Beijing is on the cusp of the much-delayed annual gathering of the National People’s Congress. The highlight of this event is usually the gross domestic product growth target, but it may not be a scene-stealer this time. Both the government and the people must change their priorities amid the Covid-19 pandemic. Public opinion surveys around the world show that people prioritise health over the economy. That should and is likely to translate into government budget priorities and people’s consumption patterns . There are signs that Chinese people are changing their priorities. Trends in household debt suggest a sharp reduction in the appetite for debt-fuelled expenditure. Between 2014 and 2019, household debt rose at nearly 20 per cent per annum. Unaccounted for debt in the shadow banking system probably rose even faster. While debt in the official financial system is stalling – even though it is still high, at around 130 per cent of household disposable income – household debt in the shadow banking system may have reduced sharply. The decline in short-term and credit card loans suggests so at least. The household deleveraging trend is reflected in the purchases of property , cars and smartphones . After crashing in February and March, the recovery in April appears anaemic, still below last year’s level, and not showing any pent-up demand from the shutdown in February and March. Even the moderate recovery in April doesn’t appear sustainable. Weaknesses are likely to recur in the coming months. This deleveraging trend is a turning point for China. There could be three factors driving it. First and most importantly, growth expectations have changed. The Covid-19 pandemic appears to have exacted a heavy psychological toll. Slowing economic growth over the past five years didn’t convince people that the outlook for China had changed. It has taken a pandemic to convince them. Rising international tensions have also contributed to the shift in sentiment. Second, the pandemic has exacted a toll on wealth and income. The income lost during these months will be reflected in people’s purchasing power in the future. While lockdowns have ended , demand is still significantly below prior levels, which is affecting employment and cutting income expectations. The negative trends in the property and stock markets have cut demand for debt for speculation. Third, the pandemic has changed people’s perception of what’s important, with opinion polls showing how much more people value their health over GDP. It wasn’t so before. It took a pandemic to awaken people to the frivolity of chasing the next hot gadget or lining up for another speculative opportunity. So much of the GDP was people buying things they didn’t need and spending money they didn’t have. This change in values will have a long-lasting impact on demand for debt. The Chinese government has been pushing for GDP growth with declining effectiveness in recent years, piling on more debt for each unit of increase in GDP. This has led to a rising national debt to GDP ratio. While we can’t say precisely at what level it will hit a ceiling, the end game will be disastrous for the country. It appears that the government is pulling back from this mindless pursuit of GDP growth for its own sake. The pandemic has pushed Beijing to change its priorities just in time. Improving health care is obviously the No 1 priority. The severe acute respiratory syndrome epidemic in 2003 taught China a severe lesson . But it wasn’t learned well enough. The Covid-19 pandemic has been vastly more damaging than Sars. The government has to respond. China’s health care system has had severe flaws for a long time. Putting profit above service and science is the cause of China’s health care crisis. First, the production of drugs is thinly supervised and influenced by dodgy characters, with the sector periodically embroiled in scandals, such as the one involving vaccines for children . While some heads have rolled , the government has not addressed systemic flaws. Local government offices for supervising drug production are often compromised by the businesses that they are supposed to supervise. Over 90 per cent of China’s drug supply is generic. Most of the drugs don’t meet quality standards. Chinese vaccine scandal may hinder control of Covid-19 The medicine supply chain is characterised by outsize “marketing” costs. Large pharmaceutical companies tend to excel at marketing, not development. This perpetuates corruption and prevents the rise of research-driven pharmaceutical companies that could compete internationally. Meanwhile, government-owned hospitals are usually under constant financial pressure. Underpaid doctors have turned to “ red packets ” for supplementary income. Non-urgent threats don’t attract significant financial support. South Korea has shown that a well-prepared economy can handle a pandemic without a shutdown. This pandemic has shown how well such preparedness could pay off financially, a lesson China should learn. Food safety is another urgent matter that the government must address. Pork safety , for example, has become a serious concern in small cities and towns, where people are scared to eat the meat. Trust in domestically produced infant formula still hasn’t recovered from the scandal a decade ago. China’s ‘super pigs’ not the answer to African swine fever woes, experts say When buying food, people are usually quite worried about safety, indicating that the government hasn’t strengthened the supervisory system enough to inspire widespread confidence. China’s governing philosophy is usually dominated as much by psychology as by reality. During the Qing dynasty, the recipe for not catching the plague was to stick garlic into one’s nostrils. As long as people had faith in these remedies, it all worked out for the government. When people stop believing, the remedy is rebranded again and again until people buy into it. The Chinese government must catch up with the people and focus on quality-of-life issues. From urban hygiene to food safety and drug effectiveness, let science lead the way. Andy Xie is an independent economist Help us understand what you are interested in so that we can improve SCMP and provide a better experience for you. We would like to invite you to take this five-minute survey on how you engage with SCMP and the news.