Socialism in China – lessons for the West

 

The Chinese Government and the West share many challenges – housing, education, welfare, inequality, health, defence, social stability, preventing drugs, terrorism and abuse of young people through the internet, and much more.

There may be some politics in the different starting points of governments, but the outputs are increasingly similar as responsible capitalism and market motivated socialism move more and more similar.

So it seems to me the West should be plugging into the deep research and outcome that are developed in China as part of their “scientific method”. Most of their research is of us!

An example of this given to me about 15 years ago by a Minister of Health and his close advisers was that the West had some good examples of health services, especially in France and Northern Europe, but the cost to the States was becoming prohibitive everywhere.

China is developing a concept of financing health which is different and does not put the financing responsibilities solely in the hands of politicians, nor the need to find value solely there.

China is, I was told, splitting its health funding into three broadly similar pots.

The first is the growing middle class – around 300 million now – who would buy their health care, maybe even from the providers for the other two pots. This class is now expected to grow towards 700 million plus by 2049 and so become the main pot. No drain on the State. Let the wealthy buy their own healthcare. Most Western societies do not go down that route even if it is sensible from a funding point of view.The USA is an exception but it is also very incomplete.

The second is the employees and dependants and retirees and their dependants. The employers will pay for that with contributions from their employees. They can provide some healthcare themselves, and they can provide most through insurance. The employers will be a good source of ensuring value for money and ensuring care for their employees, as opposed to remote political structures. No drain on the State.

The third pot is the vulnerable  and dependant in society- the unemployed, the disabled, the old and vulnerable etc. They will be funded by welfare funds whose main source of wealth will come from dividends from the state owned enterprises. No drain on the State.

The State will focus on managing and supervising and seeking quality. Additionally they will invest in various ways in hospitals and clinics although they will try to encourage private sector investment if it is compatible with public sectors estimates. They will manage the pharmaceutical companies who they want to be profitable so they can invest in r and d for new drugs and solutions. The Chinese state will be more focused on finding cures and not managing medications. Although they will control medications pricing.

The aim of total state spending is 5-6pc of gdp compared to 18pc in the USA and 10-13pc in the UK and Europe. The USA has split off middle class provision through insurance but it is heavily criticised for its cost. China will take a much tougher approach to earning levels of employees in the health industry and charges.

The following story is about China moving the soe dividend and shares to welfare funds. It is described as being a move to solve shortfalls in money for some sectors. I do not think that is what it is about. I expect this to be a test for about 5 years , and eventually the main shareholders of the soe’s to be the health and welfare funds.

We can do well by studying Chinese ideas, because they are borne from studying us: see point 2 below.

Stephen

 

(The following was taken from China Economic Review)

1. Fidelity survey points to a gloomy 2019, led by entrepreneurs’ pessimism in China

Worldwide corporate sentiment has dropped the most since 2014, with the Fidelity sentiment index measuring at 0.6 globally and -0.4 in China, according to a survey conducted by Fidelity International, reported the South China Morning Post.

The Fidelity survey began in 2014 and aggregates management confidence, capital expenditure, dividend policy, return on capital and balance sheets. Neutrality is set at 0, with a positive score indicating buoyant sentiment and a negative score signifying pessimism.

“This year’s pessimism has two core drivers, a weaker consumer and increasing costs of doing business; both of which threaten to squeeze profit margins in 2019,” said Michael Sayers, equities research director at Fidelity.

Fidelity attributed China’s negative index to the ongoing US-China trade war and the affects of Chinese consumers’ uncertainty about wage growth on consumer habits.
ECONOMICS & POLICY

2. China transfers $4.7 billion of PICC shares to state pension fund

China’s Ministry of Finance has transferred a 6.8% stake in the People’s Insurance Company of China (PICC) to the state pension fund, part of a pilot program to transfer state assets to make up for the country’s pension shortfall amid an ageing population and debt pressure, reported the South China Morning Post .

The Ministry of Finance transferred 2.989 billion PICC class A shares, valued at $4.74 billion according to the National Council for Social Security Fund. The transfer reduced the ministry’s stake in PICC to 60.8%.

Local government authorities are facing increasing pressure to meet their pension obligations as the nation’s population grows older, Finance Minister Liu Kun said last week in Beijing. The government faces a shortfall of about RMB 56.6 trillion ($8.4 trillion) in the basic pension scheme of urban workers between 2018 and 2050.

HUAWEI

3. US fears undersea cable network is compromised by Huawei projects

US security officials worry that the undersea cable network, responsible for intercontinental voice and data traffic, could be compromised as Huawei further embeds itself into cable systems that ferry nearly all of the world’s internet data, said the Wall Street Journal.

Huawei Marine Networks Co., majority owned by the Chinese telecom giant, has worked on 90 projects to build and upgrade seabed fiber-optic links, competing with the US, European and Japanese firms that currently dominate the industry.

At present, there are 380 active submarine cables carrying nearly 95% of intercontinental voice and data traffic, critical for the economies and national security systems of most countries.

US officials say the company’s access to the undersea cables could allow China to sever links to entire nations or divert and monitor data traffic.

ECONOMY

4. China’s electricity output rises 6.7% in February

Despite a recent drop in sales of cars and mobile phones, the head of the National Bureau of Statistics (NBS) has said that China’s economy is off to a good start in 2019, as the electricity output, a measure of industrial activity, rose 6.7% in February, reported the South China Morning Post.

The NBS will release China’s industrial production, retail sales and fixed-asset investment data for January and February this week, which will present the official picture of the economy at the start of the year.

In the first 10 days of March, the average daily electricity output also rose 11% in comparison to the same time last year.

SupChina highlighted that electricity output is often a more reliable indicator of economic conditions than GDP figures.

FINANCE & INVESTMENT 

5. Hong Kong biotech firm seeks $96 million listing on Shanghai’s new high-tech board

Fudan-Zhangjiang Bio-Pharmaceutical Co. Ltd. is the first Hong Kong-listed company to announce its intention to list on Shanghai’s new high-tech board, reported Caixin.

The biotech company recently announced it hopes to raise RMB 650 million ($96.6 million), after its board approved the issue of up to 120 million new A-shares at a price of RMB 0.10 each. The company is currently waiting for the approval of China’s securities regulator.

The biotech firms plans to spend RMB 240 million on research and development, and use remaining funds to increase its stake in a subsidiary and invest in a US-based project.

 



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