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China's smart health care plan can unlock its economic future

Getting it right will boost consumption across all generations

| China
A woman pushes an elderly man on a wheelchair in Beijing on May 10: health care spending is expected to increase from less than 5% of GDP to over 10% by midcentury.   © AP

Lauren A. Johnston is visiting senior lecturer at the University of Adelaide. She is founder and managing director of New South Economics.

Chinese Vice Premier Liu He recently spoke of the importance of high-quality growth and technological innovation for future economic growth. For Liu, entrepreneurs are like fish. They will swim over when the water quality and temperature are right. But what are the best conditions for those fish to thrive?

When it comes to China, the dominance of its state sector in areas like finance, debt-infused infrastructure and housing-led growth gets lots of attention for how these inhibit entrepreneurialism. December's Central Economic Work Conference meanwhile highlighted that China's economy faces triple pressures in demand shrinking, supply shocks and weakening expectations.

With the added context of China's newly rapidly aging population it is, though, the health care sector that looms as one of China's most critical, directly and indirectly. This is evidenced in the November "Smart Health Care Industry Development Action Plan (2021-2025)", where the sector is the understated nexus of high-quality growth, technological innovation and sustainable health care.

Health care spending in China is expected to increase from less than 5% of gross domestic product to over 10% by midcentury. As the country's roaring economy otherwise slows down, health care and biotech offer growth worth hundreds of billions of dollars as so many workers -- Mao's children -- retire and need looking after over the next 20 years.

China's total fertility rate peaked in the mid-late1960s at more than six births per woman. For China's economy not only to look after its retirees but also to grow through it and potentially even boost consumption, successfully tapping the needs of this cohort will be fundamental. The availability and cost of health care is key.

The success or failure of China's new Smart Health Care Industry Development Action Plan, whose three parts are a guiding ideology, basic principles and a development vision, will be deterministic therein. So will its potential for generating broader technological spillovers for the economy in the process.

The first part, unsurprisingly, relates to Xi Jinping Thought. The second states that the needs of China's now burgeoning retiree pool should be met by upgrades to the supply of related products and services and should meet both health and pension needs. The third sets out a more detailed vision of how China plans to adopt technology to sustainably cater to millions of rich and poor elders while continuing to realize longer-term national development goals.

That third component of a smart health and elderly care industry offers a window to how China plans not only to foster technological innovation-driven growth but also to affordably cater to the needs of half a billion pensioners. The sheer volume of demand may enable both.

With the supply of basic related products and services expected to improve by 2025, along with a narrowing of the digital gap between the elderly and the rest of the society, the plan is urging the development of a new generation underlying technologies, including chips, sensors and operating systems. China's core technology agenda and its mega-scaled elderly care agenda are increasingly one and the same thing.

An attendant demonstrates a display at the PT Expo in Beijing on Sept. 28: China's core technology agenda and its mega-scaled elderly care agenda are increasingly one and the same thing.   © AP

While it does not elaborate any local let alone foreign investor incentives, the plan does call for the development of intelligent, miniaturized, high-sensitivity biosensing tech that is fast-charging and lightweight and suitable for application to large-scale and individual health management.

In terms of management, investment in integration and fusion application capabilities in areas such as behavioral monitoring, physiological detection, indoor and outdoor high-precision position and fall protection technology, health data analysis are all intended to allow the elderly to remain independent for longer, as are advances in home care robot technology.

In a health care context, research breakthroughs that facilitate rehabilitation intervention technology, neuromodulation technology, motor function rehabilitation, feedback and functional compensation and more -- all form part of Smart Health Care Industry Development Action Plan. Backing this up is the need for advances in baseline technologies, such as in semiconductors. It even includes the smart digitization of traditional Chinese medicine, whatever this might mean in practice.

If the plan is effective, it will also help to reduce the burden of aged care on China's younger population. Already there are a multitude of apps that allow adult children to support and monitor their parents from a distance, including by paying for products and services and being notified of sudden behavioral changes.

It will also foster new sources of growth directly through related innovation and services and their positive economic spillovers. But perhaps most importantly, yet also less obviously, if these innovations serve to help shape a more modern, affordable and accessible Chinese health care sector, this will go some way to unlocking consumption in China across all generations.

China's high household savings rate has been associated with everything from Donald Trump's trade-hinged political agenda to China's skewed birth ratio in favor of boys. Families with a son are found to save disproportionately. But it is far more directly associated with precautionary savings to cover the inhibitive cost of health care.

As China's growth slows, and world economy becomes more fragmented and the number of retirees in China explodes, the cost and accessibility of health care in China will be fundamental not only to China's push for innovation-led growth but even to diminishing global imbalances. Progress and incentivization of China's new Smart Health Care Industry Development Action Plan is worth watching.

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