What Drives Chinese Welfare State in the Globalizing Era?

Thursday, 19 July 2018
Distributed Paper
Xue LI, Fudan University, China
Most research on welfare state in developing countries find that economic globalization has a negative effect on governmental welfare spending while ignoring the rapid expansion of welfare system in China. Ranked as the largest host of foreign trade and the largest host of foreign direct investment in the world, China has established and expanded its welfare system since 1978 when it initiated market reforms. This research is one of the first attempts to understand the driving force of Chinese welfare state based upon panel data from 25 cities in the coastal, more developed regions spanning from 2000 to 2014, for over 90 percent of governmental welfare spending is paid by local governments. Focusing on social security spending, I find that economic development and labor disputes significantly encourage social security spending when facing the downward pressure of trade openness and FDI inflows. In particular, the negative effect of economic globalization can be offset and then turn positive when the level of labor disputes reaches high. This finding challenges existing literature which maintains that welfare spending in non-democratic regimes are more vulnerable to economic globalization. On the contrary, the authoritarian regime, such as Chinese government, which pays close attention to political legitimacy and social stability, tends to encourage individualized, institutionalized labor dispute arrangements, which pushes governments to expand welfare spending.