Economy

A healthy thought

How the nexus of thinktanks and academics impacts economic policy

Healthcare reform: long overdue

In the 1990s you couldn’t say much here,” says Professor Cui Zhiyuan of Tsinghua University. “But today it is much freer and the internet has made a world of difference. As long as you don’t write that the Communist Party should be overthrown immediately, you can write whatever you like.”

Contrary to what many Westerners assume, criticism of government policy and debate do exist in China’s academic and political circles. And as with the West, thinktanks are playing an increasing role in shaping policy.

The China Institute for Reform and Development is a good example. It recently published a 171 page report which grabbed headlines by stating: “This crisis is the biggest challenge in the 30 years since the reform and opening policy was adopted.” It added that the challenges were “unprecedented”.

The Hainan-based thinktank – which in the past 11 years has published over 100 books and completed 20 research projects – also agrees with many of its Western peers that China’s problem is a growth model that relies on exports and investment, rather than on domestic consumption. And that old model – which typically involves low cost, high energy consuming and highly polluting industrial activity – is broken. The thinktank warns that China – without growing exports – faces a “crisis of overproduction”.

But it does not predict that a shift to an age of “popular consumption” will be a smooth one. The chief reform it wants to see is in public services such as healthcare. “Recent experience shows that members of society will not consider buying consumer durables if their demands for basic public services cannot be satisfied,” it asserts.

The logic is simple: if you get sick in China, the hospital bills can be huge. So you save for that rainy day (hence the nation’s extraordinarily high saving rate) rather than treat yourself to a new television or small-engine car. To bring the saving rate down, and the level of consumption up, you need to give the populace confidence there is a social safety net.

It seems the government has arrived at a similar view. This week it unveiled sweeping health reforms, which will see Rmb850 billion ($124 billion) spent on upgrading basic healthcare in the next two years. The plan is for 90% of the population – both in the cities and the under-served countryside – to be covered by basic medical insurance and access to cheap, essential medicines.

In China, government and academia have often worked together to steer policy. “The Chinese like to argue about whether it is the intellectuals that influence decision-makers, or whether groups of decision-makers use pet intellectuals as informal mouthpieces to advance their own views,” writes Mark Leonard in What Does China Think? “Either way, the debates between thinkers have become part of the political process, and are used to put ideas into play and expand the options available to Chinese decision-makers.” So it should come as no surprise that the prescriptions published by the China Institute for Reform and Development were widely debated in government circles months before the report was even penned, let alone published.

All in all, it has been an important week for China and those self-same policymakers.

The G20 meeting saw China assume a more assertive position on the world stage. Somewhat less obviously, the healthcare reform package is also laden with symbolism.

It signals that China’s leadership is now committed to a new economic model: one in which a ‘rebalanced’ economy is geared more towards promoting domestic demand and less to export growth.


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