China’s Unemployment Insurance Fund Slips Into Deficit as Jobless Claims Rise

1. China's unemployment insurance fund is under increasing financial pressure. From January to April 2026, the fund covered 248 million people, with revenue of 70.53 billion yuan but expenditures of 70.86 billion yuan, resulting in a deficit of 330 million yuan. Compared to the same period in 2025, participants, revenue, and spending increased by 3.95 million, 3.99 billion yuan, and 8.09 billion yuan respectively, with spending reaching its highest level for that period since 2020. [para. 1]

2. Unemployment insurance expenditures cover benefits for basic livelihood, medical insurance subsidies, funeral allowances, vocational training, job placement, and stable-job refunds. The largest expense is unemployment benefits, which are typically set above the local minimum living allowance but below the local minimum wage. [para. 2] To qualify, individuals must have paid premiums for at least one year, be involuntarily unemployed, and register as job-seeking. [para. 3]

3. The fund's current balance slipped into deficit starting September 2025. After a surplus of 1.66 billion yuan from January to August 2025, the period from January to September 2025 saw revenue of 152.73 billion yuan against expenditures of 154.58 billion yuan. For the full year 2025, the deficit reached 91.3 billion yuan, with spending climbing to 216.53 billion yuan, an increase of 32.35 billion yuan from 2024. In 2026, the deficit has narrowed, from 1.43 billion yuan in January to 330 million yuan for the first four months. [para. 4]

4. The surveyed urban unemployment rate peaked at 5.4% in March 2026 before easing to 5.2% in April. [para. 5] Labor economics professor Tang Daisheng attributed the surge in benefit claims to a weak economic climate, forcing people to rely on unemployment insurance. [para. 6] Underlying headline figures, the unemployment rate for workers aged 25-29 reached 7.7%, the highest since data became available, while the rate for migrant agricultural workers climbed to 5.7%, a three-year high. [para. 7][para. 8] Policy expansions and increased media coverage have also raised awareness, with some regions like Fujian launching pilots to fund vocational training and job subsidies. [para. 9]

5. Despite expanding coverage, structural mismatches persist. Li Lei, an associate professor at Yunnan University, noted that the benefit-coverage rate—the proportion of unemployed workers receiving support—was only 14.4% in 2023, compared to 40%-70% in developed countries. [para. 11] An evaluation report by the China Association of Social Security found that less than a quarter of registered urban unemployed actually receive benefits, leaving the majority without support. [para. 12] Mao Yufei from the Capital University of Economics and Business explained that voluntary resignations or contract expirations fail the "involuntary" criterion, and claims processes are cumbersome. [para. 13] Additionally, flexible and gig-economy workers are often uncovered due to difficulties in formalizing labor relations. [para. 14]

6. According to the Ministry of Finance's 2024 final accounts, unemployment benefits and basic medical insurance subsidies accounted for 50.9% and 14.9% of expenditures respectively, while stable-job and training subsidies combined made up less than 23%. [para. 15] To address gaps, experts and local bureaus have suggested easing eligibility criteria, introducing transitional subsidies for voluntary resignations with legitimate reasons, creating a gig-order contribution model for flexible workers, and increasing the share of spending on active labor-market policies to shift from mere livelihood preservation to a combined focus on protection and employment promotion. [para. 16]