Paper Example: Chinese Health Expenditure and Economic Growth

Published: 2023-07-23
Paper Example: Chinese Health Expenditure and Economic Growth
Type of paper:  Essay
Categories:  Economics Asia Healthcare policy Community health Essays by wordcount
Pages: 7
Wordcount: 1701 words
15 min read

In the recent past, there has been a growing concern about establishing the relationship between health expenditure and economic growth in most countries. Notably, health expenditure in China has experienced a growth rate of 11.6% (Long et al., 2013). Economic data in China has revealed that this growth has surpassed the country's economic growth, which stands at 9.9% annually (Kumar et al., 2015). The establishment of early socialism theories helped in blending China's planned economy under the leadership of Deng Xiaoping during the 1980s (Li et al., 2014). The steady economic growth of China has largely been attributed to the increased involvement of the government in economic development processes. China has emerged as the second-largest world economy by GDP. Moreover, the country is the largest country by population in the world. Understandably, these facts have provided grounds for the study of the underlying successes and failures of the country's health system in relation to its economic growth. The paper will explore the relationship between China's health expenditure and economic growth between the period of 1980 and 2017.

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Undoubtedly, the complexity of the Chinese health care system is often hinged on its large population and geographical area. The Chinese central government has been playing an instrumental role in the formulation of public health protection policies and laying a foundation that promotes its implementation (Long et al., 2013). In the recent past, health expenditure has significantly increased in China, and this is because it has been established that a healthy population is critical in driving the country's economy forward. Evidence has revealed that the rapid economic growth of China has a strong correlation with the rapid improvement of the country's health sector. China's Heath expenditure data reveals that there healthcare spending rose from 4.6% in 2010 to 5.6% in 2014 (Li et al., 2014). The growth has been attributed to rapid growth in consumer income and effective implementation of the national healthcare reforms formulated by the country's central government. More importantly, Statistical trends have indicated that China has continued to invest heavily in its health sector, and this is premised on the fact that its economic growth has been on the upward trend.

It should be noted that China's comprehensive three-tier medical service network has resulted in the need to increase investments in the sector. The three-tier is made of the province, prefecture and county hospitals, which depend on the country's central government to provide more resources. Undeniably, since its shift from a closed economy to open economy, China has established strategic export zones and its subsequent joining of the World Trade Organization in 2001 has immensely contributed to its increased export ratio to GDP. Data indicates that the ratio rose to 37% from 21% in 2006 (Marten et al., 2014). Research has revealed that there is always a positive relationship between healthcare spending and economic growth (Kumar et al., 2015). Equally important, China often leverages on its vast human capital and advancement of technology to set the country in the path of economic growth. The increased health expenditure in the recent past has bolstered the general health of Chinese, who, in turn, participate actively in the country's economic growth (Liu & Zhao, 2014). Further, the rise in health expenditure in China has been associated with the increasing prevalent cases and the ever-rising health price fluctuation.

China has experienced rapid urbanization trends since the 1980s (Li et al., 2014). The growth has reflected on the population that moves to urban areas. More imperatively, the increased number of people in urban areas has played an integral role in driving the economic wheel of China. However, the National Bureau of Statistics of China has indicated that the rising population in urban areas is likely to strain the country's healthcare system, and this will decrease accessibility to healthcare. Worth noting is that the economic growth driven by increased industrialization in urban areas has resulted in more allocation of resources to health sector to meet the rising demand. Moreover, the changes in lifestyle have resulted in more healthcare issues in China, and this has necessitated increased expenditure in the country's economic system. The global financial crisis of 2008 created an economic downturn in China (Marten et al., 2014). During this period, there was a substantial reduction in healthcare expenditure, and this undoubtedly frustrated the effective implementation of established healthcare reforms. The Chinese government often aims to strengthen its role in influencing health and its underlying expenditures. The country often relies on public financing to guarantee the provision of universal health coverage. Still, private spending that is hinged on Out-of-Pocket and voluntary health insurance is critical in shaping the countries healthcare expenditure (Kumar et al., 2015).

Notably, the 2009 health reforms in China provided the central government with a major role to play in the country's health sector (Khan et al., 2016). China's government has moved to adjust public funds that have been used in enhancing insurance coverage and bolstering primary care services. In the last four decades the per capita health expenditures have increased significantly. Understandably, the rise has been attributed to ageing population, health insurance reform, and advancement of healthcare technology among others. It should be noted that adoption of market model led to increased Out-of-Pocket payments in China which was at 60% in 2002 (Long et al., 2013). More critically, increased innovation has contributed to China's economic growth. In the same vein, the increased need to adopt contemporary technology in healthcare has motivated the Chinese government to increase its health expenditure. Moreover, the upward trend in Chinese economic development has created a large pool of resources, and this has enabled the government to issue subsidies that are integral in strengthening the country's health system. Additionally, increased China's economic war-chest in the last four decades has allowed the central government to pursue different initiatives aimed at reinforcing public health insurance schemes (Wang et al., 2013).

More significantly, despite China's overall economic growth, the underlying income inequalities have resulted in low private health expenditure. Evidence has revealed that increased disposal income often result in enhanced expenditure in healthcare (Khan et al., 2016). Undoubtedly, the declining rates of disease prevalence have greatly contributed to limited savings in health expenditure in China. Economists have demonstrated that improved healthcare is instrumental in augmenting accumulation of human capital (Wang et al., 2013). In light of this therefore, China has scaled-up its expenditure on healthcare to ensure that labor productivity is increased, and hence greater economic development. Also, in the recent past, China has focused on increasing healthcare expenditure to ensure that it addresses its problem of population ageing by establishing a healthcare system that prolongs life expectancy and reduces infant mortality rates (Jakovljevic et al., 2017). China's increased economic growth has made the people place much value on high-quality life and this is often accompanied by higher expectations of adequate healthcare services. Most Chinese people often look forward to enhanced social security, safety, and welfare, among others. In the face of the above expectations, the Chinese government has significantly increased its healthcare expenditure to guarantee a healthy population that will form a dependable labor force.

Research has shown that health often has a significant effect on the country's economic growth. China in appreciation of the long-term relationship of healthcare expenditure and GDP has developed reforms aimed at creating modern healthcare system that will inevitably reduce cost of medical services (Kumar et al., 2015). Further, China's real GDP growth has increased its capacity to make a significant investment in healthcare to offer services for its vast population. Studies have indicated that expenditure per prevalent case in China has been the primary driver of increased health expenditure. More importantly, China has leveraged its economic growth to develop disease control and prevention system and establish a patriotic health campaign to ensure that the country's overall health system is enhanced (Khan et al., 2016). Also, China has developed policies that have been helpful in promoting capital accumulation, which is subsequently used in enhancing the country's health system.

In conclusion, there is always interdependence between healthcare and economic growth. China's increased economic growth in the last four decades has contributed to the growth of the country's health system. However, comparatively, China has not placed much effort in matching its rapid economic growth with increased healthcare expenditure. The underlying healthcare problems in China have been attributed to entrenched income inequality and limited accessibility to healthcare services. Further, Chinese aging population has sent the central government to the drawing board by formulating policies aimed at expanding the healthcare infrastructure to reduce cost medical services. Undeniably, human capital often drives the economic growth of any country. In light of this therefore, the Chinese government should ensure that it allocates more resources to health sector to guarantee the much-needed labor efficiency. Also, the central government should develop programs that will ensure that all the untapped resources are channeled to the country's health sector as that will help in enhancing innovation, hence reducing the cost of healthcare services.


Jakovljevic, M., Potapchik, E., Popovich, L., Barik, D., & Getzen, T. E. (2017). Evolving health expenditure landscape of the BRICS nations and projections to 2025. Health economics, 26(7), 844-852.

Khan, H. N., Khan, M. A., Razli, R. B., Shehzada, G., Krebs, K. L., & Sarvghad, N. (2016). Health care expenditure and economic growth in SAARC countries (1995-2012): a panel causality analysis. Applied Research in Quality of Life, 11(3), 639-661., K., Singh, A., Kumar, S., Ram, F., Singh, A., Ram, U., & Kowal, P. R. (2015). Socio-economic differentials in impoverishment effects of out-of-pocket health expenditure in China and India: evidence from WHO SAGE. PloS one, 10(8)., Y., Wu, Q., Liu, C., Kang, Z., Xie, X., Yin, H., & Ning, N. (2014). Catastrophic health expenditure and rural Household impoverishment in China: what role does the new cooperative health insurance scheme play? Plos one, 9(4)., H., & Zhao, Z. (2014). Does health insurance matter? Evidence from China's urban resident's basic medical insurance. Journal of Comparative Economics, 42(4), 1007-1020., Q., Xu, L., Bekedam, H., & Tang, S. (2013). Changes in health expenditures in China in the 2000s: has the health system reform improved affordability? International journal for equity in health, 12(1), 40.

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