A middle class is emerging in China, and simultaneously, its population is rapidly aging. These two phenomena are impacting the country’s traditional consumer habits, including spending on healthcare. Experts say private-sector services are one important part of the future of China’s healthcare system, and perhaps also a sign of what’s to come for other countries in the region. Entrepreneurs can provide innovative services that cater widely to consumers and support a shift toward integrated care for health promotion and long-term management of chronic disease, also supplementing resources available in traditional public facilities.

Three experts visited the Walter H. Shorenstein Asia-Pacific Research Center and shared perspectives on those trends at the panel discussion, “Healthcare Entrepreneurs in East Asia: Innovations in Primary Care and Beyond,” hosted by the Asia Health Policy Program.

Historically, healthcare services in China have been almost entirely government-run. A patient would go to a public clinic, stand in a queue, and receive treatment within a few hours – being referred elsewhere if additional treatment was required.

Now, the private sector is growing, based on the promise of improved care and an enhanced experience, both removing the waiting line and ushering in new technologies. The government has also issued several policies encouraging “social capital” investment in health and fitness services.

The private sector for preventative care services now holds around fifteen percent of the entire marketplace in China, and “is expected to get much bigger over the next five years,” said Lee Ligang Zhang, the founding chairman and chief executive officer of iKang, a healthcare group based in Beijing.

Zhang oversees the company’s operation of 50 self-owned healthcare centers and an extended network of 300 affiliates. iKang is one of many groups catering to a growing consumer base of corporate workers and senior managers seeking care outside of the public system.

Comparative view

Increased development of premium healthcare facilities is not only emerging in China, but also in neighboring Taiwan. Since 1995, Taiwan implemented a national health insurance system, and has been lauded for its success in service provision.

Taiwan transitioned its healthcare market to universal coverage. Under this system, a patient can essentially “shop around” and select where to go for services, most of which are covered under the country’s insurance collective system at public or private providers.

“On average, every Taiwanese goes to see a doctor 14 times a year, compared to five times a year in the United States, and two times [a year] in China,” said Dr. Fred Hun-Jean Yang, a physician and chairman of MissionCare, Inc.

Such numbers reflect the higher availability of services compared to China, he said. Even as a small island, Taiwan has over 15,000 clinics and the price for services is generally affordable for the average citizen. Despite this availability of public and private services, Taiwan’s newer healthcare entrepreneurs seek to fill a market demand shaped by similar factors as in China. Yang says technology and the efficiency of the private sector healthcare system is attracting new consumers.

Missioncare is headquartered in northern Taiwan’s Taoyuan City and consists of four community hospitals with a larger network of clinics across the country as well as coordinated long-term care services for the elderly and those with chronic disease. The group has already expanded into China, and plans to integrate healthcare innovations, such as wearable monitoring and mobile payment.

Patient-centric service

Chinese citizens, particularly those with greater expendable income, are more willing to pay out-of-pocket for an improved patient experience, the panelists said.

“The consumer psyche is important,” said Dr. Wei Siang Yu, the founder of the Borderless Healthcare Group (BHG), a group of companies based in Singapore that focuses largely on health telecommunications.

One perspective is that consumers desire a “high-end” environment made possible by tailored design aesthetics and effective branding. Guided by this trend, Yu, a business executive and physician by training, started the “smart cities, smart homes” initiative at BHG.

BHG is now launching an incubator model in Shanghai, which combines intelligent design aesthetics with patient care, and is planning to localize such centers across China. The model is referred to as an “experience center,” rather than a hospital or clinic, and healthcare services – examinations, operations and value-added activities like wellness and education activities – are all centralized in one location.

Looking ahead, Yu said healthcare is likely to move even further away from the traditional hospital setting, and more toward experiential and home-based care models.

FOR MORE INFORMATION, CONTACT: Daniel C. Sneider; Lisa Griswold

STANFORD, California – Stanford University’s Walter H. Shorenstein Asia-Pacific Research Center (APARC) will convene a Track II dialogue of academic experts from Asia, the United States and Europe to discuss the issues of wartime history that continue to impact relations in the region. The dialogue, “Wartime History Issues in Asia: Pathways to Reconciliation,” is being held on May 11-13 on a closed-door and confidential basis with the goal of offering practical ideas to help resolve tensions surrounding those issues. Shorenstein APARC has been a leader in academic research on the formation of wartime historical memory through its Divided Memories and Reconciliation project, including a ground breaking comparative study of the treatment of the war in the high school history textbooks of China, Japan, the Republic of Korea (South Korea), Taiwan and the United States.

The core participants in this dialogue will be scholars from China, Japan, the Republic of Korea (ROK) and the United States, along with Stanford University scholars. Most of these participants have significant experience in previous efforts to foster dialogue and reconciliation on wartime history issues. In addition, select experts on the European experience in dealing with wartime historical memory will contribute.

The dialogue takes place under the co-sponsorship of the Trilateral Cooperation Secretariat (TCS), based in Seoul. TCS is an international organization established by the governments of China, Japan and the Republic of Korea (ROK) in 2011 to promote peace and prosperity among the three countries. Through various initiatives, the TCS strives to serve as a vital hub for cooperation and integration in Northeast Asia.

TCS representatives will attend the dialogue as observers; any expression of opinions will be in their personal capacities. It is expected that the outcome of this dialogue will include a set of forward-looking recommendations to civil society, researchers, and governments. TCS may adopt them for consideration by the governments of China, Japan and the ROK.

“It is my sincere hope that through this joint scholarly endeavor, TCS will be provided with the necessary direction and guidance to follow-up on bilateral efforts at historical dialogue over the past years,” Mr. Iwatani Shigeo, Secretary-General of TCS said in his letter of invitation. “I look forward to your insight and wisdom on ways to promote peace and reconciliation in this region.”

The Stanford dialogue could launch a new effort to resolve wartime history issues in the region. “Our further hope is that this will be an ongoing process, building on previous efforts at bilateral dialogue on history issues that will go beyond this initial meeting,” Shorenstein APARC Director Professor Gi-Wook Shin said in his invitation to participants.

Relations between China and Japan continue to fray and have no immediate chance of improving, according to one of the nation’s leading East Asian scholars.

“I think we all know that Sino-Japanese relations are about as bad as they have ever been,” said Harvard professor Ezra Vogel, who spoke to a filled room at the Shorenstein Asia-Pacific Research Center in the Freeman Spogli Institute on Thursday.

“I tend to be optimistic,” he said. “But I honestly don’t see any short-term solutions, I think we’re in for a period now where the issues are going to be very tough and the relations are going to be very tough.

“For any long-term solution, there is going to have to be some resolution of the history issue,” he added, referring to the disputes over the wartime past in Northeast Asia.

Vogel delivered the final lecture in a seminar series focused on the Sino-Japanese rivalry. The series brought various experts to Shorenstein APARC this spring to consider the historical contention between China and Japan, and its impact on that contemporary relationship. Professors Peter Duus of Stanford and Jessica Chen Weiss of Yale University were among the scholars who presented earlier this year, along with the Brookings Institution’s Richard Bush.

Professor Vogel is a renowned scholar of both China and Japan, the author of many books that have become classics in the study of both countries. A sociologist by training, he is the Henry Ford II Professor of Social Sciences, Emeritus, at Harvard University. Vogel described himself as a historian in practice, joking that he had become a historian “simply by living a long time.”

A shifting terrain of relations

In his April 3 lecture, Vogel traced the history of relations between Japan and China, particularly in the post-war era, and discussed how they have been impacted by disputes over history.

In the current atmosphere, under the influence of the media and political leaders highly responsive to public opinion, the image of Sino-Japanese relations is dominated by a sense of deep friction. But, Vogel said relations between the two great Asian powers were not always bad. 

After the early decades of the Cold War, when there were no formal ties between Japan and the People’s Republic of China, there was a relative blossoming in the relationship. Following the normalization of relations in 1972, and as Chinese leader Deng Xiaoping took over the reins of power, Sino-Japanese relations entered a period of closer ties and political thaw.

“The relationship was really moving in a very positive way,” Vogel said. Japanese aid and foreign investment was key to the opening up of China to the world economy and there was a flow of exchanges among youth and of popular culture between the two neighbors.

That “special era” remained through year 1992, even as the rest of the world distanced itself from China, both economically and politically, following the Tiananmen Square incident. The visit of the Japanese Emperor to China that year marked the peak of a “golden age” of positive relations between the two countries following the war.

‘Golden age’ fades

After 1992, the constructive relationship between China and Japan began to slip for several reasons.

By the mid-1990s, the Soviet Union no longer existed as a threat – a “broad strategic reason” that had united the countries. Taiwan’s growing independence movement was becoming a flashpoint of contention, with Chinese irritation over the close ties between pro-independence Taiwanese leaders and Japan.

Perhaps most important of all, China, in the wake of the student protests, embarked upon a “patriotic education” campaign designed to shore up the loyalty of youth by stressing broad themes of Chinese national pride. In that campaign, reminders of the wartime struggle against the Japanese invasion of the 1930s occupied a central part of the message, communicated in textbooks, movies and books that remain a staple of Chinese popular culture. The demonization of Japan has colored Chinese perceptions, Vogel said.

In Japan, the sense of anxiety about the rise of China is also reflected in a rise of conservative attacks on China and the promotion of a Japanese version of ‘patriotic education.’ The perception that Japanese leaders are increasingly unrepentant about the wartime past, symbolized by the visits of Japanese leaders to the Yasukuni shrine to Japan’s war dead, feeds these tensions over the past.

Vogel said biased education on that wartime era and misinformation in the media are key factors behind the publics’ formation of historical memory, and subsequently, encourage strong antagonism toward one another.

Guarded optimism

Disputes over history, particularly of the wartime period, must be addressed for any warming of the Japan-China relationship to occur.

“I think until we get some kind of deeper meaning of World War II, we’re not going to have much progress,” he said.

Vogel said the Japanese should try harder to give a fair representation of World War II to youth, who often only receive a few short details on that time period. The Chinese should “slow down” on anti-Japanese propaganda, he recommended.

Vogel said he is optimistic about an improvement in the bilateral relationship, but also emphasized that progress will be hard to achieve under current leadership. Even so, the two countries would be remiss to avoid dealing with issues of historical interpretation, especially as it continues to serve as a roadblock to an easing of tensions in the region.

The audio and transcript from the April 3 seminar, "The Shadow of History and Sino-Japanese Relations," are posted below.

Masahiko Aoki has been engaged with Stanford University for over four decades. He has witnessed the roots of Silicon Valley grow and seen the many successes of students who formerly passed through his classroom. Selected academic papers written over his 40-year academic career have recently been published.

Aoki is the Henri and Tomoye Takahashi professor emeritus of Japanese Studies in the department of economics and a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI), in residence at Shorenstein APARC.

You have been at Stanford since 1967 in different capacities – what has changed since then? Can you share some memories with us? 

I first came to Stanford as an assistant professor in 1967. Campus and the surrounding environment were different then – there were series of apricot orchards along El Camino to the south and my office was located in a wooden building – the old president’s house where the engineering buildings stand today. Changes at the university and in Silicon Valley have been fascinating to witness. I was away from Stanford in the 1970s, but when I came back in the 1980s, I had over 200 students at a time in my classes. This was because of widespread interest in Japan’s economic performance, which was then challenging American industries. Now students are inclined to be more interested in the rise of China. I share the same interest.

What has been most interesting for me is collaboration with graduate students and faculty to develop institutional studies. In the 1990s, I worked with Paul Milgrom, Avner Greif and Marcel Fafchamps among others, to initiate the field of comparative institutional analysis in the economics department. Greif and Fafchamps now have appointments in FSI like myself. Our research worked to understand why and how institutions matter to economic performance. However, my interests have expanded since then. I aim to understand relations between economic and demographic variables as well as institutional complementarities between economic institutions, social norms and political governance. As for my former students, many of them can now be found in important academic, government and private sector roles across the world.

What particular “lens” do you use to conduct your research?

Some influential economists understand that the nature of polity determines economic performance. They say this correlation is obvious if we compare the exploitative political regime like North Korea with that of a democratic political regime like South Korea. But this “lens” is a bit too simplistic for me. Why do ‘bad’ political regimes persist in some countries?  The relationship between political governance and economic performance is more complex than “the former simply causes the latter.”

To understand the relationship between political governance and the economy, I use game-theoretic concepts. While I am not a game theorist, I still believe that human interaction – whether economic, political or social – is a kind of game. People form beliefs based on how others play societal games. One of the important insights derived from these ideas is that political governance and economic institutions actually co-evolve. Furthermore, we need to look at the historical context to understand the present.

How have you applied these theories to the cases of Japan and the United States?

One of my major research interests has been the comparison of corporate governance across countries. Financial economists view the corporation as the property of stockholders. But we can also view the corporation as a system of distributed cognition. That is, the corporation is a group of people who have different cognitive roles and capabilities. Individuals can be organized to achieve economic value using physical assets as tools for respective cognitions.

By looking at corporations in this reversed way, we can identify different types of organizational architecture and their comparative advantages. In short, my research has found that managers’ cognitive assets are prioritized in U.S. corporate model, while workers’ entrepreneurial cognitive assets are prioritized in Silicon Valley’s model. In contrast, Japan favors a model where manager and workers’ cognitive assets are more interdependent.

You emphasize the connection between economics and demographics. What can be done about Japan and greater Asia’s rising demography problems?

Human capital is very valuable, but cultivating human capital is quite costly. Due to this constraint, the total fertility rate of women has declined as the economy develops. Scholars call this phenomenon the demographic transition. In addition, as economies further develop, people live longer and the working age population in the total population declines. Japan, Singapore and Taiwan are experiencing this phenomenon. Korea will follow this trend soon and at an even faster rate than Japan. Even if China modifies the one-child policy, the demographic dilemma cannot be escaped. And even for California, which is typically considered to be the youngest state in the U.S., a study predicts it will become the oldest state around year 2030.

So, what can be done to cope with this phenomenon? One option to raise the retirement age. Over two decades ago, Japan started this policy and has seen noted, positive effects. Another option is to increase and secure participation of women in the workforce. Across Asia, total populations are still rising due to immigration. Japan should consider liberalizing immigration. It is interesting to note that in the past 1,500 years Japan’s cultural development benefitted greatly from migration and assimilation of people, such as monks, political refugees and artists from Korea and China. 

With the recent execution of Abenomics, what performance can we expect to see from Japan’s economy in year 2014?

Abenomics has only been assessed in terms of short-term effects on the economy. Instead, my view is that Japan is now in the process of longer-term institutional change. Lifetime employment was the core of Japan’s overall institutional arrangement until some twenty years ago. The main banking system and government-industry relationship complemented and mutually reinforced lifetime employment. Though, with the demographic transition, the Japanese government has found it increasingly difficult to sustain. However, Japan’s institutional arrangements are normally very resilient. I think institutional transformation fitting this new demographic phenomena will require the duration of one generation. Institutions cannot be changed overnight by a revolution or government decree.

Of course, Abe could accelerate institutional adaptation by expanding the roles and opportunities for women and young people and creating more open foreign policy. This policy agenda may be related to the so-called “third arrow” of Abenomics, a period of structural reform following monetary easing and fiscal stimulus. But what Abe can do and has the willingness to do has yet to be fully seen. Thus, if we believe that Japan started the process of institutional change in the early 1990s and requires one generation to attain visible outcomes, the next several years are crucial. Tokyo has been chosen as the host city for the 2020 summer Olympics. I hope this event will act as Japan’s opportunity to display its changes to the international audience. 

The Faculty Spotlight Q&A series highlights a different faculty member at Shorenstein APARC each month giving a personal look at his or her teaching approaches and outlook on related topics and upcoming activities.