Investing in China’s Healthtech Industry
China’s healthcare industry is facing an onset of new challenges due to its rapidly ageing population. There is now an ostensible gap between the medical resources available and the current health needs of the nation.
Still, China is uniquely placed. A combination of factors – its large middle class, advanced technology capabilities, and strong government support – creates key capacity to produce innovative solutions for the market.
China’s healthcare system has also made significant strides. Within the last two decades the country has benefited from large-scale reforms of its medical infrastructure, insurance system, as well as the opening-up of its healthcare market.
Future growth, however, depends on how the country chooses to respond to its current set of challenges.
In 2014, the Chinese government pitched its healthcare sector as an area for foreign investment – with the introduction of a new law permitting foreign investors to hold a 100 percent ownership of private hospitals.
The government also made it clear that healthtech is now a strategic area of development for China. It features heavily in both the 13th Five-Year Plan (2016-2020) and its Healthy China 2030 strategy.
The objective is to improve the access, quality, and cost-effectiveness of China’s healthcare services.
As the challenges to China’s healthcare industry grow and diversify, so do the opportunities – its healthcare market is expected to reach RMB 198 billion (US$28.59 billion) in 2026, increasing tenfold from 2016.
Here, we identify the digital solutions making improvements to China’s healthcare industry and showcase the opportunities for foreign investment in this market.
China’s healthtech solutions: Three key segments
China is home to the largest population of netizens in the world. Approximately 700 million people have internet access in the country – 86 percent of which connect online through their smartphones.
This internet spread and usage provides an essential foundation for technology-based growth, including across various healthcare subsectors.
From pre-patient appointment registrations, online information inquires, making payments, to receiving test results – more and more of the patient’s hospital experience is mediated by an online interface.
The recently coined term ‘fingertip medical treatment’ describes this as the new emerging healthcare model.
Here, we look at three specific examples of how the introduction of digital technology and innovation-based solutions improve the efficiency or quality of healthcare.
Online patient management
Streamlining a patient’s healthcare experience is now central to many healthcare organizations.
According to a survey conducted by PwC, 49 percent of healthcare provider executives consider revamping the patient experience as one of their top three priorities over the next five years.
Using technology to enhance the patient experience is already becoming a standard operating procedure in several hospitals and medical businesses – online payments, digital communication tools, remote patient monitoring, online scheduling and task management, clinician tools and support, etc.
Moreover, as the market becomes saturated with new healthcare players, consumers find it increasingly difficult to navigate the complexities of the system.
New technologies like mobile healthcare apps are disrupting the industry to help customers select from a wide range of healthcare options available to them.
One such example is The CareVoice, a Shanghai-based insurance tech startup that works with insurers to offer consumers a digital platform where information about the healthcare facilities and services covered by the insurance policy is clear and easy to process.
The startup provides a triage feature service on their mobile platform that guides users to the appropriate medical facility, according to their symptom and their insurance policy.
Sebastien Gaudin, CEO of The CareVoice explains, “many people end up spending a lot out-of-pocket and for this reason, people prefer to go to public hospitals, which is often considered more affordable and trustworthy.”
He adds, “As a result, public hospitals often become overcrowded and the overall quality of care decreases, and China is now tasked with trying to redistribute some of the weight from the public to the private sector.”
Finally, Gaudin explains the app’s larger impact on the healthcare industry: “With The CareVoice, we are increasing the efficiency and transparency of the entire process and making commercial insurance products more appealing to consumers, which is in turn engendering more activities in the private medical care industry as a whole.”
Wearable medical devices to monitor consumer health
China’s population demographics have changed significantly over the past 20 years. Two major trends are apparent.
First, China’s population is ageing. By 2030, China is expected to have nearly a quarter of its population over the age of 60.
Second, it is now reported that China has nearly 300 million patients with chronic disease, accounting for 86.6 percent of deaths in China. This means that the country has officially reached a tipping point whereby chronic conditions surpass infectious diseases as the leading causes of early deaths.
Together, these trends have generated a higher demand for disease management and ongoing monitoring.
Here, wearables and medical devices aim to fill the gap in medical resources shortage by delivering healthcare information straight to the consumer.
Many businesses are now capitalizing on this growing demand by investing in the medical devices and wearables industry, which grew by 20.1 percent in 2016, to reach RMB 370 billion (US$56 billion).
For example, Hinounou, a Shanghai-based startup, aims to develop an intelligent healthcare device for the elderly to provide companionship, tailored insurance, and ongoing health monitoring services.
One part of the multifaceted business is to provide home wellness kits for seniors. This kit includes various take home devices, such as a gene testing box, a finger pulse oximeter, a blood pressure monitor, and an IoT scale that helps users monitor for around 10 critical chronic diseases, blood oxygen levels, weight, and blood pressure.
These new devices are not only a great way to encourage patients to be more proactive in monitoring their own health, but also aims to reduce the misutilization of resources in China’s tertiary hospitals.
Artificial intelligence to assist doctors with medical diagnosis
According to the Organisation for Economic Co-operation and Development (OECD), China has 1.8 practicing doctors per 1,000 citizens.
Further, hospitals that received a top “triple-A” ranking make up only 7.7 percent of the country’s medical centers, but handle 50 percent of total outpatient visits.
There are multiple reasons for this overcrowding.
These include the concentration of the best hospitals in top tier cities, lack of qualified doctors available, and an inadequate primary care system that could reduce chances of needing to see a specialist in a hospital.
While urban hospitals have undergone a rapid transformation towards more advanced and specialized medical care, rural hospitals suffer from a lack of staff, supplies, and patients.
Artificial intelligence (AI) is one way of relieving the pressure on China’s overburdened healthcare system.
The two tech giants, Alibaba and Tencent, recently found success in developing AI software to interpret medical scans and make diagnoses in order to speed up the screening of medical images.
In 2018, Alibaba’s health unit introduced AI software that could help interpret CT scans and an AI medical lab to help doctors make diagnoses.
Shortly after, Tencent released its own AI software, Miying, which was first trialed in the southwestern region of Guangxi but is now used in nearly 100 hospitals across China.
Other smaller startups have also attempted to develop their own AI technology as a tool to enhance medical provider efficiency. According to Yiou Intelligence, a Beijing-based consultancy firm, some 131 Chinese companies are currently working on applying AI in healthcare.
Opportunities aplenty in China’s dynamic and growing market
Healthcare in China has long been a national priority, beginning as early as the first healthcare reforms of 1980s.
The sector is now witnessing rapid transformation facilitated by both, market needs and technological advances.
In 2019, subsectors of both the pharmaceutical and healthcare industries were added to the 2019 Foreign Investment National Encouraged Catalogue.
Foreign investors manufacturing raw materials for production of vaccines and cell-therapy drugs and those investing in medical institutions services can access preferential treatment, such as tax incentives, streamlined procedures or discounted land prices.
Together, these signal China’s unwavering commitment to improving healthcare services in the country; it has also followed the government opening up related sectors to foreign investment.
The State Council recently recommitted to its Healthy China 2030, releasing an execution plan for the latter half of the strategy (Full version can be found here: Health China Action (2019-2030)).
The document makes reference to technology close to 30 times and calls on relevant parties to utilize technology to promote and advance the health of the nation.
Leading private players, meanwhile, have been making significant progress in developing capacity for more efficient healthcare practices.
For many years, China’s tech giants Alibaba and Tencent, have looked at ways to build diagnostic tools to make doctors more efficient.
However, at present, the competition to develop these tools is no longer just between the tech behemoths. There is now an upsurge of smaller tech players capitalizing on the opportunities that China’s recent reforms have brought about.
Businesses and entrepreneurs in the technology, infrastructure, or medical care industry should capitalize on the growing number of opportunities that healthtech can offer – whether to provide knowledge, assist medical providers, or make the patient journey more efficient.
China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to firstname.lastname@example.org for more support on doing business in China.