In your book, you mentioned “ Chinese consumers” are the centerpiece of the Next China. In order to stimulate consumption, it seems that the addressing issue of retirement and medical care is a crucial and critical and very urgent task that China’s one of the priorities now.Sowhat do you think the private capitalcan do in this regards?And can we say that the research issues like “health care financing” will be the next frontier research topics?
I think there are a lot ofprivate marketand private companies can do to help address this safety issue.The system’s focused in recent years by the Chinese government has been to expand its enrollment in social security or nationwide health but not to deepen its benefits. They system does not pay enough benefits to Chinese people when they need to go to the hospital and they think about retirement, there is a big funding issue I think the government has the awareness of its all to provide ample sources of funding through its surplus savings. But there is another aspect of the safety net issue, it is to provide sector’s solutions. That’s the development of modern technology-equipped health care service hospital clinics in urban and rural areas, certainly needs considerable focus in China today.
One of the areas that I think a lot about is the need to focus more on rural healthcare delivery systems.One of the unfortunate disadvantages of your new infrastructure enables rural families to go to the city for healthcare. The demand for health services in rural areas suffers because of the modernized infrastructure that encourages the families to go to the cities.I’m a big fan and very positive about infrastructure built in your country, but you can’t neglect having modern clinics in rural centers. Special attention needs to be given to that and your hospital systems are improving but there is a lot needed to be done.
Finally, everyone knows you have a very serious and very rapidly aging problem. With the aging comes to need for assisted living, special care for seniors. You have a strong culture that the families take care of the elderly members but that is not a sustainable culture for a modern society. Special attention needs to be given to the medical needs of the elderly generation which is given your demographical trend a critical importance over the next 15-20 years.
In China we have an old traditional thinking, we always want to keep our house because we want to raise ourselves by our house. How do you think to use the house to provide for healthcare?
I think it is conflict between the traditions and requirements of healthcare for elderly in a modern system. Nobody wants to leave their home, but aging occurs and it demands lifestyle changes as you get older. There are the new type of trade-offs challenge these historical traditions and the answer is not an easy one. It just goes back to the point I made earlier that the support for elderly, it needs to greater funding by the government both from the point of social security and pension but also the benefits that is paid out by the healthcare system. If the government were to shift its focus now from the quantity of enrollment to the quality of the benefits, that would be helpful to address the very important question you have raised.
We are all dealing with the same issues with different systems. The laboratory for dealing with rapidly aging society is Japan. Japan has the oldest population in the world right now. If you look at the demographic profile of old age dependency ratio, the ratio of65% of the older to the working age population.Japan looks like China except it’s about 20 years ahead. China is going the same direction as Japan. So japan is ahead of focusing a lot on addressing its elderly issues.
In the class I teach in Yale, I took students through this comparison in great detail. I do this not just from the standpoint of demographics but other characteristics such as currency and debt. But from the standpoint of demographics, the characteristics in Japan are very similar to where China is headed, not today, but 20 years from now, if China does nothing in terms of addressing its child birth and retirement age characteristics. It will look like Japan. So I run some stimulations through the demographical data of UN. If you expand the family size by literally on average half a child or more per year, which seems very feasible to me given a shift occurred in the family planning the one child policy in recent years. If you raise the retirement age, it’s very important from say 65 to 70, which is very consistent with the improved lifestyles or survival rate of Chinese citizens. That could make real differences in avoiding the Japanese’s type of outcome for China.
The number and scale of Chinese enterprises that have listed in the overseas capital markets and raised corporate development funds to global investors are growing.Have you ever observed and studied the “China concept” in the global capital markets?What are the characteristics of its industrial structure on the whole? What kind of challenges do you think that Chinese local investing banks, securities, and others will face?
China, over the last, I say, 20 years, has embraced global capital market. It’s source of capital.And as a system that forces western style corporate governance on Chinese enterprises to raise that capital in global capital markets.I was very involved with a joint venture, CICC, that played a leadership role in negotiating for a lot of large Chinese companies in the 2000s.The government has more willing to take considerable risks in transforming the ownership structure, from state-owned to more of a market-based industrial structure.
Particularly in the last year,the government has placed a great deal of emphasis on state-owned enterprises and the reforms that were promised in the Third Plenary of 18th National Congress in November 2013.The state actually, I think, returned as a very powerful aspect of Chinese economy after 35 years’ of, but diminish the importance of the private sector has taken on.So that’s the worrisome of the development. I spent a lot of time looking at how Japan got the trouble by supporting insolvent Japanese corporations in the 1999s. Then they became zombies, the walking dead. There’s a risk of that in China right now. That’s a warning.
As for investing banks, CICC was the market leader in capital market activities in China for a long time. Because it was the only bank.But now there are competitors. That makes CICC have to work hard to maintain its market share.I think global investing banks, requires broad capabilities, including distribution around the world. That’s gonna be very difficult for Chinese companies to acquire.Morgan Stanley had a deal out institutional plans all over the world. It is very expensive thing to do. I don’t know if Chinese domestic securities forms are in the position of what they could have done there.