31 May 2011

China SignPost™ (洞察中国) #36–Internal Challenge: China’s diabetes epidemic highlights how rising healthcare costs could constrain economic growth and military spending

Gabe Collins and Andrew Erickson, “Internal Challenge: China’s diabetes epidemic highlights how rising healthcare costs could constrain economic growth and military spending,” China SignPost™ (洞察中国), No. 36 (31 May 2011).

China SignPost 洞察中国–“Clear, high-impact China analysis.”©

As analytical attention (including a substantial portion of ours) focuses on China’s growing military power and economic influence, both in East Asia and further afield, it is also important to step back and realistically assess major domestic challenges that Beijing faces. Healthcare costs are becoming a key issue as China grapples with a rising incidence of diabetes, which already afflicts roughly 10% of Chinese adults—almost identical to the U.S. rate of 11%. China is now has roughly 92.4 million diabetes sufferers, the largest number of any country. Sadly, the numbers continue to rise rapidly, exacting an increasing toll in economic and human terms.

In 2007, China’s diabetes epidemic accounted for more than 14% of healthcare expenditures and cost the country at least 0.6% of GDP in lost productivity, according to the Economist Intelligence Unit. The EIU based its assessment on the assumption that 4.3% of Chinese have diabetes, but new estimates place the rate at around 10%, meaning that the costs of diabetes on China’s economy from productivity losses are probably closer to 1.5% of GDP. Atop this, the International Diabetes Federation estimates that in 2010, China directly spent around US$6.9 billion on diabetes treatment.

This suggests that many patients are not being treated or are receiving inadequate care, setting the stage for additional costs and higher mortality from complications later. Managing Type 2 diabetes (the most common type) currently costs an average of US$6,000 annually per patient in the U.S., according to The New York TimesAssuming China can treat diabetes patients at 1/3 of the annual U.S. per patient cost and that even 25% of China’s estimated 92.4 million diabetes population is being actively treated, the annual cost for treatment alone would come out to roughly US$46 billion per year. This is equal to half of China’s officially stated 2011 defense budget. …