China's New Social Policy: Initiatives For A Harmonious Society Initiatives for a Harmonious Society

After more than 30 years of rapid development, China has established herself as an important engine of growth for the world economy. This achievement, however, came with a heavy price, in the form of serious pollution in its developed regions and social problems in areas such as healthcare and housing. This publication studies some of such problems and provides an updated account on a wide range of new social policy initiatives in China.China's New Social Policy distinguishes itself from other literature in this field. It undertakes a general methodology that assesses the social impact brought about by the market-oriented changes in China's social policies, and contests the idea whether market-oriented development can result in a more sustainable society. All chapters in the book are crafted by prominent scholars, which include Professor Zheng Yongnian, Director of the East Asian Institute, and Professor Gu Xin, School of Government, Peking University. Contents 6 Acknowledgement 10 About the Editors 12 About the Contributors 14 Introduction 18 1. Economic Reform, Social Policy and Political Transition in China Zheng Yongnian 28 Economic Reforms 30 Social Reforms 31 What Type of Democracy is China Developing Into? 35 2. Towards Central Planning or Regulated Marketization? China Debates on the Direction of New Healthcare Reforms Gu Xin 40 Setting the Scene: Market Reforms and High Healthcare Cost 41 Central Planning or Regulated Marketization? 46 Reforms in Healthcare Delivery: Restoring a Planned System? 51 Concluding Remarks 54 3. Direct Provider Subsidies vs Social Health Insurance: A Compromise Proposal Åke Blomqvist and Qian Jiwei 58 What Has Been Done So Far? 59 Proposals for Increased Provider Subsidies 61 Social Insurance versus Direct Subsidies to Providers 62 A Compromise: Government Purchasing of Health Services 64 Why is Third-party Party Purchasing Needed in Health Care? 64 Why Market Competition in Health Care May Not Be Effective? 65 Third-party Purchasers in the Private Sector: Prepaid Care and Competition for Contracts 66 Purchasers in Publicly Funded Systems 67 Integrating the Social Insurance and Provider Subsidy Approaches in China: A Proposal 68 How Should Purchasers Pay Providers? 70 Retrospective Payment via Fee for Service and the Cost of Care 71 Prospective Payment Methods I: Salary and Fixed Budgets 71 Prospective Payment Methods II: Capitation in Primary Care 73 Alternative Payment Methods III: DRGs for Hospitals 75 How Much Should Patients Pay? Demand-side vs. Supply-Side Incentives 76 User Fees: Paid to Providers or Purchasers? 77 One Purchaser, Several Plans? 78 Conclusion 79 Appendix 1: Opting Out and the Role of Private Insurance 81 Appendix 2: Models of Purchasing in Publicly Funded Health Insurance 84 Additional References 88 4. China’s Higher Education: Growth and Problems Zhao Litao and Sheng Sixin 90 Reviving Higher Education after the Cultural Revolution 91 The Rapid Expansion of Higher Education Since 1999 93 Funding Higher Education’s Expansion 96 Government Spending 97 Private Higher Education Institutions 98 Bank Loans 99 Independent Colleges 99 University Town 100 Tuition Fees 100 Developing World-Class Universities Since the 1990s 101 Problems of Higher Education Expansion in China 103 Looking Ahead 107 Additional References 109 5. China’s New Public Housing Policy: The Case of Xiamen Liang Ruobing 110 Market-Oriented Reform in the 1980s and 1990s 111 Impact of the Housing Reform of the 1990s 113 Property Boom and Reasons Behind 114 New Public Housing Policy in Urban China 117 Xiamen’s Public Housing Project 119 Unresolved Issues and Problems 122 Promoting Xiamen’s Pattern: Difficulties Faced 124 Conclusion 126 Appendix III: Geographical and Demographical Features of Xiamen. 130 Appendix IV: First Phase of Planned Construction Projects of Xiamen’s Public Housing 2006. 131 Appendix V: Regulations on Allocation and Management of SSCH and SSRH in Xiamen. 132 Appendix V: 133 6. Land Market Development in China’s Central-Local Relations Su Fubing 136 Land Market and State Regulations in China: Some Institutional Background 138 Implications on the Liberalisation of China’s Land Market 138 Boom in China’s Land Market 141 Land Development: Some Positive and Negative Consequences 143 Positive Effects of China’s Growing Land Market 144 Negative Effects of China’s Growing Land Market 147 Building an Efficient Land Market: Central Policies and Local Experiments 151 Increasing Transparency in the Sale of Land Use Rights 151 Farmland Preservation Quota and Cross-Region Land Purchasing 152 National Land Supervision System 154 Defining Land Rights to Farmers 155 7. A Long Way to Go Green: Rethinking China’s Environmental Policy, Laws and Governance Chen Gang 158 China’s Environmental Laws and Regulations 160 Basic Environmental Law 160 Specialised Environmental Laws and Regulations 162 Bureaucratic Structure Concerning Environmental Governance 163 Central-Level Administrative System on Environmental Protection 163 Weakness of Local Environmental Protection Departments 166 China’s Major Environmental Problem 169 Water Pollution and Water Shortage 169 Air Pollution 171 Solid Waste Pollution 172 Protecting the Ecosystem 173 New Environment Policy and Programmes 174 Banning Industrial Projects Along Major River Systems ( ) 174 Usage of Clean Energy 174 “Green-Credit Policy” ( ) 175 Usage of Green Indexes to Measure Economic Performances 176 Setting Up a Green Fund 177 Eco-City Project 177 Discussing Levy of Environmental Tax 178 A Long Way to Go Green 178 Appendix: China’s Environnemental Protection Apparatus 180 8. China’s Looming Water Crisis: Is Beijing Struggling to Overcome It? Yang Mu and Teng Siow Song 182 Water Shortage in China 183 Excessive and Wasteful Water Use 185 Water Pollution: A Worsening Problem19 187 Further Urbanisation Raises Water Demand and Pollution 190 Dealing with China’s Water Crises 192 Controlling Water Pollution to Increase Supply of Clean Water 193 Increasing Water Supply in the Drought-Prone North 194 Increasing Water Supply in the Growing Cities 196 Water Market Restructuring 197 Moderating the Demand 198 Policy Dilemma 200 Foreign Participation in China’s Water Industry 201 Opportunities for Singapore 205 Conclusion 206 Appendix 207 9. The Tainted Milk Formula Incident: Another Hard Lesson for China Zhao Litao and Lim Tin Seng 212 The Unfolding of the Milk Formula Incident 213 China’s Growing Dairy Industry 215 Cutting Corners to Stay Competitive 218 Tainted Formula as a Government Failure 221 Government Response to the Incident 223 Winners and Losers 225 10. A Pivot for Change: The Potential Role of the Haigui in Addressing China’s Social Problems Yang Mu and Tan Soon Heng 228 Haigui: From the Past to the Present 228 Haigui’sContribution to China’s Technological Advancement 235 Managing Social Issues: Haigui’s Experience in China’s Reforms 238 Additional References 240 Index 242 After more than 30 years of rapid development, China has established herself as an important engine of growth for the world economy. This achievement, however, came with a heavy price, in the form of serious pollution in its developed regions and social problems in areas such as healthcare and housing. This publication studies some of such problems and provides an updated account on a wide range of new social policy initiatives in China. China's New Social Policy distinguishes itself from other literature in this field. It undertakes a general methodology that assesses the social impact brought about by the market-oriented changes in China's social policies, and contests the idea whether market-oriented development can result in a more sustainable society. All chapters in the book are crafted by prominent scholars, which include Professor Zheng Yongnian, Director of the East Asian Institute, and Professor Gu Xin, School of Government, Peking University