High healthcare costs are encouraging households in China to save rather than spend, according to a new International Monetary Fund (IMF) book that identifies limited social spending and financial insecurity as barriers to stronger domestic consumption.
The report, titled Toward a New Economic Growth Model for China, found that rural Chinese households spend 8.7% of their disposable income on healthcare, the second-highest proportion among 20 major economies examined. Only the United States ranked higher, with healthcare accounting for nearly 9.9% of disposable income.
Urban China ranked third, with healthcare expenses absorbing 5.4% of disposable income, slightly above the level recorded in Canada. The figures highlight the financial burden medical costs place on Chinese households, particularly those living in rural areas, where incomes are substantially lower than in cities.
The disparity becomes more pronounced when healthcare spending is considered alongside disposable income. US per capita disposable income stood at $68,289 at the end of last year, more than 10 times China’s figure of 43,377 yuan, equivalent to approximately $6,400 in US dollar terms.
Within China, the income gap between urban and rural households further highlights the unequal capacity to absorb healthcare costs. Official data accessed through Wind Information showed that urban disposable income reached 56,502 yuan, compared with 24,456 yuan in rural areas. The country’s countryside officially emerged from extreme poverty in 2020.
The IMF argued that expanding public spending on healthcare and social security, particularly in rural areas, could reduce households’ need to accumulate precautionary savings and encourage greater consumption. Its analysis, drawing on prefecture-level data, found that targeted increases in government spending on health and social protection could significantly lower the savings rate among rural households.
“China’s social spending is low compared with international peers, and increasing that spending would lift consumption,” wrote Yizhi Xu, an economist in the north Asia division of the IMF’s Asia and Pacific Department, and Fan Zhang, the fund’s deputy resident representative in Beijing.
The researchers also identified a substantial difference in saving behaviour between rural migrants working in Chinese cities and urban residents with formal local residency rights. They recorded a savings rate of about 14% among people from rural areas working in cities, compared with approximately 6% for people holding an urban hukou.
The hukou household registration system determines access to certain social welfare benefits, giving urban residents with local registration rights greater access to support than migrant workers from rural areas. The difference in savings rates reflects the distinct circumstances of the two groups, although the study’s cited figures do not establish that healthcare costs alone account for the gap.
Housing market weakness is another factor restraining household spending. Xu and Zhang wrote that falling house prices in recent years had continued to weigh on consumption and contribute to elevated household savings.
The IMF’s findings place healthcare affordability and social protection among the factors influencing how Chinese households allocate their income, with rural families facing the combined pressures of lower earnings and a comparatively heavy medical spending burden.
