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March 04, 2011



A non China buff asks: is there any hope at all to be pinned on that stuff about 'establishing a comprehensive public social welfare system' and establishing 'government funded medical services with comprehensive basic coverage by the end of 2011'?

These are Big Things. Even promising them in public carries certain political risks, in any country. So what is likely to happen?


If it's in the five year plan then it's technically mandatory. The economic rationale is in place: it releases savings for consumption. And Beijing has already pushed through chunky rises in the minimum wage across the country so there is a will to act in that general direction.

The question is how much the government want it to happen and what will play a big role in determining that is the extent to which it believes that it will contribute to the security of the regime.

If those two ducks - economic and security - are in a row, then it comes down to the extent that China can promote domestic consumption while keeping inflation down. What's worrying here is that there's nothing about low income housing in the Plan, and housing costs are big drivers in squeezing consumption and in inflation. WRT healthcare, afaik China is underdoctored, so with the best will in the world there are capacity issues here.

So, wait and see. As for the political risk of promising things, my guess that the attitude of the public is : we'll believe it when we see it.


So what is likely to happen?

The basic building blocks (medical savings accounts) are more or less already in place in the big cities. What China is looking at, ideally, is the Singaporean system, although in the next five years China will not go anywhere near as far. The most likely outcome is a medical savings account-based regime, supplemented by gradually increasing government subsidies, although frankly if the government wants to make a difference one task would to reduce the pervasive corruption culture in hospitals.

What's worrying here is that there's nothing about low income housing in the Plan

Low-income housing in the Chinese context inevitably means public housing, and the Chinese population is more or less allergic to this sort of thing given the sub-Soviet-quality housing blocks of the past. There's simply no earthly way to force local governments to favour low-income housing provision in commercial developments, and the central government knows this; the mountains are high and the emperor is far away.


Public housing was always provided by the work unit, not the local or central government, and a lot of people missed it when it was gone, mainly because it was discarded before there was anything much to replace it, and also because it went at exactly the same time as the jobs in SOEs. I agree that the real problem here is local government dependence on land dealing and property development. You're not going to solve that without re-imposing local taxes on the rural population, and that could be socially explosive as well as depriving central government of revenue.


Public housing was always provided by the work unit, not the local or central government, and a lot of people missed it when it was gone

You might be surprised to learn that this sort of housing was still being built very recently "under the table" by the wealthier work units. (It would be formally set up for the purposes of construction as a sort of voluntary trust for the employees that would be discreetly subsidized by the work unit.)

and that could be socially explosive

Local land dealings are a lot more lucrative for local officials than plain vanilla taxes, so this is going to be quite tricky to fix even if it weren't socially explosive. China has an amazingly decentralized and localized fiscal regime; it makes Canada, a relatively decentralized country, look centralized in comparison.


"Scientific development" owes something to both Hu's technocratic aspirations and the perennial fantasy of Marxism-as-science, I think.

chris williams

The post- Kruschev ideology of the USSR featured the 'scientific-technical revolution'. Comrade Brezhnev wrote a slim pamphlet about it: I think I have a copy somewhere. I think it was the last stage before they stopped pretending.

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