Public services provision has been an important component of China’s social policy agenda, particularly the provision of health and education. Though increasingly open to private participation, these two sectors were largely dominated by government-run institutions – the so-called public service units (PSU). Until the early-1980s, public medical and educational institutions were wholly dependent on government funding, and – like SOEs – were major government employers. By 2004, over 1.3 million PSU employed nearly 30 million people, managed around 300 billion yuan (US$36 billion) of state assets, and were recipients of more than 30 per cent of total government expenditure (People’s Daily Online 24 March 2004). Over 95 per cent of teachers and doctors throughout the country worked in these PSU (Lan 2004). It was this particular role as employer that delayed government attempts to reform public-service agencies, which in turn had implications for service delivery. Rising unemployment, worker’s demonstrations and the growing number of urban poor – both direct and indirect consequences of SOE reform – taught the Chinese government to tread carefully when dealing with PSU reform. The Central government gradually allowed and later on encouraged nonpublic participation in the fields of health and education, even though within the leadership the debate continued as to whether non-public organisations could and should pursue public ends. Earlier ideological formulations had persistently influenced policy formation pertaining to public-services provision. Since the start of reform, however, the growing participation of private supply and the blurring of boundaries between public and private provision forced the government to reconsider its role as the sole provider and financer of public services, to one of regulator and guarantor of provision. By the late-1990s, this logic became the justification for the government’s ideological shift, by which it sanctioned private involvement in the socio-economic development of the country. Up until then, government policy towards private providers and public-private cooperation in the provision of public goods remained characterised by its ambiguity (Meng et al. 2000). In general, private providers were perceived as pursuing only economic gains, although later regulations allowed for the registration of non-profit private organisations. However, the rapid growth of private investment into health and education seemed to be primarily a response to the growing

demand in an increasingly profitable market (Carrillo 2008; Hou and Coyne 2008; Xie and Wang 2008). Private and other non-government participation in healthcare and in education also thrived due to the failings of public provision (Liu et al. 1994; Mok 2005; Hu 2007). During the 1980s and most of the 1990s, China experienced a significant reduction in state funding for social services, in particular for the financing of health services and health-risk protection (Duckett 2010). Yet, contrary to the claims of a ‘shrinking state’ and outright privatisation (Blumenthal and Hsiao 2005), public-service supply in China resulted in a more complex pattern of provision (Xu and Jones 2004; Carrillo 2008; Carrillo and Duckett 2011); one in which new public-private partnerships were formed. In practice, the dichotomies of market-state and government-society remained analytically problematic when examining the Chinese reality (Goodman 2001; Pieke 2004; Mok 2005; Li 2006b). Goodman (2000, 2001, 2002) found that – particularly at the county level – the strength of social institutions and their ability to effect social change (including enterprise, entrepreneurial and social development) rested primarily on their inter-connectiveness with the Party-state. The state actively intervened in markets in order to accelerate market forces, while maintaining its influence over socio-economic development. This mixed economy in the provision of social services urged the need for greater regulation in order to curb overcharging, corruption and malpractice, and in order to advance the well-being of individuals and society. International organisations like the World Bank and the OECD advanced the idea among the Chinese leadership of the government’s responsibility to deliver services in a satisfactory manner, though not necessarily delivering services itself (OECD 2005; World Bank 2005: 38). However, mixed provision required well-framed regulatory and accountability systems, especially in order to uphold the equity and efficiency of those systems. And, as international experiences elsewhere showed, public-private partnerships for service provision were no easy panacea (Richter 2004). China’s regulatory institutions and regulatory capacity remain incipient and weak, even after almost three decades of reform (Bloom et al. 2008; Fang 2008). Moreover, given China’s one-Party system and the hierarchical nature of its bureaucracy, regulatory bodies continued to lack independence and usually had ambiguous and overlapping roles (Egglestone et al. 2008: 159-161; Fang 2008). The reforms announced at the National People’s Congress in 2009 seemed to be trying to reverse state retrenchment from social services and welfare, and advanced a renewed commitment by the Central government to remain as the main provider of public goods, particularly in the case of health services. These reforms involved a degree of re-centralisation in the decision-making process, alongside a restructuring of government agencies aimed at improving coordination of responsibilities over service delivery and regulation (Meng 2009).