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Source: www.asiaecon.org |


China has pledged to spend $124 billion (850 billion yuan) on a new health care plan aimed at providing basic health insurance to 90% of the country's 1.3 billion population by 2011. The government hopes that the plan will also help boost consumption and increase economic growth in light of China's current slowing economy.

China has pledged to spend $124 billion (850 billion yuan) on a new health care plan aimed at providing basic health insurance to 90% of the country’s 1.3 billion population by 2011. The government hopes that the plan will also help boost consumption and increase economic growth in light of China’s current slowing economy.

The precarious state of the Chinese health care system has long been a topic of political debate and public resentment. In the 1990’s, China went through an economic reform where the government aimed to create a market-oriented system, essentially privatizing health care that had previously relied on the government for more than 90% of its total expenses. As a result, basic health care became increasingly unavailable, particularly in rural areas. In 2005, the UN reported that only 25% of the public health resources were dedicated to the citizens living in rural regions, even though they made up 60% of China’s overall population.

Moreover, public hospitals and health centers no longer receive sufficient government funding and therefore, have to rely solely on profits from medical services and drug prescriptions. These revenues are not nearly enough to ensure proper modernization or efficient operation, resulting in the current deplorable state of China’s public hospitals.

Changing diets and lifestyles also pose long-term challenges for China’s health care system. With a growing percentage of people suffering from chronic diseases such as heart attacks and cancer, the demand for medical services will grow substantially. Thus, the government will be pressured to spend more on education and prevention. Moreover, public resentment has been significantly felt regarding soaring medical fees and low insurance coverage.

In 2006, Chinese citizens spent a total of 984 billion yuan on health-care. The government only accounted for 42% of the spendings, less than 1% of the country’s GDP and a small amount compared to countries like the U.K, where the government accounted for 87% of all health care spendings. The World Health Organization ranked China 156th out of 196 countries surveyed in terms of government spending on health care.

Meanwhile, China has experienced its slowest growth in years as plunging demand for exports has severely impacted the country’s economy. China’s economy only reached a 6.8% growth rate during the last quarter of 2008, reflecting its slowest growth rate in seven years.  Official urban unemployment rate may reach 4.8% this year, its highest level in thirty years. This figure does not even include unemployed rural laborers, a number which some estimate might reach millions. The increasing unemployment rate has placed significant pressure on the country’s social welfare system.

As a response, the government has decided to substantially invest in a new health plan. The plan will aim to increase government subsidies to public hospitals, in order to lower drug and medical supply prices, as well as health check-up fees. China’s Health Minister, Chen Zhu, expects particular focus on the infrastructural development of public hospitals, increasing the availability and modernization of the facilities. It will also aim to provide basic insurance coverage for most of its population, including citizens living in remote rural regions. Each person in the new health care plan will also receive a 120 yuan subsidy starting next year.

The Chinese government introduced the health plan in order “to overcome the current difficulties and to also lay the groundwork for long-term development,” said Ma Jiantang, head of China’s National Bureau of Statistics. The new health care plan is expected to boost consumption during the current economic downturn, as widespread coverage will allow the population to spend money previously saved for medical care.  “The government has to provide social welfare so people feel secure enough to spend,” said Huang Jing, a visiting professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy. Since the Chinese have a high savings rate, a relief in medical expenses would consequently stimulate spending. “If you really care about consumption, you have to systematically overhaul the social welfare system in China,” said Charles Su, chief macroeconomic analyst at CEBM Group in Beijing, an independent investment-advisory firm.

Overall, the Chinese government expects the new plan to significantly improve social welfare, while at the same time spurring private consumption, helping to achieve the country’s goal of 8% economic growth this year. “Chinese leaders finally realized that social welfare systems, like the health care system, are not just for people’s health, they’re for the health of China’s economy,” said Huang Jing.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |

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