Governing Informal Payments by Market in the Chinese Healthcare System

Informal payments are an illegitimate practice that has been endemic in the Chinese healthcare system for decades. This chapter examines two market mechanisms that the government has used to contain it, namely, internal competition and differential pricing. It reveals that due to market failures, internal competition pushed up the demand for the services of elite practitioners and led to the concentration of informal payments in their hands. Differential pricing not only concentrated informal payments in the hands of senior surgeons, but also exacerbated health inequality and subverted the government’s ideological commitment to social justice. Both mechanisms did not achieve the purpose of controlling informal payments and have been abandoned either by hospitals or by the government