A well-known Chinese proverb relates the story of a thief who accidentally set off the doorbells as he attempted a break-in. Clasping his hands over his ears, the thief lulled himself into a false sense of security. Of course, he was caught, providing history with a classic anecdote of self-delusion. After the debacle over Severe Acute Respiratory Syndrome (SARS), the Chinese government was accused of deluding itself while covering up the severity of the SARS outbreak in China. The SARS outbreak is interesting because it provides a lens through which to understand the status of China: it caught a nation in the uncomfortable position of adjusting to globalization. China stands at a juncture between the new world order and the old—between an age of transparency and a legacy of secrecy.

Undoubtedly, China is becoming more economically integrated with the rest of the world. With entry into the World Trade Organization, the 2008 Olympics, the 2010 Shanghai Exposition, and a Formula One circuit in Shanghai, China has embarked on a roller-coaster ride of global integration. As the SARS situation illustrated, entry into and exit from China has become less restrictive, and with the assimilation of Hong Kong, another gateway into and out of China has opened. Travel to and from China has become more fluid, yet along with the benefits of the global economy also come drawbacks. Rough estimates indicate that China’s global domestic product growth for 2003 could be reduced by between 0.5 percent and 2.0 percent as a result of SARS. Morgan Stanley lowered an early estimate of 2003 East Asian growth, excluding Japan, from 5.1 percent to 4.5 percent, demonstrating that the rest of the world is no longer buffered from China’s plights.

It is within the paradoxical framework created by China’s dual desire for political stability and economic progress that SARS has reared its ugly head. The dilapidated state of the national healthcare system and the lack of transparency exposed during the SARS outbreak both illustrate China’s awkward position: the country is caught between communist trappings and capitalist yearnings. China has developed problems associated with a capitalist society even though only a small portion of the population has been able to reap the benefits of a freer market economy and globalization. Chinese society has had to suffer, and is still suffering, from the inefficiencies and the totalitarian grip of communist rule, which has revoked its socialist promise to provide widespread social welfare to the people. These problems have been particularly apparent in the government’s mishandling of the healthcare system since Deng Xiaoping’s rise to power in the late 1990’s and, specifically, during the recent SARS epidemic.

Ruthless Capitalism

Under Chairman Mao Zedong, more than 90 percent of the population of China enjoyed government-subsidized, cradle-to-grave healthcare. Those living in cities received more comprehensive coverage from hospitals, while the rural dwellers primarily sought medical attention from “barefoot doctors” and local clinics. These barefoot doctors—peasant paramedics—were trained and paid by the government to administer free basic medical care and mass prevention initiatives throughout the countryside. The government used funds from farming collectives to pay for rural doctors and clinics. Although this system provided only basic care, such initiatives helped double life expectancy in China to 65 years by the mid-1970s. In comparison to other developing countries such as India, Burma, Vietnam, and North Korea, China’s healthcare system was far more effective and was often held up as a shining example to the rest of the developing world.

Everything changed when Deng Xiaoping rose to power in 1979. The egalitarian values of the Mao era were discarded. Instead, the state was separated from the economy, and market forces took over in order to lead China to economic success. Deng’s famous phrase “to get rich is glorious” became a national mantra. As part of his pragmatic market reforms, farming communes were abolished, and as a result, government subsidies for social welfare services such as healthcare and education for the countryside evaporated. Urban workers were able to retain more healthcare coverage than their rural counterparts because many of them were employed by state-owned enterprises (SOEs) or directly worked for government or universities. But starting in the mid-1980s, SOEs went out of business at an increasing rate in the face of fierce competition from non-SOEs and foreign ventures. By 1996, 70 to 80 percent of SOEs were in the red because they no longer had monopolized markets and the resources they had enjoyed under the planned economy. They also had lost much control over fi ring and hiring employees. Many SOE employees have now been laid off or have suffered salary, pension, or health benefit reductions. According to a 1997 World Bank report, only 50 percent of the urban population of 400 million, and 10 percent of the rural population of 900 million have medical insurance.

The egalitarian social safety net that communism promised has given way to what some call ruthless capitalism. There has been almost a complete reversal from the Mao era. In the past two decades, the share of total healthcare spending paid by the government has dropped from 36 percent to just 15 percent, and patients are now expected to pay for nearly two-thirds of the total bill. In comparison to other developing Asian countries, which typically devote eight percent of total government expenditure to healthcare spending, China only contributes about fi ve percent of total health expenditures. Clearly, China is no longer the shining example of nationalized healthcare that it used to be. Yet when Deng Xiaoping introduced his capitalist reforms, there was widespread praise domestically and abroad for rejecting communist values in the economic sphere and embracing the free market. As China tries to maintain a balance between exposing its healthcare system to market forces and intervening to ensure that everyone has access to care, it may fi nd itself in a precarious position. A viable healthcare system is essential to achieve an economically successful free market system, yet the path to and realization of the market system may not bring about an equitable and effective healthcare system.