As Autumn arrives, it’s time to review the China news that happened while many of us were on holiday. Hint: it wasn’t a military parade!
High-profile summits and hypersonic missiles make compelling news coverage but reveal little about the day-to-day realities facing your China operations.
For anyone running operations in China — particularly those employing staff — the real news was two regulatory shifts that received less media attention yet carry immediate, actionable consequences.
Specifically: tougher social insurance rules and a new national childcare subsidy.
Social Insurance: No More Informal Deals
In August, China’s Supreme People’s Court closed a lucrative loophole. For years, employers and workers routinely agreed to forgo social insurance contributions (pension, healthcare, unemployment, housing funds) in exchange for higher take-home pay.
The practice was widespread: Financial Times analysis found only one-third of China’s 734 million workers made full social insurance contributions in 2024, while a separate survey of 6,000 Chinese companies found fewer than 30% fully complied with social insurance requirements.
The court ruling makes such arrangements legally void.
Supplier Risk Assessment Required
For many foreign businesses, this is seemingly no big deal. Most were already doing this by the book. However, their supplier networks likely did not.
Chinese companies now face unavoidable contributions: employers typically contribute 20-28% of wages, with employees contributing another 10%. For suppliers operating on compressed margins, this represents a substantial cost increase that will inevitably flow through to contract pricing.
If your suppliers were among the 70% of companies not fully compliant with social insurance, they’re facing a 20-30% increase in labour costs with little warning. Combined with ongoing tariff pressures, this could push marginal suppliers toward financial distress.
What Businesses Should Do: Review your own company’s worker contracts and stop any “no insurance” deals with employees. Conduct financial health checks of critical suppliers, particularly smaller manufacturers in labour-intensive sectorsl Review existing supplier contracts for price adjustment clauses that could accommodate higher labour costs
New Childcare Subsidies
China also launched its first nationwide childcare subsidy over the summer, providing 3,600 yuan ($500) per year for children under 3. This forms part of Beijing’s “birth-friendly society” campaign aimed at reversing falling fertility rates.
The money goes straight to parents, not companies. Yet, it does signal broader policy shifts ahead. At a press conference detailing the new policy, Guo Yanhong, deputy head of China’s National Health Commission, urged local governments to introduce complementary policies alongside the national subsidy.
This suggests additional regional regulations around maternity and paternal leave are likely.
In fact, Shanghai has already responded by introducing a social insurance subsidy that reimburses employers 50% of social security contributions during maternity leave periods. The scheme partially offsets new insurance obligations — provided companies apply.
Maternity leave
All this increased focus on childbearing creates hidden regulatory exposures that many businesses underestimate.
For example, around 22% of Chinese mothers voluntarily reduce their 98-day national maternity leave entitlement, according to University of Bielefeld research. Career concerns drive this trend, with many women worried about being passed over for promotions if seen as likely to take extended leave.
However, accommodating shortened leave requests can create legal liability.
Maternity leave is first and foremost a right and a protective measure for the female employee. It is not merely a benefit to be waived.
Chinese regulations make employers responsible for ensuring employees can take their full leave entitlement without pressure. Companies face liability if they create conditions that discourage leave usage or if regulators determine an employee’s “voluntary” decision wasn’t truly voluntary.
Therefore, it’s important to encourage workers to feel comfortable taking their full leave entitlement. If workers insist on returning early or splitting their leave, require them to initiate it, document everything thoroughly, get medical certification and secure written agreements. Never be the first to bring it up.
Even so, given how broadly “workplace pressure” is defined, the safest approach remains encouraging full leave usage.
Paternity leave operates under more flexible local rules, but the same principles apply.
What Businesses Should Do: Train HR staff and managers never to suggest career consequences for taking leave. Review and update employee handbooks to emphasize full leave entitlements by locationl Establish protocols requiring employees to initiate any early return requests in writing. Check if your city/province offers maternity leave subsidies for employers, like Shanghai.
Military parades grab headlines, but regulatory changes like these shape your actual costs, which is exactly why we track them for you.
