PIP: The People's Republic of China for the first 30 years of its existence had a centrally directed health care system which achieved impressive health gains for its population. By emphasizing prevention; organizing innovative, low-cost, locally controlled health services; and promoting accessible primary health care in rural areas, China increased life expectancy for most of its people, dramatically reduced levels of infant mortality, and eradicated or controlled a range of infectious and parasitic diseases. Since 1978, however, China's leadership has come to depend more upon market forces than central direction and planning to achieve economic growth. These new orientation has had major effects upon the organization and financing of health services. After more than a decade of economic and agricultural reform, China still has problems providing good-quality, affordable, and equitable health services for the majority of the rural population and both urban and rural poor. The need to pay for health care considerably exacerbates poverty in China. This paper describes the structure of government and the health care system, the nature of change during 1978-90, the impact of the reforms upon health status and health care delivery, and future challenges.