BMI View: As the world's most populous country gradually shifts towards universal healthcar e, many commercial players ( pharmaceutic al firms, healthcare providers and medical device manufacturers amongst others ) will benefit from healthcare reform . H ealthy economic growth, a growing middle class population and high wages are helping to fuel the development of the private healthcare sector . However, rising medical costs and disparate access to healthcare services remain the Chinese peoples' main concerns , and the government will gradually address these issues.
Since the start of the healthcare reform programme in 2009, China has progressively improved healthcare standards and introduced various policies to strengthen the link between healthcare, healthcare insurance and pharmaceutical provision; enhance public healthcare services; further develop medical care to benefit patients; boost the morale of medical professionals by improving working conditions, particularly in rural and remote regions; speed up public healthcare reform; further reduce foreign ownership restrictions in joint venture medical institutions; improve regulation of the pharmaceutical supply chain; and crack down on illegal activities to prevent drug price escalation. China's Premier Li Keqiang has reiterated these aims recently through written instructions on April 29 2015, calling for further medical reforms to ensure that China's healthcare system is improved on the back of the country's economic development plan.
Key aims for 2015 are to cut down on hospitals' reliance on drug sales as a source of income, improve the private sector's presence in the market and introduce a multi-tiered system of diagnosis for patients. This is on the back of the central government's longer term plans to increase health expenditure to 6.5-7.0% of GDP by 2020 to achieve 10 targets. These include improving a number of key health indicators: increase average life expectancy to 77 years, reduce the mortality rate in children under five to 13%, reduce the maternal mortality ratio to 20/10,000,000, establish a comprehensive and equitable medical and healthcare system and enhance the country's disease monitoring system.
We note that healthy economic growth, an expanding middle class population and high wages help to fuel the development of the healthcare sector in China. People in more developed regions such as Beijing, Shanghai and Zhejiang enjoy better healthcare services in terms of medical staff numbers and hospital beds. In affluent coastal provinces, expatriates' higher disposable incomes also drive demand for private healthcare. In recent years, we have observed the establishment of foreign hospitals in these regions to meet increasing demand for advanced treatments.
However, rising medical costs and inequitable access to healthcare services remain the leading concerns of Chinese people, more so than 'declining moral standards' and the provision of social security. We highlight that healthcare service standards match each province's economic development. Governments try to rebalance the situation by spending relatively more money per-capita in provinces such as Tibet, Qinghai, Ningxia and Xinjiang where provincial GDPs are significantly below the national average level. Despite this, China's centralised political system has concentrated a significant amount of prime healthcare resources in areas like Beijing and Shanghai. Per-capita government spending on healthcare in direct-controlled municipalities such as Beijing, Shanghai and Tianjin is some of the highest nationally. Meanwhile provinces with large populations, such as Shandong and Henan, are worse off in terms of per-capita government healthcare spending.
In addition, large-scale pollution has become an inevitable side effect of China's rapid economic growth, and a serious threat to the population's health. Respiratory system disease is the fourth-highest cause of death in both urban and rural China, while pollution is also one contributing factor to more serious conditions such as cancer and cerebrovascular diseases. In March 2014, China's central government declared its intention to take serious measures to curb the alarmingly high pollution levels in its mainland cities. However, we believe that over the short-to-medium term, it is very unlikely China will address the problem effectively.