Overall implementation of health and social policies to on track, but challenges remain

With a variety of new health and social policies under the 14th FYP, China is trying to tackle the country’s several long-term challenges. Below some key challenges and policy solutions under the umbrella of social policies are briefly assessed.

Assessment

  • One of the most critical challenges the Chinese government faces is a rapidly ageing society. As per the 2020 census, China’s working-age population has reached its peak and is now shrinking rapidly (-5.98% in 2020) in relative, though not yet in absolute terms, putting pressure on China’s existing labor-intensive development model and an underdeveloped pension and care system for the elderly.

  • In response, the 14th FYP advocates for a gradual extension of the statutory retirement age in place since 1978 – now at 50 or 55 for women depending on job types and 60 for men. Respective pilot programs have been launched in Jiangsu and Shandong.

  • The plan also raises both qualitative and quantitative targets for elderly care services, already yielding an expansion in total facilities of 5.3% in 2021. The problem: A policy focus on the supply is largely not met by the corresponding demand, and around half of the available beds remain empty. Chinese elderly still often prefer home-care, and the many vacant private elderly homes are quality- and price-wise not attractive.

  • To improve the national healthcare system and ensure a more universal affordability, the 14th FYP focuses on the Volume-based Procurement (VBP), China’s system for bulk procurement of drugs and medical consumables, together with the dynamic adjustment of the National Reimbursement Drug List (NRDL) that decides on reimbursement eligibility via basic medical insurance. These initiatives cover around 60% of all sold drugs in China have reduced prices substantially. The plan has also been pushing for accelerated drug approvals. Today, drug approval times in China are generally on par with those in the US or in Europe.

  • To address deficiencies in the country’s pension system, the 14th FYP for the first time mentions a “third pillar”, i.e., private commercial pension and savings options. The “Exclusive Commercial Pension Insurance” scheme, a new type of insurance for gig economy workers, for instance has started pilots in Zhejiang and Chongqing with a cumulative premium of 400m RMB within six months. This scheme is now being rolled out nationally as of March 2022.

  • The 14th FYP also recognizes continuing deficiencies in China’s education system such as unequal access to education and gaps in vocational education. It therefore raises the quantitative targets for access to education, such as the high-school and pre-school education enrollment rates, high-quality vocational education and training (VET) schools and majors etc. As per official indicators, this work is on track.

  • While there are no explicit goals on poverty alleviation in the 14th FYP, the government wants to make sure to safeguard the formal achievements made towards the first centennial of officially eradicating absolute poverty by mid-2021. Through targeted assistance, regular monitoring of vulnerable people or job programs, the government seems confident these days that the vast majority of low-income people won’t slide back into poverty. .

Implications

  • The rapid demographic trends unfolding in China are a major factor in the government’s push for Common Prosperity, emphasizing the centricity of the “people” in the new development philosophy. While Beijing wants to steer clear from any form of “welfarism” (fulizhuyi), the 14th FYP makes clear that private as well as public services in elderly care, education, or rural development will receive more policy attention in the years ahead.

  • And this social policy focus, to some extent, will be upheld even against the overriding goal of the government to prioritize economic and industrial development, to avoid “getting old before getting rich”, or falling into the middle-income trap.

  • This also means relevant business opportunities. Besides core government responsibilities such as compulsory education, private actors can thus expect continuing policy easing or even encouragement in fields such as elderly care, innovative drug development or commercial pension schemes – all huge and rapidly growing markets.

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