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China keen to avoid domestic backlash

November 26, 2011

 http://www.ft.com/cms/s/0/c6ca459e-1065-11e1-8010-00144feabdc0.html#ixzz1eJULkHqt

By Jamil Anderlini in Beijing Financial Times 21 Nov 2011

Ask anyone standing around in the crowded corridors of Beijing’s
Affiliated Children’s Hospital whether they think China should contribute
to a bail-out for debt-ridden European countries and they will respond
with scornful disbelief.
Here in the dirty, overcrowded wards, visitors can glimpse why there is
little enthusiasm in this country for bailing out rich Europeans while
most Chinese lack access to even basic social services.

The emergency waiting room resembles a crowded train station in a war
zone. The smell of urine hangs where people have relieved themselves on
the floor and sick and injured children spill out through the corridors
into the parking lot.

After waiting for hours, sometimes all day, patients in China are often
prescribed drugs they do not need, charged outrageous sums for unnecessary
tests and may be forced to pay bribes to doctors and nurses for anything
beyond rudimentary care.

With the Eurozone debt crisis spreading from Greece to Italy, Europe’s
embattled leaders have been looking to China and other emerging markets to
contribute to a bail-out fund they hope will stop the contagion.
On the surface, contributing to this fund makes sense for China.
Europe is China’s biggest trade partner and the country has $3,200bn in
foreign exchange reserves that it wants to diversify away from the US
dollar. Why not help out and buy a few extra bonds from the Europeans to
help them through their hour of need?
In private, Chinese officials say they are open in principle to
contributing to a bail-out. Beijing has been the first port of call as
European officials pass round the hat for donations to its financial
stability fund.
But Beijing is confronted by a dilemma not normally associated with
one-party autocracies.
It has to worry about a backlash in public opinion that could result from
rescuing what they perceive to be coddled, lazy Europeans so they can
continue retiring early and enjoying the world’s best health and social
welfare systems.
By contrast, China’s nominally Communist government has reduced its own
welfare obligations over the past three decades of reform and today its
public health, pension and welfare sectors are regarded as run-down and
inadequate.

No indication has been made that China would contribute, so debate on the
topic is subdued. But If China were to make a public announcement of a
contribution to the bail-out, it would no doubt spark fierce condemnation
on China’s rambunctious microblogs.

“If you ask a Chinese peasant farmer whether China should help save
Europe, he will ask you who’s going to save him,” says one senior official
working on China’s policy stance toward Europe.

Back in the wards of Affiliated Children’s, that is a common refrain.
“How can the government help foreigners but not help its own people,” says
one woman who has travelled nearly the length of the country to try to
find a doctor who can tell her why her child can no longer walk. “We’ve
had to go deeply in to debt just to try to get our son treated.”
According to China’s official central budget, public spending on
healthcare, including central government spending and transfer payments to
local governments, came to just under Rmb150bn last year.
That is roughly the same as public healthcare spending in Greece before
recent austerity measures were announced, and is equivalent to only around
one-eighth of what the UK spent on healthcare last year. China’s
population is 120 times the size of Greece’s and around 20 times the size
of the UK’s.
In addition to spending by the central government, local governments in
China are supposed to finance around 70 per cent of all public health
spending from their own budgets but many do not meet their commitments and
instead require hospitals to make up the shortfall themselves.
The World Bank says that in the Chinese health system “drugs are used and
overused in ways that are neither financially nor medically efficient”
because “both hospitals and doctors rely on drug sales for supplemental
income”.
Although public education is in better shape, China’s pension and welfare
systems, like the healthcare system, are still woefully inadequate.
By definition, China’s massive foreign exchange reserves cannot be spent
at home on fixing the country’s creaky health system or shoring up its
fragmented and elementary pension system.
But when Chinese officials suggest they may contribute $100bn, or more
than four times the amount the central government spent at home on
healthcare last year, to a European bail-out, they need to explain that
decision to people in China’s overcrowded emergency wards or risk
undermining the Communist party’s legitimacy.
Some officials joke that in this respect at least, the Communist party is
as beholden to public sentiment as politicians in Brussels or Athens.

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