High Healthcare Costs Drive Savings in China, IMF Report Reveals
- High healthcare costs lead Chinese households to prioritize savings over spending, according to the IMF.
- In rural China, 8.7% of disposable income is allocated for healthcare, the second-highest globally.
- Targeted government spending in rural areas could lower the savings rate, the IMF suggests.
BEIJING — High healthcare expenditures are significantly influencing the saving behaviors of individuals in China, according to a new report from the International Monetary Fund (IMF) titled “Toward a New Economic Growth Model for China.” This report highlights that residents in rural China spend approximately 8.7% of their disposable income on healthcare, making it the second-highest rate among 20 major economies, surpassed only by the United States, which tops the list at nearly 9.9%.
In urban areas of China, healthcare spending constitutes around 5.4% of disposable income, ranking third and slightly above Canada’s spending levels. The disparity in healthcare spending becomes more pronounced when comparing per capita disposable incomes. As of last year, the United States reported a per capita disposable income of $68,289, over ten times greater than China’s figure of approximately 43,377 yuan, or around $6,400.
The economic divide becomes even clearer in rural regions, which only officially emerged from extreme poverty in 2020. Disposable income in urban China is significantly higher than in rural areas, at 56,502 yuan compared to 24,456 yuan, according to data from Wind Information.
The IMF’s analysis indicates that enhancing government expenditures on health and social security in rural regions could markedly decrease household savings rates. Yizhi Xu, an economist in the IMF’s Asia and Pacific Department, and Fan Zhang, the IMF’s deputy representative in Beijing, noted, “China’s social spending is low compared with international peers, and increasing that spending would lift consumption.”
Current findings demonstrate a savings rate of about 14% among rural migrants working in cities, versus roughly 6% for urban residents with hukou, or residency rights, which provide greater social welfare benefits than those available to migrant workers. Furthermore, Xu and Zhang highlighted that the continuing decline in housing prices has further strained consumption and fueled elevated household savings rates.
News Courtesy of CNBC
