Why is Chinese healthcare booming?
Lu Rahman looks at the state of China's healthcare market and asks why it is growing at an unprecedented rate.
Where healthcare is concerned, it seems that all eyes are on China. A report from McKinsey & Co says the country’s healthcare market is tipped to grow at an unprecedented CAGR of around 12% which will see it hit the $1 trillion mark by 2020 – in 2011 the sector was valued at $357 billion.
What’s the reason behind the boom? Thanks to a range of factors and conditions including a growing and ageing population, huge R&D investment, and central and local government support, the healthcare market in China is on a serious upward trajectory.
The government in China has taken major steps to improve local healthcare infrastructure. According to a report by the Health Industry Summit, last October the Chinese government approved a blueprint called "Healthy China 2030", pledging to build a healthy China in the next 15 years. By 2030, the size of the healthcare market is expected to reach $2.3 trillion. From pharmaceuticals to medical products to consumer health, China is one of the most attractive markets in the health industry, and is the fastest-growing of all the large emerging markets
The research by McKinsey & Co points out the significant effect healthcare reforms have had on the system in China. It highlights three factors: “The continuation of economic and demographic trends, further health-care reform, and the policies articulated in the government's 12th five-year plan”.
The report explains that improvements in infrastructure, the widening of health insurance coverage and the support for innovation, will have strong appeal for multi-national companies. It highlights how healthcare spend between 2006 and 2011 has more than doubled: “From pharmaceuticals to medical devices to traditional Chinese medicine, almost every health sector has benefited."
According to Export.gov: “The medical device market is one of the fastest growing market sectors in China with the industry maintaining double-digit growth for over a decade. In 2016, the medical device market reached $53.62 billion, an increase of 20.1% compared with 2015. 72.7% of this growth is fuelled by hospital procurements.”
The region has been an attractive proposition for US device companies for some time with companies such as Medtronic, Covidien and GE Healthcare looking to increase their Chinese presence. According to the McKinsey & Co report: “China’s rise to prominence has prompted organizational changes, too. A few companies, such as Baxter, have moved their Asia–Pacific regional headquarters to Shanghai. Some have even relocated to China the global headquarters for select units—GE’s X-ray business and Bayer’s general-medicine business, for example. Roche plans to make Shanghai one of three global strategic-operations centers, alongside Basel and San Francisco. Many companies have changed their reporting lines so that China operations report directly to the chief executive or to the global head of pharmaceuticals or medical devices.”
All eyes on China but where is China looking?
While the Chinese healthcare sector is booming, it’s interesting to learn that Chinese investors are eyeing up Israeli opportunities. Bloomberg’s Gwen Ackerman and Li Hui have labelled this move as the “Israel-China” romance and explain that medical device companies are turning to Israel “where company valuation are lower and enterpreneurs are hungry for new markets”.
It’s no surprise that along with many other countries, digital health is a growing market in Israel. According to a Start-Up Nation Central report investment in Israeli digital health companies in 2016 was up by 30% on the previous year. It’s hardly a shock to anyone in the healthcare sector. Recent trips to Medica in Dusseldorf highlight just how keen Israel is to embrace the healthtech and digital health markets. Improved patient care and experience, the on-going desire to streamline hospital systems as well as create digitally-enabled devices, has been swooped upon by Israeli innovators. As China’s population both expands and grow old, it’s no wonder that its healthcare investors increasingly see the benefits in forging business links with Israeli healthtech providers.