times higher than neighboring East Asian countries.
The CCP’s social security system has something called a “contribution base,” which is the basis for calculating social security contributions. However, this base is not based on the actual wages received by employees but on the “social average wage.”
每 year from June to August, each province in China publishes a “social average wage.” The upper limit for social security contribution is 300% of the social average wage, while the lower limit is 60%. In other words, regardless of how much you earn, you must contribute at least 60% of the social average wage. This results in low-income groups being forced to over-contribute.
For example, Peng Shuo, a political commentator, mentioned a case in Shenzhen where someone had a monthly take-home pay of just over 3000 Yuan, but had to contribute based on a base salary of 7000 Yuan.
Why is the “social average wage” so high? Financial blogger “Tom” revealed the painful truth: around two to three hundred million low-income “flexible workers” in China such as delivery drivers, ride-hailing drivers, and freelancers are not counted in the statistics. Excluding their incomes naturally inflates the average wage.
In recent years, as China’s economy has slowed down, people’s incomes have shrunk annually, yet the officially published social average wage levels have continued to rise.
For instance, the social average wage in Sichuan rose from 7,076 Yuan in 2023 to 7,518 Yuan in 2025, marking a 7% to 8% increase. This led to widespread complaints online: “Salaries remain unchanged while social security increases every year.”
And this is just the tip of the iceberg in terms of “how much to pay.”
The second layer of the problem is that even if you pay, it doesn’t guarantee protection for you.
For instance, the design of the CCP’s medical insurance system is completely opposite to international norms. While most of the world operates on a “self-pay cap” system where individuals pay up to a certain limit, beyond which the insurance covers the rest, China’s system is a “reimbursement cap” system with fixed limits. Any amount beyond the limit is borne by individuals. If someone falls seriously ill, they have to bear the expenses themselves, which could potentially bankrupt a family.
The disparity in pension benefits is even more outrageous due to the “dual-track system,” causing a huge gap in benefits: farmers earn only a few hundred Yuan a month, while retirees under the system receive tens of thousands of Yuan.
Furthermore, there is a long-standing controversial system called “equivalent payment,” where the deficit in the pension system from the planned economy era is directly attributed to today’s younger generations. This results in young people not only paying for their own future security but also covering the shortcomings of the past few decades. The so-called “social security” has turned into “intergenerational exploitation.”
The numbers are alarming – according to the CCP’s Ministry of Finance data from 2022, the basic pension fund deficit in China reached 700 billion RMB in 2021. This figure, being self-reported by the CCP without third-party audit, likely contains significant discrepancies. A research report on China’s pension fund published by the Insurance Industry Association predicts that this deficit will reach 8 to 10 trillion RMB between 2025 and 2030.
The operation of social security funds in various regions remains opaque. A report by the State Council of the CCP in late June 2025 on the 2024 audit showed that over twenty provincial governments misappropriated 60.2 billion RMB of pension funds for debt repayment and salary payments.
In 2019, the Chinese Academy of Social Sciences also warned that China’s basic pension fund will be depleted by 2035.
Please note that these are the CCP’s own figures.
A blogger from Chengdu, “Xikang,” pointed out that due to the impending bankruptcy of the social security system, for young people retiring after 2035, paying social security contributions is essentially like pouring water into a sieve. This money is more like a compulsory tax.
With the system riddled with holes, the CCP chose to forcefully push for social security in 2025. Why?
The answer boils down to one word – money.
Political commentator Peng Shuo highlighted that many provinces in China have long been experiencing deficits in their pension funds. With an increasing aging population and a shrinking workforce, the contributor pool is shrinking, while the number of beneficiaries is increasing. The hole in the social security fund is growing, and it can only be filled by continuous injections of state funds.
However, local finances have been under pressure in recent years – stagnant land sales, declining tax revenues, and soaring debt levels. Where does the capacity to subsidize social security come from?
In this situation, the CCP pushed the pressure down the pyramid. “Forced social security” became the quickest way: requiring companies to make up the shortfall, making workers bear the burden, and channeling cash flow back into the social security fund.
Political commentator Wang He also analyzed that the CCP’s unusual push for mandatory social security is due to the severe shortfall in the social security system more than a decade ago. With the current financial situation becoming more untenable, the government had to resort to drastic measures. This indicates that the severity of the CCP’s current crisis surpasses that of 2018 and the epidemic period. The policy confusion reveals a governance crisis.
When social security becomes a tool for “financial subsidy,” it loses its essence of protection and becomes another form of “burden shifting.”
What the CCP didn’t anticipate was the immediate repercussions.
Many companies, upon close examination, realized that mandatory social security was not just a slight increase in costs but was pushing them towards the edge of a financial cliff.
Consequently, companies started to “rescue” themselves, and the first wave of actions emerged quickly. For example, to reduce long-term costs, many companies began to outsource stable positions to temporary labor agencies.
According to a report by Caijing Network, Li Yu, a pseudonym who operates a domestic service agency in Beijing, decided to outsource all staff except for administrative personnel to labor agencies, adopting a practice followed by several peers.
Simultaneously, there was a trend of concentrated closures among small businesses.
Chen Ping, a pseudonym who owned a daily necessities factory in Yiwu, Zhejiang, witnessed a gradual decline in business since the second half of 2014. He mentioned that the factory barely made a profit in recent years, with overall revenues and expenses balancing out, but the “new social security regulations” in August became the last straw, leading to the decision to lay off workers and shut down the factory.
Liu Yu, a pseudonym operating a textile factory in Jiangsu, stated that the profit margin in the textile industry was limited, coupled with weak domestic and international market demand and fluctuating orders. If following the current regulations meant contributing the full social security amount for employees, labor costs would comprise roughly 70%, making it more challenging for the factory to survive.
Multiple small business owners also expressed that they “couldn’t handle it.” A sofa factory owner in Yuhang, Zhejiang, told a reporter from Dajiyuan that for an ordinary employee earning a monthly salary of 3000 Yuan, the company had to contribute nearly 1000 Yuan for social security, making the total cost 4000 Yuan. With rising labor costs and declining orders, companies were forced to reduce salaries or hire fewer people.
Moreover, many companies opted to place new capacities directly overseas, and some factories even accelerated the relocation of their entire production lines.
Such decisions will have two long-term consequences: firstly, the rapid hollowing out of domestic industrial chains, and secondly, a reduction in domestic new job creation.
China’s unemployment problem is already severe; official figures from the CCP showed that in August 2025, after excluding students, the unemployment rate among 16-24-year-olds reached 18.9%, nearly one-fifth of the youth population unemployed. What might be the actual unemployment rate, likely significantly higher?
In such a scenario, pushing for “mandatory social security” seems to be adding fuel to the fire.
Even for those who are employed, the situation is challenging. Liu Yun, a pseudonym working at a clothing wholesale store in Guangzhou, expressed that he would prefer a higher salary without contributing to social security because the company stated that once social security was paid, the salary wouldn’t increase. With living costs rising year by year – even a 15% increase in the price of toilet paper, if the company reduces salaries to pay social security contributions, who will compensate for the loss he incurs?
He resignedly said, “In such an unstable economy, those of us at the bottom already feel like our good days are over.”
The social security system was originally intended to secure people’s futures, but under the guise of “mandatory social security,” the CCP is using it to address a financial crisis, highlighting that the more it is enforced, the more the fragility of the system is exposed, and the more it tries to replenish, the faster the losses mount.
In light of this, do you think the CCP can successfully shift its crisis onto the people and make them bear the burden for it?
That concludes today’s program; thank you for watching, and we’ll see you next time.