Thank you very much. It's a great honor to speak at this forum. First I would like to offer my congratulations for the launching of Peking University Institute for Global Health and Development. At this forum I would like to talk about economic development, health systems, and their impacts on health.

For health, its purpose is to improve people’s well-being and to allow them to have longevity. We know that with economic development, household income will increase, people will have better nutrition and if they are sick they can go to doctors. Under that situation, they will be healthy and can live longer.

According to the World Bank’s data, in 2018, in low income countries, the life expectancy of the people is 63.5 years. For low-medium income countries, their life expectancy is 68.4 years. For upper-middle income countries, their average life expectancy is 75.3 years. For high-income countries, their life expectancy is 80.7 years. Although we know the relationship between economic development and health and life expectancy, the issue is how to promote economic development.

From my study of the new structure of economics, we know that economic development is a process of structural transformation with continuous technological innovation in the existing sectors to improve productivity, and also industry upgrading to relocate resources from lower value-added sectors to higher value-added sectors. By this way, the economy will have better performance and the income of people will increase, resulting in better health and longer life expectancy.

Technology innovation is very important in the transformation of the traditional agriculture. But only in agriculture is not sufficient, because unless a country is well endowed with arable land, otherwise no country can reach middle-income status by agriculture alone.

So，when a country is in an agrarian a stage, it is always poor. If a country wants to improve its income, it needs to upgrade to manufacturing sector, and gradually to service sector. I think this is known to almost everyone, but only a few developing countries have been able to industrialize their economy and to move from low income to middle income and further to high income.

From my own studies, if a country wants to be successful in industrialization, the country needs to follow its comparative advantages in the process of development. Because for the ambition to imitate the high-income countries' industries, the intention is good, but in general, because of violation of comparative advantages, firms in those industries are not viable and need to be subsidized with all kinds of government distortions.  As a result, their performance will be poor.

For a few successful economies, which catch up the high-income countries, they followed their comparative advantages in their industrialization. When they transformed from the agrarian economy, they started with labor intensive industries which were consist with their comparative advantages. They were competitive and gradually they moved up the industry ladders to more capital-intensive industries.

To develop a country’s economy, and especially in the manufacturing sectors, along the line of a country’s comparative advantages, two institutions are important: one is to have an effective market system. Only with an effective market system, the factor prices can reflect the relative abundance of factors endowments which determine the comparative advantage of the economy. With competitive markets, the price signals will guide the entrepreneur to adapt the right technology and to go into the right industries which reflect the country’s comparative advantages.

At the same time, the comparative advantages only mean the factor costs of production of the industry will be low. To be competitive, the industry also needs to have suitable infrastructure and institutions to reduce transaction costs. The improvement of infrastructure and institutions require government coordination. Therefore, it's essential to follow the comparative advantages of the economy in the development. But to make that happen, both the market and the state are needed. If a country can develop its economy successfully by following its comparative advantages with the supports of market and the state, people in the country will increase income, improve nutrition, and you can have much better health and life expectancy.

At the same time, it's also very important to have a good health system. We can take China as an example. In 1978, before starting the market orientation reform, China was the third poorest country in the world according to the World Bank data. Its per capita GDP was only 156 US dollars, which was less than one third of the average of sub Saharan African countries. But in 1978, the health measured by life expectancy in China was 65.9 years, while average life expectancy in low income countries was 47.6 years, in lower middle-income countries was 54.2 years, and in upper middle-income countries was 64.4 years. It means the life expectancy in China was 18.3 years higher than low-income countries, 11.7 years higher than lower middle-countries, and 1.5 years higher than the upper middle-income countries. How that was possible? Well, it is because of the good health system in China.

At that time, China had a prevention health system that was set up all over the country. At the nation level, China had the ministry of health; at a county level, China had county hospitals; at the township level, China had the township health center; and in a village, China had village health clinics. By that, China could prevent pandemics and infectious disease very effectively. If farmers got sick. They could go to village clinics to get treatment. If the clinics could not treat them, then they could go to the hospitals in the township. If the township hospital could not deal with the problems, they could go to the county hospitals. That's one thing.

Secondly, the farmers had the cooperative health system. They pooled money together and if someone got sick, they had the money to go to the clinic or go to the hospital to get treatment.

And the third was the famous Barefoot Doctors. At the village, they had barefoot doctors. Their training was minimal but they were able to take care of simple diseases.

I think with these three systems, China was able to create a kind of miracle. In 1978, China was one of the lowest income countries, but China's performance in terms of health was better than upper middle-income countries. Certainly, this kind of system will not appear spontaneously. The government needs to create and institute them.

Good health is one of the common goals in the world. According to the United Nations’ Sustainable Development Goals, good health is the number three goal among 17 goals, which all the countries in the world commit to achieve by 2030. So from the above observation, I think if we want to have good health for the people, first of all we need to have economic development to raise the income of the people, so that when they get sick they have the money to go to the hospital, and they can have good nutrition. To have good economic development, we need to have two institutions working together: one is a market institution, the other one is the state. And to have good health, in addition to raising people’s income, it is also essential to make health care available and affordable to the people. If we want to make the health care available and accessible to people, we need to have a government to create the system. Overall, we need the market and the state working together to promote economic development and to provide health care and so on to the people. Then the good health in the Sustainable Development Goals can be achieved.

Those are my observations. Thank you.