Part of the zeitgeist throughout much of the libertarian speaking circuit today involves a false dichotomy: that economically speaking, the US is on the way down and China is on the way up. That entitlement programs in the US are dragging an already wounded thoroughbred down into an abyss. And that China does not have these same sort of entitlement programs and is therefore becoming a bastion of free-market liberty.
For example, Jeffrey Knoll wrote in the TLS comments section two months ago:
One aspect of China that is more libertarian is that they have limited welfare and social security, so their society is not burdened with unfunded liabilities like the West is. This also forces the Chinese to save more which provides more capital for investment.
Another example is from Peter Schiff, who said in a debate four months ago that:
“[China has] accumulated massive savings, doesn’t have social security and doesn’t have a lot of the same government programs that the US does.”
Both of these statements are wrong. In fact, here is the official website from the PRC explaining their social security system. China’s public pension system has been operating in the red for many years now (due in part to a relatively low retirement age and longer lifespan), hitting a purported $267.6 billion deficit last year. Chinese policy makers have even rolled out universal health care plan that is targeted for a 2020 completion date — what will the ultimate financial costs be for this?
Cato even published a paper (pdf) back in 2003 explaining the challenges that the Chinese pension system faces. And this demographic issue is only going to get worse, or in the words of The Economist — China will become old before they become rich.
Not only has the Chinese government implemented several types of social security plans, but foreigners are fully co-opted into the apparatus too.
In fact, the only way for a foreigner to get out of the new laws that were passed last year are to sign a promissory note, saying that you will never work in China again.
So, just like the myth of a China that is visa-free was busted, the myth of a social security-free China should be taken off the list as well.
Below is a fantastic overview from Matthew Stinson regarding the new laws, specifically applied to foreigners.