Policy Responses to Domestic Challenges

1. Policy Responses to Domestic Challenges Inequality

2. Inequality • Measures • Gini coefficient • 1980 .33 • 1995 .45 • 2002 .45 • Urban-rural disparity is a big factor • As wage-earning has increased for rural residents (including migrant laborers), intra-rural inequality has declined.

3. Hu Jintao/Wen Jiabao leadership • Building a “harmonious society” • Attempt to address inequality

4. Inequality • Health care* • Education • Social Security  under-funded by state

5. Inequality in access to health care • Health care in rural China • As of 2000, roughly 80% of people in rural China were without health insurance of any kind • new Rural Cooperative Medical Scheme (2003) • Implemented in 86% of counties by 2007 • Subsidies per enrollee: • 40 RMB from the central government and 40 RMB from local governments • Reimbursement • Formula for inpatient service • Medical savings account for outpatient services and preventive care • Illness major cause of impoverishment • lack of health insurance raised the number of rural households living below the poverty line by an estimated 44% • low-income families had to cover high-out-of-pocket medical costs themselves • Access • “we do not find that the NCMS decreases out-of-pocket expenditure nor do we find that it increases utilization of formal medical service or improves health status, as measured by self-reported health status and by sickness or injury in the past four weeks. Our study indicates that despite the wide expansion of coverage, the impact of the NCMS is still limited.”

6. Fiscal system “broken” (C. Wong) • Expenditures very decentralized • Center allocates 30% of budget • Localities allocate 70% • Local governments tasked with funding • Health • Education • Society security • Welfare, old-age pensions, unemployment

7. Hu Jintao/Wen Jiabao leadership • Slowly shifting emphasis in inter-governmental fiscal transfers

8. Central-local regular intergovernmental fiscal transfers (equalizing)

9. Intergovernmental fiscal transfers to support rural tax/fee reform (equalizing)

10. Earmarked intergovernmental fiscal transfers (often disequalizing)

11. Attitudes toward inequality

12. Attitudes toward inequality