The Healthcare Sector in China

by | March 31, 2020

The Healthcare Sector in China

March 31, 2020

The healthcare sector in China is a vast industry with multiple subsectors growing at different rates, yet all are on an upward trajectory. The reasons for this are multiple, urbanization, an aging population, a continuous rise in wages and living standards for Chinese citizens, as well as more innovation in high-tech and broader access to healthcare. Chengdu city in Sichuan province, will be highlighted as a case study, exemplify these factors.

 

Factors for growth

According to the National Bureau of Statistics, the average cost of healthcare in china was reported at 1,902 RMB per person in december 2019. An increase of 15% from the previous year which is supportive of the healthcare sector’s rapid growth, particularly from a supply-side. The accessibility to healthcare can hugely be attributed to stable investment from the government in the healthcare sector in China and the favorable policies to support its growing population. Some of the policies include opening markets of correlated sectors such as insurance allowing foreign companies to enter, accelerating its infrastructure and service capability. This is part of the drive of the Chinese government working on providing affordable basic healthcare to all residents by the end of 2020.

The healthcare policy in Chengdu is relatively open. In the past five years, the number of hospitals in Chengdu has increased at a rate of 5.8% per year. Most of the growth has come from running medical services. Private hospitals have quickly settled in Chengdu at a rate of 30 new ones a year. As of the end of 2018, the ratio of the number of public hospitals to private hospitals in Chengdu was 1: 2.7. The total revenue of the private hospitals was 20 billion RMB, a rise of 29% year on year.

From a demand perspective, the growing middle class across China who are now more cognizant of medical healthcare have increased their consumption of the services, particularly in private healthcare. This trend is very noticeable in Chengdu. For example, the demand for private hospitals in Chengdu is 7 times that of Shenzhen.

 

Rise of the private healthcare in China

Public confidence and preference are given to private healthcare institutes; which is now more affordable in an environment where some of the public services are considered underdeveloped. This has created an optimal condition for consumptive health services in China. These hospitals, particularly in Chengdu, tend to target higher-profit fields like gynecology, andrology, dentistry, orthopedics, and ophthalmology, as well as consumptive health services including medical cosmetology; assisted reproduction services; high-end prenatal, delivery, and postpartum care; and rehabilitation services. It is not surprising that there is a rise in Medical Tourism in China.

 

Technology and Big data in the healthcare sector in China

There has been a rise of the Chinese web giants such as Baidu, Alibaba, and Tencent providing healthcare solutions using their own respective platforms. All of these companies have used blockchain-based methods to boost the efficiency of the country’s medical infrastructure while keeping patients’ data secure. Not only does this create sophisticated profiles for insurance and healthcare management but it also makes it more accessible to the millions of people who use smartphones. This method alleviates bottlenecks in the domestic medical sector, namely around medical service access and efficiency. These solutions are gradually being applied in different provinces around the country.

Tencent is collaborating with Waterdrop, a crowdfunded health insurance firm, to develop a medical and insurance solution leveraging blockchain technology. Tencent plans to integrate the solution into its WeChat messenger, which means more than 1 billion Chinese users who actively use the platform each month can access medical bills efficiently and securely. The solution will also benefit medical institutions and insurance firms by facilitating an efficient billing system as well as a platform for secure, auditable storage of medical information to prevent claims from fraudulent invoices.

 

Cosmetics industry in China

According to Morgan Stanley, the cosmetic and beauty industry in China is “a massive, fast-growing market of people who increasingly want to buy”. This is due to the rise in prosperity and higher disposable income.

Chengdu’s medical and aesthetic industry started early and developed rapidly. The country’s first private medical and aesthetic institution was first established in Chengdu. In the following 20 years, medical institutions have developed strongly at an annual growth rate of more than 10%. If you want to know more about the cosmetics industry in China read our article on the topic.

 

Large scale development of medical devices

Zhang Yongjian, director of the Food and Drug Industry Development and Regulatory Research Center of the Chinese Academy of Social Sciences, believes that from the perspective of scale, the domestic medical device industry has reached a saturation point. This has led to fewer R & D companies and fewer original technologies and products. Now there is a demand for medical device research and development technology to promote high-quality development of the industry.

Reviewing healthcare in China 2019 showed that medical equipment as being one of the pillar industries. Having innovative domestic products boosts the quality of healthcare in china as advanced methods and equipment play an important role in improving the wellbeing of the patients’ recovery. Zhang Yongjian believes that the medical device industry is highly strategic, stimulating, and growing. If China’s medical device industry wants to achieve better development, it must change from high-speed development to high-quality development.

 

 

Investment opportunities in the healthcare sector in China

With both supply and demand developing the healthcare sector in conjunction with the medical insurance market also expanding, this does create opportunities for foreign investors in the healthcare field.

The government has recognized this, and initiated methods to boost foreign investment in this field. R&D and manufacturers of raw materials for the production of vaccines and cell-therapy drugs can now receive favorable policies such as tax incentives, streamlined procedures or discounted land prices.

There is ample room for foreign manufacturers to cultivate the market of China, but at the same time, foreign manufacturers must pay attention to its domestic manufacturing plan. According to China’s “Made in China 2025” initiative, China is aiming to strengthen the use of its domestic products in hospitals to 70% by 2025. The Chinese government plans to strongly support and upgrade its domestic products so that they can prevail in the export market.

Collaborations that support the Chinese long term health policies will, therefore, be more welcomed and advantageous to those SMEs that can.

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What happened in the year 1421?

From 1421 to 1423, during the Ming Dynasty of China under Emperor Zhu Di (朱棣) the fleets of Admiral Zheng He (鄭和), commanded by the Chinese captains, discovered Australia, New Zealand, the Americas, Antarctica, the Northeast Passage; and circumnavigated Greenland.

Due to this endeavour we can conclude that “1421 is the year that the Chinese discover the world”.