Health reform to boost economy

Healthcare reform will counter the financial crisis by pumping money into local businesses and boosting consumption, experts say.

Ge Yanfeng, director at the Development Research Center affiliated to the State Council, said infrastructure projects will be awarded to businesses and help drive economic growth.

In addition, the new medical insurance system will allow households to spend money previously set aside to cover medical bills.

He also said it will give many people a better quality of life and this in turn could lead to increased consumption.

"The healthcare reform will provide a motive for China's economic growth," Ge told the Xinhua News Agency.

Li Yingpeng, analyst with China Galaxy Securities Company Limited, said the government needed an additional 50 to 60 billion yuan to fund its promise to increase the annual medical insurance subsidy. It will be increased from 80 to 120 yuan per person by 2010.

It also needed to raise billions of yuan to finance plans for increased reimbursement of hospital costs.

However, both plans will help remove insecurities about the health system and could lead people to spend more money in the domestic economy, said Zhao Xijun, a finance professor from the Renmin University of China.

Li Ling, professor with Peking University, said plans to supply public hospitals and clinics with essential drugs at government-regulated prices will reshuffle the pharmaceutical industry.

According to official statistics, the healthcare budget this year is 341.6 billion yuan, an increase of 36.68 percent from the previous year.