The short and simple answer is Volume Based Procurements and DRGs.
I suggest you watch that video I posted by the PKU healthcare reform expert - she lays out exactly the problems before and what they're doing to fix it. These reforms bogged down under Hu-Wen and were finally launched in 2015/2017 with a few key policy changes - including reorienting the payor/regulator (NHSA - National Healthcare Security Agency - the payor; and NMPA - National Medical Products Administration - eliminating the old CFDA).
However, the part of the Sanming reforms does not address is how do you invigorate R&D for new drugs. Biologics drugs have been a novel class of drugs created largely to combat cancer - and like many industries in China, the Chinese biotech industry is nascent and catching up (still not quite best in class but a lot of "me too" and "quick follow" firms). However, the notion of a drug company to make money is to sell drugs at a price that can recuperate the upfront R&D costs (Globally, the average drug that gets approved cost about 1bln USD to go from IND to approval). Well guess what, if you come up with a 'new drug' that then gets volume procured by the payor at a fraction of the price of what you were hoping to sell for - it doesn't exactly foster commercialization of research. R&D creates technologies, but entrepreneur drives the revenues/profits and economic growth. This is the exact political economy problem they need to balance.
Before we go further - you need to understand excess deposits =/= excess savings. The former is a technical term used to describe money sitting in cash and the latter is a holistic increase in total net worth. You can have the former increase without the latter increase.
So netting off the 20% of accumulated excess deposits against increase in household debt, another big chunk of increase in excess deposit is precisely the reduction in real estate sales. In China if you weren't aware you pay for the entirety of the apartment upfront to and pay for the mortgage while the apartment is under construction - if you backed out the reduction in real estate sales in 2022, and the 2H of 2021 when Evergrande blew up, then applied a 60-70% haircut (meaning 30-40% of real estate sales = down payment with the rest in mortgages) - that explains for another significant portion of excess deposits sitting in bank accounts vs. run-rate pre-2021.
In addition, we have the reduction in stock market over the past year which further puts pressure on the wealth effect.
And as I've illustrated, significant sqm and value of housing is sold in Tier 3 and below - majority of which were speculative given population flows - you know very well this ain't coming back. People are not suddenly going to take what cash they've earmarked for 'investment' (or in this case, speculation) purposes, and spend it on iPads or Haidilao hotpot. Behaviourally, they are accounted separately and are not fungible.
The final part you don't quite understand is that the change in wealth effect is not "oh the house is *only* down 5% I'm going to spend like a fiend" - the change in consumption as a result of the wealth effect is calculated by the difference between "what was my apartment appreciating at" (growing 5-10%) to "what is it declining now" (-5%) - that delta is in the 10-15% range. That explains further reduction in willingness to spend.
The final piece of this puzzle is that you know as well as anyone that the wealth gap in China - MPC for rich and poor are not the same. If you tracked any granular retail sales data you would know that luxury consumption in China has *not* been impacted at all - Moncler, Richmont, LVMH, Mercedes, BMW, Moutai, Wuliangye, have all continued to seen strong growth throughout the pandemic/lockdown. Rich people will spend marginally more given the relaxation of consumption but that won't be nearly the scale you're talking about.
As such what you're arguing for in terms of consumption growth, is predicated upon those who don't have cash now, to make cash, and to spend. You need the *jobs* and *income* to come back first before spending comes back. As a result of structural transition away from real estate, there is a significant dislocation in the labour force that needs to sort it self out first, before the incomes/jobs come back. Any hope of an immediate snapback to spending without a corresponding increase in jobs and income is just hopium not based on reality.
I've already illustrated the significant increase in unemployment rate in the younger workforce which is ~18%.
