By Nicholas Hopper
Jul. 2 – China’s per capita healthcare expenditures have expanded steadily over the last few years, with annual growth rates of up to 20 percent. Meanwhile, rising income levels and growing social security throughout the country have favored massive government and private investments throughout the industry, and this trend is still far from reaching its potential. In fact, more and more foreign and local investors are discovering the possibilities within the market, gradually turning major parts of China’s health care industry into profit-making ventures.
China’s one-child policy has led to one of the world’s largest elderly populations. Roughly 10 percent of the population is expected to be over 65 by 2015 and, by 2050, the average age in China is forecast to be nearly 45 – one of the oldest in the world. Additionally, some 20 percent of the population is already suffering from liver disease, cancer, diabetes and similar inflictions, and this number is likely to grow alongside its aging population.
In anticipation of these trends, the government took the hospital industry off the FDI restricted list in January this year (foreign entities previously had to sign on with a local partner).
Private healthcare expenditures are expected to grow another 36 percent by 2015 to over US$200 billion, while the government has announced its goal to have 20 percent of hospital beds privately owned in three years’ time. This gradual shift from a predominately publicly-owned industry to a more efficient, but less affordable private one, caters to the development of China’s growing middle and upper classes.
“We have learned our lessons from some of the more developed countries,” China’s Health Minister Chen Zhu told Reuters earlier this year, referring to the much higher health care expenditure to GDP ratio in western countries. In the United States it is around 17 percent, while China is currently only at 5 percent. This figure could rise to “maybe 6 to 7 percent” in the next few years, according to Chen.
The entire medical services market is expected to reach US$500 billion by 2015 according to a recent report by Deloitte China, offering great potential for foreign medical equipment and drug manufacturing companies. GE just recently opened an innovation center in Chengdu in proximity to hospitals in the western regions of China, and large drug manufacturing companies will likely see substantial market growth, as roughly 80 percent of China’s drug market is within the hospital industry.
Breaking into this highly regulated industry is not an easy thing to do, but large foreign players will likely see their efforts compensated fairly quickly. Smaller companies in the equipment and drug manufacturing industry will also be able to profit from this trend and might find opportunities in catering to new hospitals and clinics throughout China. As a country where 95 percent of the population has some form of health insurance and where disposable income is steadily on the rise, China is definitely an investment location to consider for business in the medical services sector.
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