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A healthy relationship

By Nina Hachigian

As "formestic" policies become increasingly important, Chinese plans to invest in healthcare will benefit US-China relations.

Over the long run, investments for healthcare in both the US and China, kicked off by programmes in each of their economic stimulus packages, could matter more to US-China relations than the contentious issue of currency. Increasingly, these "formestic" policies will influence global politics in a world that is growing more interdependent.

On the day after President Obama's inauguration, when most Americans were too giddy to notice, Beijing announced that its domestic stimulus plans include investing some $123 billion over the next three years in a universal healthcare system. This is welcome news for US-China relations. Why? Because social safety net programmes will help grow a stable Chinese middle class and, over the long term, the growth of a broad, sustainable middle class in China will support the growth of a larger, more sustainable American middle class. As China moves up the ladder of development, Chinese citizens leave deep poverty and their wages rise, and they can then afford to buy higher-priced American products and services.

To grow a large and stable middle class, China needs to build a functioning social safety net beyond healthcare, an enormous project that is on Beijing's to-do list. A set of systems that reliably provide unemployment benefits, disability pay, investor protections, consumer protection, workers rights and affordable healthcare, as were built in America in the first half of the 20th century, will prevent Chinese people from backsliding into poverty. If China goes through with its stimulus investment in healthcare and strengthens the system from there, it will become an important foundation for a stable middle class.

The social safety net that China weaves will benefit our economy, too. At the moment, many Chinese feel they are just one sickness, ponzi scheme or natural disaster away from returning to poverty, so they save like crazy-some 50 percent of China's gross domestic product compared to America's savings rate of near zero. This disparity in savings, in turn, fuels the record-breaking trade deficit between the two countries.

Beijing should let its currency appreciate in the short term (as it was doing until the middle of last year), but a more significant rebalancing requires the Chinese to spend more and Americans to save more. Studies indicate that spending in China is higher in rural areas with government-sponsored health insurance programs.

China's healthcare system is also critical to global and American security. Wild bird migration patterns make China a likely ground zero for any major pandemic of avian flu. SARS was not a particularly lethal or contagious pathogen, but from Guangdong in Southern China, it spread to 30 countries in a matter of days and virtually shut down Asia. An avian flu virus that mutates so it can pass easily from human to human would be a truly devastating phenomenon; the avian flu pandemic of 1917 killed millions across the globe.

Many public health experts believe it is just a matter of time before we experience major outbreaks. A more capable Chinese healthcare system, along with a robust international detection and response effort led by the World Health Organization and better domestic preparedness are some primary elements in the architecture that determines Americans' safety.

That brings us to the American healthcare system, which also has implications for US-China relations and foreign policy. Doctors and hospitals are the bulwark against a foreign microbial threat that could, even in the near term, slay hundreds of thousands or even millions of Americans, which is why it was shortsighted for Congress to strip the funding to fight pandemics from the final economic stimulus and recovery deal.

But medical expenses are also a fateful economic issue. US businesses cite surging healthcare costs as a reason they offshore jobs. Obama's stimulus package throws $50 billion at digitising medical records to permanently reduce the administrative costs of health care delivery. That's a down payment on what the United States really needs-a comprehensive universal healthcare system for the sake of our own wellbeing but also for a healthy economic relationship with China, and the rest of the world.

Nina Hachigian is a Senior Fellow at the Center for American Progress