ABSTRACT
In China, medical care is one of the few industries that is still dominantly owned and
managed by government. In 2001, privately owned for-profit hospitals accounted
for only less than 1% of total hospitals; the number of beds, doctors, and nurses
in private hospitals accounted for 1.4, 9.4, and 0.8%, respectively. As it did for
other state-owned enterprises, the economic reform brought market competition to
state hospitals. Under the current policy, hospitals must be financially independent;
funding from the government is fixed and accounts for less than 20% of total revenue
for most hospitals. Market competition has forced some hospitals into financial
insolvency. Competition has also induced behaviors leading to inefficient resource
allocation from societal perspective.
