With mainland China’s compulsory social security contribution policy taking effect on September 1, an electronics factory in Huizhou, Guangdong, chose to deregister its business on August 31. (Online screenshot)
[People News] Starting September 1, mainland China will officially enforce compulsory social security contributions. With the economy already in deep winter, mandatory payments have become the last straw crushing small and micro enterprises. Some companies have already shut down their factories. One electronics factory in Huizhou, Guangdong, chose to deregister its business on the very last day, August 31.
According to mainland media reports, in recent years, small and micro businesses have struggled, and many companies have not been paying social security for their employees. With the new mandatory policy, some owners have opted to cut wages, lay off workers, or simply shut down their factories.
An e-commerce boss in Yiwu said he has about 50 employees, but only three are enrolled in social security: “I haven’t even enrolled myself.”
He revealed that in Yiwu, perhaps over 95% of people don’t even think about social security. Workers mainly want real take-home pay, and it’s unrealistic for them to work 10 or 20 years on an assembly line just to complete the contribution period.
According to his observation, small e-commerce factories in Yiwu only have profit margins of around 5%, which is nowhere near enough to cover social security costs for their workers. “If it really comes down to forced contributions, Yiwu will collapse.”
A Shenzhen parcel pickup station owner took another approach: starting September 1, he switched all his couriers to contract-based subcontracting. This way, couriers are treated as independent contractors, which allows the company to avoid many obligations. Any accidents or issues during deliveries are no longer the company’s responsibility.
A fresh produce supermarket owner complained that every day he sees six or seven videos on Douyin (TikTok) about social security. Some say that as long as nobody reports you, you’ll be fine, but if someone does, you’re in trouble. This left him with constant headaches.
A barbecue restaurant owner bluntly said, “Everyone’s losing money this year. No one’s going out to spend, no one’s eating out, so we can’t make any money.” He gave an example: some restaurants renovated their storefronts and made upgrades to attract customers, but still didn’t make a profit. A nearby shop ran a “ten pounds of crayfish for 99 yuan” promotion and drew crowds for a short time, but now it’s empty again.
“I’ve thought about shutting down, too, but my lease still has four or five months left, so it’s hard to transfer. As for social security, I’ll just wait until September 1 to see what happens,” the barbecue owner said, deciding to wait and see.
The Huizhou electronics factory simply decided to stop playing. With mandatory social security starting September 1, they deregistered the company on August 31.
Netizens joked: “This is openly defying the policy!”
The factory owner sounded helpless: “Our profits were already pitiful. Paying social security would cost hundreds of thousands of yuan every month. Once paid, we’d never recover the costs. So we figured, might as well just shut down and deregister.”
The company issued a closure notice in advance, officially announcing that operations would end on August 31, 2025.
Netizens sighed: “They asked us to pay social security, and we showed them by shutting down. That’s one way to respond. But where does that leave the workers? Is social security really going to be the last straw that kills businesses?”
“It’s true that companies rely on low labour costs for cutthroat competition, but it’s also true that social security fees are so high that some businesses can’t survive. The rates should be reduced, and pensions for retirees inside the system should be cut back significantly.”
“When small and micro firms collapse, everyone dreams of going to big, prestigious companies. But will they really have a place for you? Once these low-margin businesses are gone, ordinary workers’ survival becomes a problem. Let’s wait a few years and see.”
“You pay social security, and someone else gets money to spend. They call it ‘for the people,’ all high-sounding words — but do they ever think about where that money comes from?”
And many more netizens expressed worry: “This is a tragedy. A wave of unemployment is coming.” △
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