Market-makers in China’s healthcare sector

Yiming Dong

Marketisation is one of the most striking changes in China’s healthcare system in recent years. In 2015 the number of private hospitals in China overtook the number of public hospitals for the first time. This was despite private practice being illegal until 1978. In a sector that has been (and still is) dominated by large public hospitals, we are seeing a wave of development of large private hospitals and multi-institution healthcare complexes. The Hainan Bo’ao Lecheng International Medical Tourism Pilot Zone is a good example of this.

Who are the market-makers in China’s healthcare sector, and what is the rationale for their intervention?  In order to find answers for the two questions, we analyse data collated from policy documents and detailed searches for English- and Chinese-language business reports and press media coverage.

We find that the state was the major market-maker. Initially this was ideological in nature, driven by the ‘opening up’ of the Chinese economy and desire to move to market-based provisioning in healthcare. But it has since taken on a stronger economic rationale, as the government has sought to reposition China within the global healthcare economy. A series of government reforms and policies stimulated a new phase in the development of China’s private healthcare sector involving the emergence of large private hospitals and multi-institution complexes. The state has been extensively involved not just in directing the formation of zones of healthcare infrastructure, but also financing this infrastructure through its large state-owned enterprises. Private hospitals are partnering with overseas institutions, and attracting investment from a wide range of companies. The healthcare system is thus rapidly evolving from the previous scenario of a large public sector and smaller private sector to one where private hospitals outnumber public hospitals.

The expansion of the private hospital sector is being seen across a range of middle-income countries (Chee, 2008; Eren Vural, 2017; Lefebvre, 2010), along with its penetration by non-healthcare actors (Hunter & Murray, 2019). What is notable in China, however, is the extent to which central policy and regional governments are actively driving this trend as a health sector solution. The state has been at the forefront, directing healthcare infrastructure formation, financing it through state-owned enterprises, and encouraging private health insurance uptake through tax relief. This more interventionist strategy for industry development reflects contemporary Chinese state capitalism, and a vision of global leadership in biomedical markets.