During socialist times of planned economy, only people living in urban regions participated in the public pension insurance and health care system. People living in rural areas relied mostly on local community welfare and allotted lands for self-cultivation. Backed by the economic upturn since the reform era, the Chinese government took major steps to improve the rural insurance situation. In 2003, a new public health insurance system for rural residents had been initiated, which replaced the malfunctioning system of rural community welfare. In 2016, this rural health care was merged with urban health insurance to create a unified basic public health insurance system for all of China. The number of covered people grew rapidly and reached 1.35 billion in 2019, which was nearly 97 percent of the total population.
Similar steps were taken regarding pension insurance. In 2009, a new public pension system for rural residents had been initiated, which is mostly state subsidized. Coverage grew rapidly from around 103 million insured people in its first year to around 524 million in 2019. Including the people insured in the urban pension insurance, the total number of Chinese with a basic pension insurance reached 968 million in 2019. However, the level of pensions paid out by the rural insurance is considerably lower than that of the beneficiaries in the urban system.
In the future, it will be an important task for the Chinese government to further improve the level of social insurance of people registered in rural areas and to further integrate the urban and rural entities of the unified insurance system. A major challenge is the rapid aging of the Chinese society, which will lead to increased disbursements in the future. This in turn can only be met by higher contributions, a growth in state subsidies, or a lower payment level.