The process of globalization and the extension or preservation of public welfare systems seem to lead to conflicting interest at times. Although economical and social conditions in China and Germany are very different, both countries are facing choices concerning this issue. While China is currently building up social welfare structures and implementing a wide range of measures, the ongoing debate in Germany focuses on the limits of the already extensive state welfare structures.

In cooperation with the Party School of the Central Committee of the Communist Party of China the Hanns Seidel Foundation organized a workshop on March 19th 2010 in Beijing. Researchers from Germany and the Central Party School offered their perspectives on "Globalization and Social Welfare - the Development of Social Security in China." Presentations were followed by discussions.

Prof. Elmar Rieger of the University of Bamberg opened with a presentation on "Globalization and the Welfare State - Lessons to learn from History ". Rieger sees a functional relationship between the development of social policy and the global integration of an economy. In his opinion a strong safety net boosts the general acceptance of market economy in a society, therefore it can help a nation to overcome an international crisis without resorting to protectionist measures, despite temporarily tightening international competition.

Rieger put forward the thesis that the lack of insight into this functional relationship was one of the main reasons for the failure of what he calls the first process of globalization between the First and the Second World War. He interpreted the global economic disintegration in that period as a consequence of the deficits in social policies. As a result of the economic downturn social breakdowns occurred in developed countries, which then took refuge in protectionism. According to Rieger it was the expansion of the welfare state in the post-war period that finally led to a new liberalization of international trade. But he cautions that globalization – in a historical perspective – is by no means an irreversible progress, it has to be supported by government policies worldwide.

Dr. Günter Schucher of the GIGA Institute of Asian Studies held the final presentation on "The Global Economic Crisis, Inequality and the Reform of the Social Security System in China." He stated that China – contrary to Western countries – has not strengthened, but rather dismantled the welfare system in its the industrialization process due to its pursuit of an economic development based on cheap labor. As a result the social impact of the economic transformation was intensified, leading to a fast rising disparity. According to a recent survey among cadres at the Central Party School, most of them believe that social inequality will continue to increase.

The disparity between urban and rural areas has been on a steady rise, but also the gap within the communities is widening. According to Rieger social policies in China have actually contributed to this tendency by an unequal integration of different social groups in the welfare system, as can be seen in the better coverage of persons in regular employment and the minimal amount of welfare granted in the countryside. But a few years ago a “social policy turn” occurred. Since then several measures were taken to counter these issues: the introduction of social assistance to families living below the subsistence minimum level, the extension of social security to include migrant workers, as well as introducing pension insurance and cooperative medical insurance for rural areas and the reform of the health sector. But there are still many people left out of the system. At the same time an aging process is taking place in society, which will have a strong impact on the development of the workforce. Schucher sees further reform efforts – that go beyond the steps taken so far – as necessary for safeguarding social stability. These should include higher social transfers for the poor, equal rights for migrant and informal workers and the reduction of the rural-urban disparity by supplying equal facilities for education and health. In regard to the demographic change the country is experiencing, he cautions that reforms in that sector should not be overlooked.

The main theme of the discussion was the tension between state, market and social policy. The welfare state, as described by Rieger, serves as a means to secure public loyalty and to legitimate the market economy, while also functioning as a way to institutionalize distributional conflicts in a society. In Western democracies social welfare tends to have an expansive character, as competing political parties use the promise of more social security to gain votes. This can make cutting back on social spending a hard task, even if necessary from an economic and political perspective.

In China, the dynamic economic development that has been the main force in reducing poverty, has also led to a strong social stratification and inequality. But in regard to the international competition the low level of social benefits still serves as a competitive advantage. But, as Li Lei emphasized, the global crisis has shifted the focus on the development of the national market, thereby helping to push forward a stronger expansion of the welfare system. In this regard, the political measures taken in China differ fundamentally from the actions of the international players in the world economic crisis in 1929.

Participants repeatedly stressed that the huge social inequality in China is a serious problem, which is partly a consequence of general market failures and structural deficits in the transition from a planned to a market economy. Prof. Lei Li also sees the hukou-system as a factor contributing strongly to social inequality. Prof. Guo Dawei argued that the government should introduce better mechanisms for wealth redistribution. As Dr. Du Xiangqian pointed, in the analysis of social security in China specific factors tend to be overlooked, in particular the crucial role of families as a social institution. But Dr. Schucher cautioned that the demographic change and the effects of the one-child policy will more and more difficult for families to fulfill their traditional function of compensating social risks.

Another question raised in the discussion concerned the specific meaning of the widely used phrase "with Chinese characteristics". According to Cao Li this essentially means adapting policies to specific Chinese circumstances and taking a pragmatic approach while considering a historical dimension. In the case of the social security system this refers to the inclusion of a large number of people, the complexities of China's modernization process and the unbalanced development processes. Especially the integration of 800 million rural residents in a modern economy will be a “specifically Chinese” task.

In his closing remarks Prof. Liu Jianhui, Head of the Department of Party History of the Central Party School stressed that all participants profited greatly from this event, especially because of the systematic and differentiated approaches to the subject. The main task of the Party School, said Liu, was not only the analysis of the situation but also finding solutions and pointing out alternatives.