The rapid growth of medical expenses has become a worldwide problem. Since the 1990s, the world's major countries such as the United States, Germany, Japan, South Korea, Singapore, and China have begun health care system reforms, trying to find resolutions which are suitable for various health care systems. Starting from 1985, China's health care system reform has been going on for more than 30 years, and the results are remarkable. It has established a public health system and a health care coverage system, though the reform path was rugged. After the launch of the “New Health care Reform” in 2009, the Chinese government has increased financial input in health care industry. In 2017, China's total health expenditure exceeded CNY 5 trillion, accounting for 6.2 percent of GDP. However, how to make medical care more accessible and affordable remains to be Chinese people's major concern. Based on the history and future trends of China's medical health needs, we gain an insight into the core issues of China's health care industry from a historical and national perspective. There are three major structural problems in the health care system. We believe that the key to solve these structural problems lies in the “incremental development” and “dual-track dynamics”. When these problems are solved, China can hereafter open up a new era for health care industry.

Our research report consists mainly of three parts. The first chapter explores the core issues existing in health care industry in China from a historical and international perspective, examining the driving forces that influence demand. This chapter also analyzes the rapid growth of China's health care demand, whose development presents diversified, hierarchical, and dynamic features. The second chapter analyzes the dualtrack structure of the health care system, the evolution of “dual-track dynamics”, and the crucial factors that affect the evolution process. The third chapter analyzes new opportunities for China,s health care industry during the process of the "dual-track dynamics".

This report utilizes various studies in innovation and industrial development by Institute for Global Industry, Tsinghua University. Adopting an objective and neutral stance, we explore the development and blueprint of China's health care industry, as well as the factors that will affect its development. This study adopts the PRE-M model, an analytical framework for industry development that studies the interactions among the Product Market, Resource Market and Equity Market. PRE-M Model for industry development and the theory of Strategy Rhythm was first introduced by Prof. Zhu Hengyuan and Prof. Yang Bin (2018) in their book Strategy Rhythm: Winning in Turbulent Times (Beijing: China Machine Press). We take a historical and international perspective, study the relevant literature and data source and gain insights from interviews with hospital administrators, health care industry investors, business managers, government officials etc. This study aims to promote China's health care industry by helping relevant stakeholders and policy makers understand the dynamics in China's health care sector.

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DUAL-TRACK DYNAMICS: THE FUTURE OF CHINA'S HEALTH CARE INDUSTRY