Market watch - The Chinese health system at a crossroads

The Chinese government has committed to increasing government funding for health care by directing 1-1.5 percent of its gross domestic product to universal basic health care. However, China is at a loss as to how to transform its new money into efficient and effective health care. This paper critically examines the various options currently under heated debate in China. We argue that unless China tackles the root cause of unaffordable health care-rapid cost inflation caused by an irrational and wasteful health care delivery system-much of the new money is likely to be captured by providers as higher income and profits.