NEW INVESTMENT OPPORTUNITIES IN CHINA
& THE WAY AHEAD
Since 2010, China has been the second largest economy in the world. With consistent changes in their policies over the years, there have been many opportunities for investments into the Chinese healthcare sector from foreign and locally private companies. Since the COVID 19 pandemic, the scope for investment opportunities only grew more until now.
Are you aware about the ongoing investments being made in the healthcare sector? Are you wondering about the future of China in Healthcare Investments?
Through this article, Hospacxx Healthcare Consultancy presents the current investments made into the Chinese healthcare sector, along with the scope for newer investment opportunities for the progressive growth of the healthcare sector for advanced healthcare services and further, to become a contributor for the economic growth of the country.
CURRENT INVESTMENT SCENARIO IN CHINA
China’s healthcare market is growing fast and is expected to become the largest healthcare market in the world in a decade, due to an ageing population, rising middle class, and increasing penetration of commercial healthcare insurance.
According to World Economic Forum, China’s healthcare sector is expected to be worth $1.7 trillion in 2023, and grow well above the rate of the overall economy as demand for medical treatments far exceed supply of doctors and facilities across all medical fields. Meeting this demand will require significant investments and innovations.
HEALTHCARE CENTRES
The Chinese Healthcare sector has been under the scrutiny of the government since the 1950’s. But due to the steady growth in the ageing population and indirectly, the increased rate in the prevalence of Chronic, Non-communicable diseases has left more burden on the healthcare systems to upscale the availability & affordability of advanced healthcare services, especially the preventive type of services in order to meet the public’s demands.
According to the World Bank Data, China’s ageing population is expected to increase the burden of chronic diseases by 40% by the year 2030. Currently, almost 80% of deaths in China for people aged 65 years and above are a result of chronic diseases, with cancer, heart disease, and diabetes being the top causes of death.
As a result of an ageing and increasingly ill population, China is now becoming one of the of the fastest-growing major healthcare markets in the world, with a five-year CAGR of 11%, compared to just 4% in the US, and -4% in Japan. China’s healthcare market is expected to reach a value of CNY 198 billion in 2026, increasing tenfold from 2016.
INVESTMENT INITIATIVES ON PUBLIC HEALTH CENTRES
China has historically underspent on healthcare. Its healthcare expenditure per capita has been severely lagging compared to other top healthcare markets. In 2018, China healthcare expenditure per capita amounted to only USD 501, significantly lower compared to other healthcare markets, which on average spent USD 5,752.
This has led to an inefficient impact of unequal distribution of medical resources across the urban and rural regions, that was supposed to meet the population’s demands. According to a survey by China’s Statistical Log book, it was observed that there was a higher distribution of the important medical resources like beds, doctors and nurses across the urban regions, in comparison to rural regions, which led to a poor patient experience and longer waiting time for the rural population.
Thus, Government made more efforts to invest in rural areas to address inequality of health services, and greater healthcare expenditure was needed to support the country’s ageing population and to improve the overall quality of healthcare services.
- As present, public reforms such as the “Healthy China 2030” policy, which outlines China’s plans to upgrade the standards and quality of service in primary care institutions, have been put into play.
- Furthermore, within the five years covered by the 14th Five-Year Plan from 2021-2025, China will be deploying the equivalent of CNY 200-300 billion into improving their public health system. With this, healthcare expenditure is expected to grow at a CAGR of 9.8% between 2018 and 2023, driven predominantly by public healthcare reforms.
INVESTMENT INITIATIVES ON PRIVATE HEALTH CENTRES
The market for private healthcare services in China is still in the early stages of development, and it must overcome hurdles before it can emerge as a feasible alternative to the public healthcare system. But the extent of the potential opportunity and the likely need of the population for patient-centered medical services will remain a tempting target for international healthcare companies.
Yet those who carefully comply through the regulatory and legislative hurdles, and with the financial resources to devote to such a challenging enterprise, are likely to achieve a successful and profitable outcome.
China has permitted foreign private investment in hospitals and clinics since the 1990s. Since then, several private and foreign-invested hospitals have appeared across the country.
- The BenQ Hospital, which opened in 2008, is a modern, 3,000-bed facility located in Nanjing, Jiangsu. BenQ Group, a Taiwan-based Information Technology company, owns 70 percent of the hospital. The Nanjing Traditional Chinese Medicine Hospital and the Nanjing State-Owned Asset Investment and Management Holdings Group own 10 percent and 20 percent of the hospital, respectively. The hospital, which targets the general public, provides outpatient and inpatient services at general public-hospital rates and has been approved to accept social health insurance (yibao).
- Clifford Hospital is a 600-bed facility in Panyu, Guangdong, (a satellite city of Guangzhou) that received Joint Commission International (JCI) accreditation in 2003 and was re-accredited in 2006. It is known for combining traditional Chinese, Western, and alternative medicine in a hotel-like environment. Established by the Clifford Group, a Hong Kong-based real-estate company, Clifford Hospital provides full-scope outpatient and inpatient services at general public-hospital rates and accepts social health Insurance.
- Local company Phoenix Hospital Group operates two major hospitals in Beijing: the 500-bed Beijing Jiangong Hospital and the 670-bed Beijing Yanhua Hospital. Though Jiangong is run for profit and Yanhua is run as a nonprofit, both are large hospitals that provide the full scope of outpatient and inpatient services at public-hospital rates. These two hospitals accept social health insurance, and because they focus on the same population group and charge about the same prices as public hospitals, they compete with public hospitals for patients.
- United Family Healthcare (UFH), which opened its first facility in Beijing in 1997, is currently the only private or international healthcare provider with a presence in multiple Chinese cities. UFH operates comprehensive, JCI-accredited, premium-care inpatient and clinic facilities in Beijing and Shanghai. It also runs outpatient clinics in Beijing; Guangzhou, Guangdong; and Shanghai and manages a clinic in Wuxi, Jiangsu. UFH plans to open clinics or hospitals in several other cities in the coming years.
PHARMACEUTICALS & BIOTECHNOLOGY
According to a report by Krane Shares UCITS, the steadily growing biotechnology industry was on demand in 2020 due to vaccine development, innovative drug approvals, highest fundraising, and the best number of licensing deals with multinational companies including Roche and Novartis.
The transition from a generic health care model to one based on innovation and competition is being led by biotechnology and life science companies and is supported by public policy in China. This shift is the most potential driver of long-term growth and has caught the attention of global investors and pharmaceutical companies.
Foreign investor interest in Chinese biotechnology IPOs has resulted in $8.1B in new funding in 2020 alone alongside strong private equity investment. Foreign investors are tempted by the massive opportunity that the sector represents. China’s rapidly aging, 1.4 billion-strong population often depends on the industry for quality-of-life improvements and relief from complex, noncommunicable diseases.
More and more Chinese biotech companies are building partnerships with global pharmaceutical companies to develop and commercialize innovative drugs in new markets. The year 2020 witnessed a surge in licensing-out deals with foreign and multinational firms, which means that drugs produced in China are now sought after across the globe. These deals yield hundreds of millions of dollars in upfront payments and may potentially generate billions in milestone and royalty payments down the road. More than 223 such deals were signed in 2020, compared to only 12 in 2019.
INVESTMENT INITIATIVES
- China-based biotechnology firm BeiGene licensed its Anti-PD-1 antibody immunotherapy drugs to Norvartis.
- Innovent Biologics announced a collaboration deal with Roche to use its platform to develop a new drug, granting Roche exclusive rights to ex-China sales and distribution.
R&D spending, patents, newly registered trials, and innovative drug approvals are all key indicators of progress for the industry. Furthermore, R&D spending is expected to grow by 23% from 2018 to 2023, exceeding global R&D spending growth.
Approvals for innovative, non-generic drugs in China jumped from just 143 in 2019 to 203 in 2020 and many of the recently approved drugs were developed by smaller biotech companies, which may see valuation bumps in future funding rounds as a result.
In addition to the potential stemming from the unmet needs of an aging, 1.4 billion-strong population, innovative drugs have the potential to generate billions in new revenue for many of China’s biotechnology firms.
Contract organizations are the main beneficiaries of the strong growth in R&D spending in China as more companies outsource their R&D needs. The percentage of R&D spending flowing to contract organizations reached a staggering 56%4 in 2020 and is expected to grow to an even higher level in the years to come.
HEALTHCARE DIGITALIZATION
With China’s current healthcare capacity unlikely to be able to serve all of the growing medical care needs of the country, the scene is set for technological innovation and frontier medical treatments to fill this ever-expanding supply-demand gap. Triggered and accelerated by the COVID-19 pandemic, the Chinese government is also accelerating healthcare reforms by focusing on re-distribution of access to quality healthcare across the country, innovative medical technology adoption and nationwide healthcare system digitization. Online healthcare has emerged as the most promising solution to ease the stress on the healthcare system exacerbated by the pandemic.
In the first six months of the year, visits to health care institutions in China dropped 21.6% from a year ago, according to data released by the National Health Commission. Visits were still down 9.7% year-on-year in June to 630 million.
On the other hand, Tencent-backed We-Doctor reported that during the coronavirus outbreak, customer orders for online consultations increased 3.6 times from a year ago. More than 50,000 doctors joined the platform for a total of about 250,000 physicians.
Thus, health tech has become an essential part of China’s health care system and is now receiving support from the highest levels of government. The government announced in December of 2020, restating the positive impact of Health tech during the pandemic.
INVESTMENT INITIATIVES
- As part of the 14th Five Year Plan, many recommendations to organize and expand the use of “Internet + medical services” had been suggested.
- Tencent Trusted Doctor, a company that operates an online consultation platform as well as offline clinics. About 450,000 physicians with 20 million patients are part of this network, and that more than 30 of the 135 clinics have already received licenses to work with the government’s social insurance program. The company aims to build user traffic through general patient care, and rely more on specialist clinics such as dental and eye care to generate profit.
- Ping A Good Doctor, a Hong Kong subsidiary of the insurance giant Ping An have reported that they achieved a 26.7% year-on-year growth in average daily online consultations to 831,000 in the first half of the year, with revenue from online medical services doubling to 694.9 million yuan ($101.56 million). The registered users grew by more than 56 million in 12 months to 346.2 million.
- Alibaba Health reported that the Alipay app it has more than 15,000 contracted medical institutions, including nearly 400 Class III hospitals in 17 provinces, that are connected to medical insurance payment services. The company’s net total of frequent active users of Alipay’s health-care channel exceeded 390 million.
Thus, the immediate health care needs arising from the pandemic, together with the emergence of biotech innovation, paved the way for the development of the country’s health care system. Furthermore, government reforms are helping to set the sector on a path of long-term growth by encouraging innovation and technological advancement in the hope of building a globally competitive health care system that is accessible, affordable, and of high quality.
CONCLUSION
China is one of the those developing countries, with booming economy that leads to creation of new opportunities in key sub sectors of Healthcare like Digitalization, Biotechnology & Pharmaceuticals. With the consistent changes in their healthcare regulations & other policies, the Chinese government is open to investments from local private companies & foreign investors. Such investments have the likelihood of benefitting both the investors & the Chinese government, through better returns on investments, further growth in the healthcare sector & economy and provision of a more specialized and advanced healthcare services that is easily accessible and affordable to the public.
Hospacxx Healthcare Consultancy, likewise, has worked across Indian and International States on Hospital Projects for Business Process Development, Service Quality Assurance, Financial Management and more. For more information, you can visit the company website on www.hospaccxconsulting.com or contact us directly.
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