Market Transition and the Transformation of the Health Care System in Urban China

During the pre-reform era, a free health care system evolved in urban China. Uniquely, the finance and administration of this system were based on the workplace rather than on the state. During the dramatic transition from a planned to a market economy which has taken place since 1979, this free health care system fell into a financial crisis in the 1990s and thus has become an institutional impediment to the marketization and privatization of state-owned enterprises, prompting the Chinese state to launch successive rounds of health reforms to transform it into a new health care insurance system. The new system is a contribution-based one administered by local governments. The contributions from both employers and employees are managed in two accounts, the social coordinating account and the individual account, which cover different payments for health care. As launching such a health care reform is against almost all vested interests in urban society, the full autonomy and high capacity of the Chinese state are required for its implementation.