In contemporary China, physicians tend to require more diagnostic work-ups and prescribe more expensive medications than are clearly medically indicated. These practices have been interpreted as defensive medicine in response to a rising threat of potential medical malpractice lawsuits. After outlining recent changes in Chinese malpractice law, this essay contends that the overuse of expensive diagnostic and therapeutic interventions cannot be attributed to malpractice concerns alone. These practice patterns are due as well, if not primarily, to the corruption of medical decision-making by physicians being motivated to earn supplementary income, given the constraints of an ill-structured governmental policy by the over-use of expensive diagnostic and therapeutic interventions. To respond to these difficulties of Chinese health care policy, China will need not only to reform the particular policies that encourage these behaviors, but also to nurture a moral understanding that can place the pursuit of profit within the pursuit of virtue. This can be done by drawing on Confucian moral resources that integrate the pursuit of profit within an appreciation of benevolence. It is this Confucian moral account that can formulate a medical care policy suitable to China's contemporary market economy.