People in China are spending nearly as much of their income as Americans on healthcare

The findings are featured prominently in a newly published book from the international financial institution titled "Toward a New Economic Growth Model for China," shedding fresh light on the deep-seated anxieties that continue to suppress domestic consumption in the world’s second-largest economy.

According to the IMF’s research, the financial burden of medical care falls disproportionately hard on rural households. In rural China, an astonishing 8.7% of disposable income is funneled directly into healthcare expenses. This places rural China in the unenviable position of ranking second globally in healthcare spending as a share of disposable income among 20 major economies evaluated in the study.

The United States claims the highest rank in the world, with residents spending nearly 9.9% of their disposable income on medical care. Meanwhile, urban China ranks third on the global list at 5.4%, sitting slightly higher than Canada according to the comparative data compiled by the authors.

Yet, these percentages alone fail to capture the full severity of the financial squeeze felt by ordinary Chinese citizens, particularly when juxtaposed against macroeconomic realities in wealthier nations. The burden of healthcare in China grows starker when considering the vast disparity in purchasing power and average earnings. Data from the Federal Reserve Bank of St. Louis shows that per capita disposable income in the United States stood at $68,289 at the close of last year. That figure towers at more than 10 times the average income in China, where per capita disposable income hovered at 43,377 yuan, translating to roughly $6,400 in U.S. dollar terms.

This economic chasm widens even further when examining China’s vast countryside, a region that only officially emerged from extreme poverty in late 2020. Official economic figures accessed via Wind Information illustrate a stark divide within the domestic economy, with urban areas recording more than twice the disposable income of rural regions. Specifically, average urban disposable income stood at 56,502 yuan, compared to just 24,456 yuan for rural residents.

For families living on these significantly lower rural baselines, unexpected medical emergencies or chronic health conditions can easily derail household finances, leaving little to no room for discretionary spending, leisure, or long-term investment.

To address these imbalances, the IMF report suggests that targeted policy interventions could yield transformative results. Specifically, the institution argues that raising government spending on health and social security explicitly geared toward rural areas can significantly reduce the precautionary savings rate among rural households. Because rural residents currently lack the robust social safety nets enjoyed by their urban counterparts, they must build substantial personal financial buffers to protect against future health crises, old age, and unemployment.

"China’s social spending is low compared with international peers, and increasing that spending would lift consumption," wrote 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, in their contribution to the volume.

The authors further highlighted how structural inequities within the labor force and residency systems continue to shape financial behavior. Their research recorded a staggering savings rate of around 14% for people from rural areas who have migrated to work in China’s bustling cities. In sharp contrast, the savings rate drops significantly to about 6% for individuals who hold official urban "hukou" residency rights. The hukou system, which ties social benefits and public services to a citizen’s place of registration, grants urban residents significantly better access to subsidized healthcare, education, and pension benefits compared to migrant workers from rural areas who often find themselves excluded from these local social programs.

Compounding these healthcare-related anxieties is the ongoing downturn in the country’s residential real estate market, which has historically served as the primary vehicle for household wealth creation and a major driver of consumer confidence.

"Declining house prices in recent years continue to weigh on consumption and contribute to elevated household savings," Xu and Zhang wrote, noting that as property values shrink, consumers feel poorer and become increasingly cautious about opening their wallets.

As policymakers in Beijing search for sustainable pathways to transition the economy toward consumption-led growth rather than heavy reliance on infrastructure and exports, the IMF’s analysis underscores that untangling the structural roots of high household savings will require deepening social safety nets, expanding medical coverage, and alleviating the heavy out-of-pocket healthcare costs that continue to burden ordinary Chinese families.