http://www.chinabusinessreview.com/public/0307/thompson.html
he outbreak of severe acute respiratory syndrome (SARS) has exposed
the immense challenges that face China's overburdened and underfunded
healthcare system. But SARS is only one of several infectious diseases
that are spreading through China, posing potentially long-term
socioeconomic damage. The human immunodeficiency virus (HIV) and
acquired immunodeficiency syndrome (AIDS) in particular will threaten
China's economic growth and social stability in the coming decade.
All companies operating in China risk incurring significantly higher
costs as a result of the rapid spread of HIV combined with China's weak
healthcare system. The PRC government estimates that by the end of 2002,
more than one million citizens were infected with HIV. Registered cases
increased more than 30 percent per year in 2001 and 2002. The United
Nations and the US National Intelligence Council estimate that China
could have between 10 and 15 million infected citizens by 2010. If the
experiences of companies in Africa and Southeast Asia are any guide,
companies in China that are unprepared for the rise in HIV/AIDS cases
may pay for their inaction through rising operating costs and diminished
profits.
Who is at risk?
The inability of China's public health surveillance system to
determine accurately the number of HIV infections in the general
population makes it difficult to assess those at risk. At the end of
2002, there were only 158 national HIV/AIDS surveillance centers in
operation—many affiliated with detoxification centers for drug users and
commercial sex worker re-education centers run by the Ministry of Public
Security. The Ministry of Health believes that more than 10,000 sites
would be necessary to assess the full magnitude of the epidemic.
Other emerging infectious diseases provide important indications
about HIV's potential to spread throughout China. Hepatitis B and C
currently infect more than 200 million people in China and are analogous
to HIV/AIDS in some ways because many people who become infected
unknowingly carry the virus for years before manifesting symptoms. In
the meantime they infect others through sexual contact, blood product
donation, and improper reuse of medical equipment. The extent of the
hepatitis epidemic and the rapid increase of sexually transmitted
infections in both urban and rural areas since the early 1980s indicate
that HIV/AIDS will likely spread to the general population. There is
currently a false feeling of security among many Chinese people who
believe that HIV/AIDS is a "foreigner's" disease that will only affect
marginal populations, making prevention and education an important task
for companies seeking to protect their employees and communities.
What are the costs of HIV/AIDS to businesses?
When HIV/AIDS enters the workforce in appreciable numbers, businesses
face significant added costs and reduced revenues. HIV/AIDS affects
businesses' competitiveness in three ways. Primary costs, such as labor,
increase. When sick employees miss work, worker productivity declines
and employee turnover, healthcare expenses, and social burdens such as
insurance premiums and death benefits increase. Secondary costs, such as
low morale and strained relations between workers and management, often
occur. Businesses also experience tertiary costs such as damage to
corporate reputations and the decline of product markets and investor
interest.
Primary costs
The well-documented increase in labor costs brought on by the
HIV/AIDS epidemic in Africa and Southeast Asia indicate what companies
operating in China may face in the future. Many people who contract HIV
are unaware that they are ill and work for several years before their
health begins to decline. The impact of HIV/AIDS first hits businesses
when a worker's absenteeism increases and may be particularly severe for
companies that employ skilled workers. A study in Beijing conducted
between 1994 and 1999 found that HIV-infected people spent an average of
89.6 days per year in the hospital and made an additional 2.7 outpatient
visits per year. Because of the highly personal nature of Chinese
business relationships, moreover, the absence of key workers may amplify
the impact of HIV/AIDS. Compounding matters, healthy employees often
contribute to worker absenteeism rates when they take time off to care
for HIV-infected family members. When workers are absent, remaining
employees take on extra work, which results in higher overtime costs and
workplace stress. Workers and their families may also demand death
benefits, funeral expenses, and bereavement leave, further raising the
costs of business for employers.
These costs—in terms of managers' time, staff disruption, training,
and productivity—could have a major impact on companies in China. Hiring
a new employee can cost several months' salary to three times an annual
salary depending on the position and industry. Regardless of whether the
person being replaced is skilled or unskilled, experienced workers are
more productive and generate more profits.
Secondary costs
It is difficult, yet necessary, to measure the secondary costs of
HIV/AIDS. Employees and employers typically are unaware of any given
worker's HIV status. A rising number of illnesses within a company may
not initially be attributed to HIV/AIDS since few Chinese doctors are
qualified to diagnose it. Because HIV depresses the immune system,
patients may die from opportunistic infections, including tuberculosis,
which may be named the official cause of death. As the incidence rate
increases within the community and more doctors become aware of HIV/AIDS
symptoms, the diagnosis will be made more often—affecting society more
openly. Once the incidence of HIV/AIDS rises, employee morale may
plummet and industrial accidents may occur more frequently because of
sickness, stress, depression, and even fatalism—further reducing
productivity.
Worker-employer relations can suffer once HIV/AIDS permeates a
workplace. The primary conflict arises when expensive, lifesaving
treatments lie beyond the financial reach of employees and are not
covered by insurance plans or employee healthcare systems. Currently,
antiretroviral treatment, known as the "AIDS Cocktail" (aizibing
jiweijiu) is available in Beijing and Shanghai using imported drugs. The
cost, prohibitive to most patients, is around $5,000 per year. Several
Chinese pharmaceutical companies are rushing generic versions to market,
hoping to lower the price to a more manageable $1,200 per year.
Companies will inevitably face difficult decisions about whether to
expand benefits to include life-prolonging treatments for employees and
their dependents.
Tertiary costs
Companies in China face significant costs and risks from HIV/AIDS in
the wider community. The most significant risk is to a company's brands
and image. If a company does not provide life-prolonging treatments to
its infected employees, it can be branded insensitive or ruthless and
risks consumer boycotts. Consumer-product companies are particularly
vulnerable to popular perceptions of their brands. Poorly planned
HIV/AIDS policies, or an absence of such policies altogether, can thus
have negative effects on the company. A company that is severely
affected by HIV/AIDS can suffer from a lack of investor confidence and
may lose access to capital.
Perhaps the greatest external cost of HIV/AIDS to a company is the
impact of a decline in the greater economy. HIV/AIDS primarily affects
workers in the most productive periods of their lives. Their
incapacitation can reduce family incomes, and payment for treatment can
eliminate their savings. The result is reduced spending and demand for
goods and services, particularly for non-essential items and services.
Writ large, this situation can spell macroeconomic decline, not only in
areas where HIV/AIDS is prevalent, but across the country or region.
Thailand is a case in point. A Thai government study in 2000 estimated
that the direct and indirect cost of HIV/AIDS to the nation was $1.2
billion. Additional estimates suggested that the Thai HIV/AIDS epidemic
could be costing the Japanese economy between 1 and 2 percent of its
annual GNP through losses in trade and potential markets. As markets
shrink and labor costs increase, profitability becomes harder to attain.
Learning from SARS
Severe acute respiratory syndrome (SARS) has raised troubling
questions for Chinese citizens—including corporate citizens —about the
nature of risk in China and the government's ability to respond to
rapidly developing crises. The PRC government's response to SARS has
mirrored the government's reaction to HIV/AIDS. The government initially
reacted with misinformation and denial, then, after heavy international
pressure, admitted the problem and eventually cooperated with foreign
partners, though with some reluctance and suspicion at the outset.
Though SARS has garnered signifi- cant political attention and has
mobilized society, China's capacity to cope with more slowly spreading,
more lethal, diseases is by no means assured.
The SARS outbreak revealed shortcomings in China's medical and
political systems. Medically, SARS presented a huge challenge to the
entire healthcare system. At the clinical level, doctors and nurses were
infected in disproportionate numbers, hospitals quickly became
overwhelmed, and the army stepped in to provide medical staff for
civilian hospitals. Public health oversight capacity was also strained
by SARS, as virtually all infectious disease specialists in the
government were unable to continue their daily work on other diseases.
Politically, SARS exposed the PRC government's initial inability to
address rapidly developing crises. The outbreak underlined Beijing's
communication difficulties with provincial authorities. Poor
communication between the Ministry of Health and Beijing city health
authorities also showed that even in the capital, lower-level officials
do not always report in a timely and accurate fashion. The subsequent
sackings and reprimands of close to 1,000 provincial- and local-level
officials for inadequate handling of the SARS epidemic illustrates the
central government's frustration with officials who do not follow its
commands quickly enough; the need to punish some officials in order to
motivate others; and careful public relations. The government's
obstruction of the World Health Organization and United Nations public
health teams exposed a continuing distrust of outsiders, which does not
bode well for more openness in the future. Though the political
establishment eventually mobilized
society and improved communication between the provinces and the
center, it is unclear at this point if these developments will translate
into more effective responses to other dynamic crises in the future.
SARS has done what other infectious diseases in China have thus far
failed to do: capture the attention of the top leadership and the
international community. Fortunately, it has infected a relatively small
number of people, caused fewer deaths, and as this article goes to
press, is on the decline. The economic impact has been sharp, but should
be brief. Preventive measures, including screening and quarantine, have
proven effective. Unlike SARS, however, HIV/AIDS is a terminal illness
in all cases, infects the young and productive at high rates, and will
have a long-term economic impact. Though some observers hope that SARS
will engender a new sense of openness, it is still unclear that the PRC
government has made such a commitment or that it will apply its
experience in dealing with SARS to other infectious diseases.
—Bates Gill and Andrew Thompson
How businesses can mitigate the impact of HIV/AIDS
The Chinese workplace generally influences employees' personal lives,
social values, and behavior. Though the work unit (danwei) system has
removed itself from many aspects of workers' lives, all companies in
China still influence workers' attitudes and are in a unique position to
provide public health education and a healthy working environment.
Preventing the spread of HIV and hepatitis within a company's workforce
is both economically and humanely preferable to absorbing the costs of
replacing workers lost to AIDS or other diseases, or to treating
infected workers.
Though many managers and experts are concerned about the impact of
HIV/AIDS on businesses in China, few companies have taken concrete steps
to protect themselves from the economic costs of blood-borne diseases. A
2002 survey of businesses in Beijing conducted by the Futures Group
Europe found that only 8 percent had an established HIV/AIDS policy,
while 26 percent had policies concerning hepatitis, and 9 percent had
policies on sexually transmitted diseases (STDs). Only 3 percent of the
companies reported that they had policies and programs specifically
designed to address HIV/AIDS in China.
To mitigate the future impact of HIV/AIDS, hepatitis, and other
blood-borne diseases, a company should establish an HIV/AIDS, hepatitis,
and STD policy and disseminate it to all employees; provide preventive
education to its workforce and families; involve the wider community in
education programs that, among other goals, attempt to reduce the stigma
of such diseases; extend prevention messages and incentives to vendors
and suppliers who also undertake prevention programs; and make
preparations for the care and support of workers and their families.
Developing an HIV/AIDS policy for the workplace
The issue of HIV/AIDS is socially sensitive in China because of the
widely held misperception that the disease only afflicts marginalized
groups, such as drug users, sex workers, and men who have sex with men.
Most Chinese are also reluctant to discuss sexual topics, particularly
when illegal or "immoral" activities are the focus. Others believe that
HIV/AIDS is a personal issue similar to hygiene that companies do not
need to address.
An HIV/AIDS, hepatitis, and STD policy should state the company's
position and practices for preventing the transmission of these diseases
and for handling infection among employees. The policy should comply
with local and national laws, establish behavioral guidelines for all
employees, and provide resources both within the company and outside it
for assistance and counseling. The policy should specify the benefits
and medical services that are included in the company's healthcare
program and ensure that confidentiality and privacy are guaranteed.
Ideally, employees will be involved in creating the policy so that they
have a stake in the results, are receptive to future education programs,
and can become a resource for other employees. An employee-designed
policy more effectively influences attitudes and exerts peer pressure on
the entire workforce. The formation of the workplace policy is the first
step toward reducing the stigma of the disease, which should be a goal
of any policy.
Organizations have used innovative methods to break down the stigma.
Some companies have detailed expected behavior of all staff toward
coworkers who are infected or who have infected family members. By
including hepatitis and other diseases that have similar epidemiological
characteristics as HIV/AIDS in their policy, companies have shown
employees the impact and transmission routes of these similar diseases,
demonstrated that these diseases are widespread, and (because of the
potential for clinical transmission through illegally reused medical
devices) emphasized that all employees and their family members may be
at risk of contracting these diseases, regardless of their marital
status.
As part of the policymaking process, companies should review existing
policies and consider whether they could contribute to dangerous
practices. For example, a manager in a Beijing company expressed concern
that his company's policy of providing a certain number of paid "sick
days" to employees, combined with a reimbursement policy for medical
expenses, led employees to view these policies as part of a benefit
package that needed to be used or lost. The manager was aware that many
employees took days off, even when they were not ill, to use up their
sick days and visit the doctor to get vitamin and other "pick-me-up"
injections, intravenous drips of herbal medicines, and possibly even
blood products. Because of the frequent reuse of needles and catheters
in unregulated facilities in China, the manager was extremely concerned
about the possible impact on the company's employees. Companies faced
with similar situations need to consider solutions, such as providing
workers who do not use up their sick days with bonuses, and reimbursing
expenses only from qualified hospitals and clinics.
Developing health education programs for the workplace
After a policy is in place, the next step for a company in China is a
health education program for the workplace. The ultimate goal of such an
education program should be to keep a company's workforce healthy and
productive, thus maximizing productivity while reducing costs from
absenteeism, increased healthcare services or insurance premiums, and
staff turnover. The health education program should help prevent
employees and their dependents from becoming infected with HIV (and
other diseases) as well as eliminating the stigma of infected coworkers,
as already mentioned. Of course all companies have different workforces
and should tailor their programs to suit the age, education level,
gender, and behavioral risk factors of their workers.
No one program will suit the needs of all companies, but successful
programs share common elements. Education programs are most effective
when delivered by peers and when workers are involved in program
development. Programs need to teach the basic means through which HIV,
hepatitis, syphilis, and other STDs are spread, along with preventive
measures, such as condom use. Again, employees should be made aware of
the danger of reused needles and syringes in clinical settings—and be
empowered to demand clean, single-use needles and syringes, and screened
blood products. Employees must also learn how these diseases are not
spread—programs should emphasize that casual contact in the workplace
presents no risk of HIV infection.
Good programs provide a forum for discussing how all employees,
including senior management, should treat infected coworkers and how the
company's policy affects everyone. Programs should discuss occupational
hazards, how to handle accidents at work, training for onsite medical
staff, and basic first aid procedures for all staff. Education programs
that conduct mandatory training in small groups and on company time have
high success rates. Perhaps most important, healthcare education
programs need to be monitored for effectiveness with follow-up meetings,
and companies must solicit feedback from workers to determine employee
understanding of the issues.
Training programs should provide resource materials, including
pamphlets or printouts with key messages, workplace issues, and company
policies. Employees should be encouraged to bring handouts home and
educate family members and peers outside the office. The 2002 business
survey in Beijing confirmed that 75 percent of companies surveyed would
like to provide an HIV/AIDS initiative, particularly if the program is
culturally sensitive.
Supporting communities
Companies, as members of the communities in which they operate, have
a vested interest in involving the wider community in their education
programs, reducing stigma, and extending prevention messages and
incentives to vendors and suppliers who also undertake prevention
programs. Companies also have a vested financial interest in maintaining
the health of the community and ensuring that there is disposable income
available for their products or services.
Insurance companies can be valuable resources to help their customers
implement programs within their own organizations. The lower the rate of
infection, the lower the cost to the insurance company in terms of
healthcare payouts. Insurers may also find that support for educational
programs enhances their brand by fostering positive public perceptions
and attracts new business by providing value-added products. Insurance
companies in many countries also provide discounts or credits to
companies with effective workplace HIV/AIDS policies. These savings can
help a company justify the cost of developing and implementing a
healthcare program. In 1999, American International Assurance, Thailand,
a subsidiary of American International Group, Inc., started an
evaluation and accreditation program to provide premium credits to
companies implementing HIV/AIDS policies and education programs in the
workplace. By combining HIV, hepatitis, and other similar diseases into
these programs, insurance companies in China stand to generate even
greater savings.
Businesses outside of the insurance industry also have opportunities
to provide incentives to suppliers to implement healthcare policies and
education programs. Manufacturers face higher costs if their vendors'
costs rise, so promoting healthy workplace policies and programs within
their supplier networks makes good business sense. Many manufacturers
already require their original equipment manufacturer and service
suppliers to attain International Organization for Standardization
certifications or require vendors' business practices to mesh with
theirs. By sharing existing education programs and policies and using
outside resources, companies can reduce the cost of designing and
implementing their own policies and programs.
Providing care, support, and treatment
Not surprisingly, the 2002 corporate survey found that less than 10
percent of FIEs in Beijing had seen any impact from HIV/AIDS in their
workforce. Little data exists about the impact on businesses throughout
China, but companies should factor in the anticipated costs and scope of
their programs when designing their care policies. The first step is to
review local and national laws to determine the legal implications for
the company. Second, companies should survey healthcare capacities—both
within the company if applicable, and in the wider community—to
ascertain high-quality care providers. If local clinics are reusing
medical equipment, then workers might be at risk, and appropriate
actions should be taken by the company to isolate those facilities and
encourage staff to seek treatment elsewhere. Identifying additional
community resources, including local health authorities, nongovernmental
organizations, and insurance companies are key to assembling the
components of a comprehensive care plan.
Once policies and educational programs are under way, companies can
consider undertaking a testing program that will establish the baseline
for treatment needs. Of course, no company should establish a compulsory
testing program, and any voluntary program should ensure that employees'
status be kept confidential. Testing for STDs enables workers to get
treatments for curable diseases, increasing their productivity. STDs
contribute to the spread of HIV through inflammation, ulcers, and more
infected white blood cells—which facilitate the transmission of HIV
during intercourse. Treating STDs is an effective means of preventing
HIV, and diagnosing a curable STD can serve as a wake-up call for
employees who do not consider themselves at risk of contracting HIV.
Testing for hepatitis can also alert workers to potential liver problems
and enable them to begin treatment regimens that will enhance their
quality of life and make them better, more productive employees. HIV
testing can be difficult to implement, particularly if employees do not
wish their employers to know their HIV status and worry that they will
face discrimination.
Companies also must consider other ethical issues with HIV screening
policies, both for new hires and the existing workforce. For example,
poorly designed HIV screening may be incompatible with prevention and
empowerment programs.
The risks of inaction
The most important issue for businesses in China to understand is the
serious consequence of inaction while prevalence rates of HIV and STDs
are low. The risks presented by HIV/AIDS in China are severe and to deny
or ignore them amplifies the economic risks that companies will face in
the future—including reduced corporate profits. As the SARS crisis
develops and the extent of the public healthcare system's inability to
confront emerging infectious diseases becomes more apparent, the private
sector in China will need to address health issues actively to avoid the
social and economic disasters looming on the horizon.
Bates Gill
holds the Freeman Chair in China Studies at the Center for Strategic
and International Studies (CSIS) in Washington, DC.
Andrew Thompson
is the research associate for the Freeman Chair in China Studies at
CSIS.
