Healthcare Costs Help Explain Why Chinese Households Save Rather Than Spend

Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

• How can healthcare costs influence whether households in China spend their income or save it?


• Why do rural residents and migrant workers face a different financial burden from urban residents?

Main Topic

Healthcare expenses can affect household decisions well beyond the cost of a doctor’s visit or a hospital stay. When people are concerned about paying for current or future care, they may set aside a larger share of their income instead of using it for everyday purchases. A recent book from the International Monetary Fund (IMF), Toward a New Economic Growth Model for China, identifies high healthcare costs as one factor that helps explain why people in China save rather than spend.

The research compares healthcare spending as a share of disposable income across 20 major economies. It finds that people in rural China spend 8.7% of disposable income on healthcare, the second-highest share in the comparison. The U.S. ranks first, with nearly 9.9% of disposable income going to healthcare. Urban China ranks third at 5.4%, slightly above Canada. These figures describe the share of income allocated to healthcare; they do not mean that households in the different places spend the same amount of money in absolute terms.

The proportion of income devoted to healthcare is only part of the story: the income available to pay for that care differs substantially between China and the U.S. At the end of last year, U.S. per capita disposable income stood at $68,289. The corresponding figure for China was 43,377 yuan in U.S. dollar terms, around $6,400. The U.S. figure was more than 10 times higher. As a result, a healthcare share that appears comparable as a percentage can represent a markedly different practical burden on household finances.

The pressure can be particularly pronounced in rural China. The country’s countryside only officially emerged from extreme poverty in 2020, and income levels remain significantly below those in urban areas. Official data accessed via Wind Information put urban disposable income at 56,502 yuan, compared with 24,456 yuan in rural areas. Urban disposable income was therefore more than twice the rural figure. When income is lower, healthcare costs can take up a substantial portion of resources that might otherwise cover food, housing, education, or other needs.

This relationship between healthcare costs and saving is important for understanding consumption. Saving can provide protection against uncertainty, including unexpected medical bills. However, when households feel they need to reserve money for healthcare and other risks, they may be less willing or able to spend on goods and services. This can constrain household consumption, an important component of broader economic activity. The IMF’s analysis suggests that healthcare costs are not the only reason people save, but they are one factor that can reinforce cautious spending behavior.

Social protection also differs across groups. The IMF authors cite prefecture-level analysis indicating that targeted measures to increase government spending on health and social security in rural areas can significantly reduce the savings rate among rural households. If public support helps households manage healthcare costs and other risks, families may have less need to hold back income as a precaution. The research presents this as a policy pathway for addressing both financial insecurity and subdued consumption.

Yizhi Xu, an economist in the north Asia division of the IMF’s Asia and Pacific Department, and Fan Zhang, the IMF’s deputy resident representative in Beijing, argue that China’s social spending is low compared with international peers. They write that increasing this spending would lift consumption. Their discussion links the availability of social benefits to household financial choices: when families have more reliable support, they may feel less pressure to accumulate savings for future needs.

The authors also report different saving rates for rural-origin workers living in cities and residents with urban registration. They recorded a savings rate of around 14% for people from rural areas working in China’s cities, compared with about 6% for people with urban “hukou” residency rights. Hukou status provides access to more social welfare benefits than migrant workers from rural areas receive. The difference in savings rates is consistent with the idea that access to public benefits can shape how much income people feel they need to keep in reserve.

These figures should be understood in context. A savings rate is not, by itself, proof that one particular expense or policy explains household behavior. Income, access to services, family responsibilities, housing costs, expectations about the future, and economic uncertainty can all influence saving decisions. The IMF discussion emphasizes healthcare costs and unequal social protection as relevant pressures, while also recognizing that household finances are shaped by several factors at once.

Housing conditions add another influence. Xu and Zhang write that declining house prices in recent years continue to weigh on consumption and contribute to elevated household savings. Changes in property values can affect how people view their financial security and future prospects. When households are cautious about housing wealth or economic conditions, they may postpone discretionary purchases and retain more money as a buffer. In this way, housing trends can reinforce the restraint associated with healthcare expenses and gaps in social protection.

Together, the evidence describes a set of connected pressures rather than a single cause of high saving. Rural households have lower disposable incomes than urban households, yet rural residents devote a relatively large share of income to healthcare. Migrant workers may also have fewer social welfare benefits than urban hukou holders, and the reported savings rates differ between these groups. Meanwhile, declining house prices have been identified as another factor weighing on consumption.

The policy implication presented by the IMF is that targeted public investment in health and social security, particularly in rural areas, may ease the need for precautionary saving and support household spending. This does not mean that every increase in public spending will produce the same result in every community. Outcomes depend on how support is designed, who can access it, and whether it addresses the costs and uncertainties households actually face. Still, the analysis makes a clear case for considering social protection as part of efforts to understand consumption patterns.

Key Insights Table

Afterwards...

The IMF’s findings point toward several areas for further study. Researchers and policymakers can examine how health insurance design, out-of-pocket expenses, and the availability of local medical services affect household budgets in rural and urban communities. More detailed evidence could help clarify which healthcare costs create the greatest uncertainty and how public support can reach households most exposed to that risk.

It is also important to study how social welfare access relates to employment and migration. Comparing the experiences of rural-origin workers and urban hukou holders can help reveal how eligibility rules and service availability influence saving decisions. Better evidence on these connections could inform policies that provide support more consistently across different groups, without assuming that all households face identical needs.

Finally, future analysis should consider healthcare, income, housing, and consumption together. Changes in house prices and household expectations can interact with medical costs and social benefits, shaping whether families feel secure enough to spend. A clearer understanding of these combined pressures can help guide policies that strengthen household resilience while supporting sustainable consumption.