Planet New Economy

Healthcare

China is getting older faster. Its seventh census showed that 13.5% of its 2020 population of 1.41 billion, or 191 million, were aged 65 and over. This scale has created vast demand for health-related products and services, which was bolstered by recent reforms to raise domestic manufacturing and distribution capabilities, plus lower costs. Accelerating digitalization promises to accelerate China’s appetite for healthcare further still. Given the need – and subsequent appetite – of society for more accessible and equitable healthcare, there are rapidly-growing opportunities that cannot be ignored across China’s biotech, oncology and contract research organization sectors, among others. 


Driving greater efficiencies

China currently spends just 5% of GDP on healthcare (compared with 17% in the US, and 10-12% in many parts of Europe), but the trajectory of consumption suggests its costs will escalate. One likely result is the more widespread usage of technologies and better application of data, both of which promise to improve patient-led treatments and make certain conditions preventative. Tencent-backed WeDoctor offers one example of how technology can redirect some less serious and more routine care away from the hospital system. At the same time, such services improve access given China’s geographic challenges

Adapting to aging

Healthcare in China is a prime target for the digitalization drive in the wake of the pandemic. The use of telemedicine in China, which has surged since the onset of Covid-19, looks set to flourish in a society that continues to age. The domestic telemedicine market is on track to see growth of nearly 50% a year over the next few years as the nation copes with its rapidly aging population – with forecasts that the over-65s will comprise 26% of the population by 2050. If trends persist, China’s telemedicine market will overtake that of the US in size to become the world’s largest, potentially reaching Rmb80 billion.

Domestic drug innovation

A combination of regulation, capital and supportive immigration policies is expected to boost capacity, quality and innovation in terms of the onshore drug sector – with an aim to increase accessibility and replace pharmaceutical imports. Oncology drugs, in particular, will become a major growth area within China’s biologics market, given the country’s unusually high incidence of cancer. More broadly, a rising willingness among Chinese pharmaceutical and biotech companies to invest in required resources will lead them to domestically develop drugs that can effectively substitute popular Western drugs, and could eventually foster pharmaceutical breakthrough drugs that are exported to the rest of the world

Building on demand

Covid-19 underscored the limitations of hospitals and other medical facilities across the country. As a result, since 2020, Beijing has mandated significant developments in medical infrastructure that are creating a wave of spending on additional medical equipment and more competitive products at more affordable prices. One prominent company in the industry estimates current orders for medical equipment coming from medical institution infrastructure expansion projects already amount to around Rmb15bn and is still growing. 

Integrating insurance

There is scope for insurers to extend business models within the healthcare sector, in particular across health management, diagnosis, treatment, recovery and drug distribution. This should help relevant industry players to more comprehensively address the health-related needs of policyholders. Rewards programs offer one example of how insurers are increasingly helping policyholders achieve healthier lifestyles and, in turn, reduce claim expenses. Some insurers are further ahead in pursuing integration – such as Ping An in telemedicine and technology, Zhong An in online health insurance and Xiaomi in wearables. The need for rivals to catch-up required might also trigger some industry consolidation.

Global exports beckon

As China’s healthcare industry becomes more digitized, efficient and innovative, leading domestic companies may well seek to expand onto the global stage. Despite the size of the local market, new treatments have application beyond geographic borders. Plus, China continues to benefit from a lower cost base for developing new drugs compared with Western counterparts. The US Food and Drug Administration, as an example, is increasingly accepting datasets generated outside the US, underscoring the potential for Chinese drug companies to make inroads in other markets.