US to Urge China to Improve its Safety Net

[Puppycow]

This article (http://online.wsj.com/article/SB124353389041863413.html) contains something slightly ironic considering the popular concept of what socialism (or communism) is supposed to mean and what capitalism is supposed to mean.

WASHINGTON -- Treasury Secretary Timothy Geithner heads to Beijing this weekend to urge Chinese leaders to fundamentally alter the export-oriented economy that has created years of trans-Pacific trade tensions.

In meetings with Chinese President Hu Jintao and Premier Wen Jiabao, Mr. Geithner is expected to reiterate U.S. support -- and gratitude -- for the giant stimulus package that China has implemented to combat the global recession.

But he is also planning to press Beijing to take drastic measures to turn China's economy into one that depends heavily on sales to domestic consumers and less on sales to the U.S. and other foreign markets, according to a senior Treasury Department official.

That means encouraging Beijing to offer more generous health-care, retirement, welfare, educational and other benefits in order to persuade the average Chinese citizen that spending now doesn't mean starving later.

"The efforts China could take would be efforts to strengthen the comfort that Chinese households have in spending, which largely involves reducing or addressing the reasons why they feel such a great need to save for precautionary purposes," said the senior Treasury official, who briefed reporters Thursday in advance of Mr. Geithner's departure on Saturday.

BTW, is the PRC supposedly a communist country or a socialist country? And is there not in fact a social safety net in the PRC? I thought that capitalism was supposed to be the "sink or swim on your own" system and socialism and communism were supposed to be the ones with generous "safety nets." So much for that idea, I suppose?

[Number Six]

I read just recently for the first time...and I think it was a Harriet Hall article in Skeptic magazine but I'm not sure...that China doesn't have nationalized health care and people have to buy their own health insurance. I assumed otherwise before that.

[Puppycow]

I read just recently for the first time...and I think it was a Harriet Hall article in Skeptic magazine but I'm not sure...that China doesn't have nationalized health care and people have to buy their own health insurance. I assumed otherwise before that.

I just looked it up, and you're right (http://content.nejm.org/cgi/content/full/353/11/1165)

China's transformation into a major world power makes its domestic affairs — and particularly, its internal political stability — potentially important for people around the globe. In that context, one of the most fascinating and important aspects of China's recent history has been the evolution of its health care system. As its economy boomed, in part by emulating Western economic methods, its health care system nearly imploded, partly because China adopted (wittingly or not) the strategies of some U.S. proponents of radical health care privatization. Ironically, the citizens of the United States, a bastion of capitalism, now enjoy far more protection against the cost of illness than the citizens of China, a nominally socialist nation. As a result, China faces huge health care problems that make those of the United States seem almost trivial by comparison and that constitute a major potential threat to China's domestic tranquility. At the same time, with governmental coffers swollen by tax revenues from its booming economy, the Chinese have opportunities for health care improvement that Western policymakers can only envy. This combination of massive challenges and huge opportunities makes the Chinese health care system a unique laboratory that Western health care planners cannot afford to ignore. The choices that Chinese officials make now could profoundly affect their future ability to manage epidemics, such as epidemics of the severe acute respiratory syndrome (SARS) and the feared avian influenza, that could affect the welfare of humans everywhere.

[Wolfman]

China wants to have universal health care. However, given the size of their population, and their financial position, this just isn't feasible. Consider that the U.S. has a fraction of China's population, while it spends much more than China does...yet finding money to fund universal healthcare in the U.S. is very problematic, even if the government desires to set such a system up.

Add to this the fact that 60% of China's population is a peasant populace...so the taxes to cover the costs of such a system would be borne by only 40% of the population.

It is pretty much standard practice, in urban areas, that one's employer pays for your health insurance. So most people in the cities, with regular jobs, do have at least some degree of coverage. However, in the rural areas (where the majority of people live, and where the need for medical coverage is generally greater), many people have no insurance at all. If they face a medical emergency, the costs can absolutely bankrupt them (if they can afford it at all).

An even bigger problem is that both doctors and nurses are woefully underpaid (they are very much at the lower end of the employment payscale). Their salaries are intentionally kept low, in order to try to keep the costs of medical care low. However, this means that many people don't want to go into the medical profession; and many of the best doctors will leave the medical practice in order to pursue more lucrative positions in private companies.

However, the whole "sell more to your own people and less to other countries" thing is fundamentally ludicrous. Imagine the reaction in the U.S. if their leaders started telling them, "We want you to cut down on exports to foreign markets, and focus exclusively on the U.S. market". Or if China responded by saying that, in line with that policy, they would restrict all foreign companies and products in China, in order to create a larger domestic market for Chinese products.

I can't believe that the people proposing this actually expect anything to result; I rather suspect it is just a political ploy, so that they can come back and say, "Look, we're doing everything we can."

[Number Six]

As far as the bit about keeping costs down, I think I read, but I'm not certain...and maybe in the same article that I read about China not having universal health care...that one of the reasons for a resurgence of TCM and acupuncture in the past 50 years or whatever is that Mao wanted to deliver cheap health care to his people, or at least make them think he was delivering it, and real health care cost too much so they want more with the TCM route instead. In fact, I think the article went so far as to say that Mao's regime coined the term TCM. And it also said that Mao didn't believe acupuncture actually worked. This was 2-3 issues of Skeptic ago I think, but I could be mistaken.

[rjh01]

<snip>
However, the whole "sell more to your own people and less to other countries" thing is fundamentally ludicrous. Imagine the reaction in the U.S. if their leaders started telling them, "We want you to cut down on exports to foreign markets, and focus exclusively on the U.S. market". Or if China responded by saying that, in line with that policy, they would restrict all foreign companies and products in China, in order to create a larger domestic market for Chinese products.<snip>

I agree that the above approach is not right. China should say "we want to be a major developed country. What have these countries got that we do not have?" They find out that answer and then spend money in getting it. If they need to pay their medical staff more money (as one small part of the answer) then so be it. They have massive foreign currency reserves, so money is no real issue.

[Puppycow]

However, the whole "sell more to your own people and less to other countries" thing is fundamentally ludicrous. Imagine the reaction in the U.S. if their leaders started telling them, "We want you to cut down on exports to foreign markets, and focus exclusively on the U.S. market". Or if China responded by saying that, in line with that policy, they would restrict all foreign companies and products in China, in order to create a larger domestic market for Chinese products.

I can't believe that the people proposing this actually expect anything to result; I rather suspect it is just a political ploy, so that they can come back and say, "Look, we're doing everything we can."
I don't think it is as ludicrous as you say. (That is, I don't think that your framing is correct.) It's not really a matter of whether to produce goods for export or for domestic consumption. The market can decide that ratio rationally if the currency is allowed to find its natural market level (currency pegging is a related issue). It's more the level of national savings.
The Chinese spend so much money propping up the US dollar instead of investing in China. The savings rate is too high. The standards of living in China could be improved if the Chinese spent more money instead of saving it all and creating asset-price bubbles in other countries.

[Wolfman]

I don't think it is as ludicrous as you say. (That is, I don't think that your framing is correct.) It's not really a matter of whether to produce goods for export or for domestic consumption. The market can decide that ratio rationally if the currency is allowed to find its natural market level (currency pegging is a related issue). It's more the level of national savings.
The Chinese spend so much money propping up the US dollar instead of investing in China. The savings rate is too high. The standards of living in China could be improved if the Chinese spent more money instead of saving it all and creating asset-price bubbles in other countries.I'd agree with you in part. However, China's already been doing this for years. Their economic stimulus package, when the economic crisis hit, was one of the largest and most aggressive of any country in the world. And instead of spending billions of dollars propping up failing industries like the States did, the majority of that money went directly into the economy, and on stimulating both production and spending.

China has likewise been lengthening and reorganizing its national holidays specifically in order to encourage greater tourism, and spending.

I'd also like to point out the huge amounts of money -- hundreds of billions of dollars -- that both government and private industry in China have put into buying foreign companies and resources. This means that more money is, in fact, flowing out of China. But, of course, China inevitably gets criticized for this, also.

The U.S. has, for decades, had a policy of pursuing what is best for the U.S. -- not what is best for the world (and justifying it by claiming that what is best for the U.S. is what is best for the world). Now, things are falling apart for them...and China is supposed to turn around and, despite facing much bigger problems and challenges than the States, they are supposed to base their policies on what is best for the world (or, more accurately, what is best for the U.S.).

China rode out the Asian economic crisis in the 90s, while every other major Asian nation almost collapsed. China has been able to face the current economic crisis and handle it more decisively, and with less internal damage, than many other nations. Yet they are supposed to buy into the idea that the best course of action is one that, in future, would actually make them more susceptible to such disasters.

A rather hard sell, in my opinion.

I'm not saying they're right; but from their perspective, I don't see anyone making arguments that are even remotely persuasive.

[BPSCG]

Yeah, if I were running China's economy, I'd be taking economic advice from my biggest debtor, whose remedy for his own debt-ridden social safety net is to double his debt over the next few years.

At best, I'd be trying to figure out how to provide decent health care for everyone while avoiding the Americans' mistakes.