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China’s Ghost Hospitals: A Hard Landing Ahead for China’s Health Care Reforms

China is in the midst of a comprehensive $178.3 billion health care reform that is arguably the most ambitious among a series of stalled, largely counterproductive post-1978 efforts to improve access and reduce inequalities between rural and urban areas within China’s regionalized health care system. Unless the health care reforms are accompanied by a reform of fiscal policies, however, the absence of good governance brought on by financial constraints and perverse cadre payment incentives at the sub-national level is likely to undermine efforts to create a robust primary care infrastructure, and will consequently result in reform failure.

The wide-ranging economic reforms of the 1980’s transferred the responsibility for funding health care onto China’s local governments. In areas of China where economic reform resulted in an economic boom – i.e. major coastal cities like Shanghai and the first of the Special Economic Zones in Guangdong and Fujian province – local governments were able to raise enough money from increased tax revenue to greatly counterbalance the withdrawal of Central Government funding. In most of the country, however, Central Government funding decreased while the tax base stayed unchanged or shrunk owing to outward migration to the urban centers and the just mentioned Special Economic Zones.

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