On a number of measures, health outcomes in China have improved tremendously over the past three decades, especially thanks to the reduction in some traditional infectious diseases. However, death rates from chronic diseases have been on the rise, not least owing to changes in life styles, including rising tobacco consumption and deteriorating environmental conditions. Supply of health care is overwhelmingly provided publicly and hospitals have been absorbing a growing share of the resources, at the expense of primary care. The number of doctors has increased fast but the level of qualification of incumbent doctors is often modest. Demand for care has risen rapidly, in line with incomes, and the relative price of care soared through the early 2000s. Hospital budgets and their doctors’ pay are partly based on the pharmaceuticals they prescribe and sell, whose prices are regulated and involve considerable cross-subsidisation. Faced with these imbalances and incentive problems, the government has launched a number of reforms since 2003. New insurance schemes have been rolled out both in rural and urban areas. As a result, coverage and use of medical facilities has increased a lot, except for migrants. In practice, however, catastrophic but also chronic illnesses continue to push people into poverty, especially in the poorer regions, given that risk pooling at the national level remains limited. A new set of reforms has been announced in 2009, aiming at universal, safe, affordable and effective basic health care by 2020. They involve investment in medical infrastructure, generalising coverage, more focus on prevention, a new essential drugs system and far-reaching reorganisation, including hospital reform. It will be important to make sure that primary care plays a greater role and that hospitals are managed more efficiently with less of a hierarchical structure. Indeed a reform that just focuses on increasing insurance coverage and not on reforming the supply side may not be effective. Progress will also require changes in the relative prices of treatments and higher doctors’ wages and tobacco prices.