Inadequate compensation doesn't reflect today's China
- Source: Global Times
- [22:51 March 11 2010]
- Comments
Illustration: Liu Rui
By Michael Gau
The February 25 issue of the Global Times carried an article on page 7, "Court: foreigner's death more valuable," and a related Observer piece on page 8, "Foreign or Chinese, price of life is equal." But on closer reading, it was a surprise to find that this issue was solely one of Chinese domestic regulation and court rulings, not dictated by foreigners at all.
Briefly, a Hunan court ordered that the family of a Singaporean man killed in a car accident should be awarded 800,000 yuan ($117,121), nearly 2.5 times as much as the maximum death compensation for a Chinese victim.
A lawyer for the People's Insurance Company of China argued that the different standard was unfair. The court had cited an unspecified "regulation" on accidents involving foreigners, which allowed a larger amount but still imposed an 800,000 yuan limit. The Singaporean's family had asked for 4 million yuan, citing the deceased's earnings prospects.
Accidents and death are tragedies that can never be reversed. Insurance is a business to compensate for economic losses. One way of looking at the economic value of a life is to calculate the earnings potential.
In this case, issues of innumeracy and insufficient economic understanding are involved. The limit for compensation for the death of a Chinese is seriously inadequate. If there is a reason for a limit at all, it should be much higher, and the issue of nationality should drop away.
The issue is not that the victim's income would probably be higher than a lot of Chinese people, but rather, that Chinese incomes are increasingly likely to be comparable to those of people in other countries, and the current limit on compensation for domestic victims is woefully inadequate.
Individual incomes and earning power in China have grown markedly over the past several decades, and are projected to grow rapidly over the next few decades as well.
For instance, 10 percent growth a year leads to an increase of 700 percent over just 20 years. A 20,000 yuan per year income would grow to over 141,000 yuan after 20 years, a seven-fold increase!
A static view of earnings is seriously inadequate for determining future earnings under these conditions.
The Hunan government assumes a maximum annual disposable income of 15,084 yuan in compensation charges, but tens of millions of Chinese are already earning far more than that.
Furthermore, other conditions are likely to change over time, leading to additional unfairness to the family of the deceased.
Inflation in the future may affect the value of a given sum of currency settled in the present. The deceased may also have had the likely prospect of increasing earnings due to increased skill and future promotions.
Finally, depending on the age of the victim, he might have had more like 30-50 additional earning years in front of him than the arbitrary 20 years suggested by the regulation.
Memories and figures can be deceptive.
