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The following text summarises chapter 2 from the OECD publication Challenges for China's Public Spending: Toward Greatere Effectiveness and Equity.
A large part of public spending funds investment, with total outlays amounting to 9% of GDP in 2002. This ratio is higher than that of nearly all OECD countries and most other large developing countries. In addition, a relatively large portion of spending, almost one-fifth of on-budget outlays, goes to public administration, most of which is spent by sub-national governments. Investment and public spending have both increased as a share of total government spending over the past decade.
In contrast, a relatively low portion of outlays are made on basic human welfare and development needs, such as education, health, science, and social security. Furthermore, the share of total spending going to education, health, and science has fallen over the last decade. In relation to GDP, public spending on education and health is well below that of nearly all OECD as well as most comparable developing countries, while private spending in these areas is among the highest in the world.
Public and private education spending as percentage of GDP in selected countries, 2001
1. Including government subsidies to households for education and direct payments to educational institutions from international sources.
2. Net of public subsidies for educational institutions.
3. Public subsides to households are included in private expenditure.
4. Direct expenditure on educational institutions from international sources exceeds 1.5% of all public expenditure.
5. Year of reference 2000.
6. Year of reference 2002.
7. Includes on-budget and extra-budgetary education-related spending.
Source: OECD (2004) and China Educational Finance Statistical Yearbook, 2002
Public and private health spending as percentage of GDP in selected countries, 2002
1. For China, public expenditure on health includes government on-budget health spending and outlays of the health social security funds. Private health spending comprises spending by individuals, enterprises, collectives and public service units.
Source: OECD Health Data, 2003 and the Health Yearbook of China, 2004.
Educational attainment and health quality compare reasonably well with other countries at a comparable stage of development. However, the low level of government spending on education and health has led to widespread inequalities in education and health spending, with urban areas and coastal provinces spending much more than rural areas and many provinces in the centre and west of the country. This leads to marked differences in outcomes: literacy rates, years of schooling, and life expectancy are all much lower in rural areas compared to urban areas. The health care system has come under increasing strain and according to some reports is in near-crisis.
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