China’s Healthcare Market: Challenges and Opportunities

By ​Chris Sevcik, Director of International Trade Services, WTCGP

​The healthcare market in China continues to increase.  In 2017, the market value was $761 billion and it is expected to reach $1.19 trillion by 2020 and then $2.39 trillion by 2030.  Growth is fueled by an aging population, an expanding middle class and advancements in medical technology.  As the market continues to develop, opportunities for US firms expand.

Entering the Chinese market may seem like a daunting task, but the market is forecasted to continue its strong growth over the foreseeable future.  As long as you are innovative and a cost competitor, the Chinese market place should not be an issue for growth says Dr. John Bennett, CEO of Devon International Group.

The main pillar of China’s healthcare service plan is increasing private capital in the healthcare system.  This will be achieved through the development of private hospitals or through public-private partnerships as China has indicated that it will curb large-scale public hospital expansions.  From 2013 to 2018, private hospitals have had a compound annual growth rate (CARG) of 13.1% while public hospitals had a growth rate of -2%.  While the growth rate of public hospitals was negative during this time, public funding has become more concentrated and now targets improving the existing public hospitals over constructing new ones. 

In 2018, public hospitals spent more than $350 billion, and it is projected that by 2022 the market value will be 71% higher than 2018 levels.  In order to ensure sufficient funding, China is promoting public-private partnerships.  The Chinese government is also removing restrictions on foreign investors owning and running private hospitals and is encouraging that they participate in restructuring public hospitals; however, they have warned against a rush to sell-off state-owned hospitals to private entities.  Some foreign entities have developed private hospitals in China, but a large structural shift towards private hospitals is yet to develop. 

Hospitals in the east coast of China tend to be better quality than those in its interior.  Telemedicine is being introduced to improve quality for patients across China.  Medical institutions, together with internet companies, will offer online diagnostic services and follow-up consultations in order to alleviate the issues of incapability and prohibitive cost for patients.  Remote consultations are reaching as far as Philadelphia.  Edgar Vesga, CEO of Philadelphia Medicine, recently met with Hospitals in Jiangsu Province that are eager to tap into the expertise of the areas doctors to assist their patients.  

​​In 2017 China was the 4th largest import market for medical devices, importing $7.4 billion.  In 2016 foreign firms held a 35% market share in urban health centers, a 27% market share in county-level hospitals and a 44% market share in first-tier cities (Shanghai, Beijing, Guangzhou and Shenzhen) and a 31% market share in second-tier cities.   Foreign firms hold a strong market share in China due to the domestic population’s preference towards high-end imported products and a lack of competitiveness in China’s domestic healthcare industry. 

China has targeted medical devices and pharmaceuticals as an area of strategic growth for the country.  Made-in-China 2025 identified pharmaceuticals and medical devices as one of the 10 strategic industries to receive government support. The program aims to increase domestic market share of medical devices to 40% by 2020 and to 70% by 2025.  In order to accomplish its goal, China will offer subsidies to their local firms who conduct R&D, lure overseas Chinese scientists to China who are currently living abroad, reduce taxes on designated companies and invest in big data analytics in healthcare.  

Historically, China’s healthcare has been open to foreign pharmaceuticals and medical devices but closed to foreign investment in hospitals.  Now, China is opening to foreign investment in hospitals but is moving to enhance their domestic pharmaceutical and medical device industry, which has the potential to limit the ease of entrance to foreign competitors.  As the healthcare market in China continues to shift, it is important for businesses to stay abreast to ensure their success in this evolving market.