China’s Healthcare System Opening Up to Foreign Investors

Published on Author Duncan

As we saw in Country Driving, China’s healthcare system has issues with staffing, payment options, and customer service among other issues. According to a recent article by China Daily, the growing middle class and aging population are beginning to demand better health services including greater access to doctors, cleaner and better-maintained facilities, shorter waiting times, and more courteous medical staff.

Putting this in perspective, before the market reforms and opening up, China’s healthcare system was part of the “Iron Rice Bowl,” under which the people enjoyed a quasi-universal healthcare system. Following the reforms however, China’s hospitals stopped receiving sufficient public funds and had to find financing through means other than government reimbursements. Long story short, China’s healthcare system has been an inefficient mess since the period of reforms. Healthcare costs are expensive and mostly out of pocket (, and with a growing middle class and elderly population, more people are focusing on bringing down healthcare costs and improving health services.

As if Chinese rush hour wasn’t bad enough, this is what the line looks like just to see a doctor!

How is the Chinese Government responding? It has not only increased healthcare spending by 19% over the past six years, but now it is opening up investment opportunities for foreign companies ( Although a few foreign companies have set up hospitals in China, most of them are joint-ventures, and the hospitals are small (typically around 50 beds). In 2011 however, the Chinese Government decided to grant full ownership to foreign healthcare companies setting up in China. Additionally, the government has recently stated that they hope to increase the market share of privately-owned hospitals to 20%-in 2010 they represented 6.5%-through privatization of existing hospitals. This has lead to speculation about China’s healthcare provider market, and companies are already taking advantage of the opportunity (See the article above).

What does this portend for China’s healthcare system? Is competition from privately owned hospitals the best solution to increasing the quality of healthcare services? Obviously foreign investment is a helpful substitute for greater government spending, but will a greater presence of foreign-owned or joint-venture hospitals be enough to satisfy the demands of the aging population and growing middle class?

I will talk about this more as I learn more about the Chinese healthcare system for my term paper. If you have any questions, just ask!

2 Responses to China’s Healthcare System Opening Up to Foreign Investors

  1. Yes, this is an important topic in and of itself, and one of a set of issues tied to local public finance. As you note, the end of collectivization undermined the system for local healthcare. Ditto local education and other functions.

    Privatization may encourage adding capacity, but it has not proven capable of controlling costs in other countries. Above all, private systems have no interest in public health or preventive health; they only get revenue from treating someone. The best advice for someone with the flu who isn’t in ill health initially or otherwise vulnerable may be to “rest and drink lots of fluids.” But there’s no money in providing that sort of advice. At a minimum you want to prescribe lots of medications (perhaps “traditional” Chinese herbal ones); better yet put someone on an IV so you can charge more.