The Healthcare Opportunity in China

One of my consistent messages regarding China is that, even though the country’s economy is already the third largest in the world, it is still in an embryonic stage of development. The most casual observer will readily note that many product, technology and service gaps exist in the country today, each representing a potentially exciting new business opportunity. Some of these gaps will be filled by Western companies with the necessary products, technologies or knowledge, but many others will be filled by aggressive Chinese and foreign entrepreneurs.

When I described this aspect of China to a visiting class of executive MBA students from Notre Dame recently in Beijing, I found many in the group to be quite interested in healthcare. This happens to be one of the industries I often cite as being one of the biggest opportunities in China going forward. My reasoning is simple. When people begin to make money, they become more interested in living longer and will happily pay for any medicine, treatment or service that can help them to achieve that objective.

With this as background, I was quite interested to read a recent article in China Daily with the apt title: “Healthcare for the wealthy a growing market.” According to a recent study, demand for private health management services in China is already a 10 billion Yuan industry which has grown between 20 percent and 30 percent annually over the past decade. The same study predicted that the industry will double over the next three to five years.

Demand for private health services is widespread among China’s growing professional class. A survey conducted by Southeast University and Nanjing AHCC Health Consultation Ltd showed that 79.9 percent of the respondents desired private health management services, with 60 percent saying they would pay 2,000 to 3,000 Yuan per year for these services. The survey covered over 3,000 corporate executives, senior civil servants and academics in Nanjing, Guangzhou and Shanghai between the ages of 30 and 75 with annual incomes exceeding 50,000 Yuan.

New companies are being established every day to take advantage of this growth. Song Haifeng, a thirtysomething who founded eHealthcare (Beijing) Co. in July 2008, describes his company as a “bridge between medical institutions and customers.” For an annual fee of between 3,500 and 8,000 Yuan annually, eHealthcare will act as a customer’s “health manager,” providing a thorough yearly medical exam, a quarterly health diagnosis and health improvement suggestions. Working with over 40 public hospitals in Beijing, eHealthcare helps its customers to find the best treatment should illness strike. Family memberships are priced from 15,000 to 75,000 Yuan.

Another new entrant is Guokang.com, a Web site that provides health tips and information on diagnostics centers. Founded just four years ago, the company has attracted millions of online members and achieved revenues of 80 million Yuan in 2008, a 400 percent increase from the year before.

In addition to services such as those provided by eHealthcare and Guokang.com, China’s hospitals will begin to see major changes as capital and new technologies flow into the sector. Chinese-run hospitals are actively seeking Western technology and management practices, and private equity firms are gearing up to bring in fresh capital. China’s aging population and surging disposable incomes all but guarantee that the country’s health management industry will thrive in the years to come.

4 Responses to “The Healthcare Opportunity in China”

  1. Jack, great post. Glad your raising awareness of this fast growing market in China. I would point to Chindex a US company with, what I think, is a great business model. They operate hospitals in Beijing and Shanghai, with more in the works. The other side of the business is financing and distributing Western technology, such as the Da Vinci system.

    I currently work in materials management at hospital in the US. We do a lot of orthopedic and spine surgeries. I’m still curious how a lot of the distribution and sales networks work in China in regards to medical device sales. maybe one of you readers who has a deeper understanding can leave a reply. Thanks!

  2. Hi Jack,

    Nice post. Seems like healthcare is an opportunity that you are really starting to eye seriously.

    I cross posted and added some commentary at Asia Health Care Blog.

    Check it out and tell us what you think. Would love to hear from you again.

    //Damjan

  3. Alexco,

    Thanks for the comments. I know Chindex and, in fact, have been one of their customers in Beijing. They do a nice job.

    I’m scheduled for my own knee surgery in August, which I will have done in Pittsburgh.

    Jack

  4. Damjam,

    We are already working on a few things in the healthcare field—very exciting.

    Thanks for cross-posting and commenting on Asia Health Care Blog. Google Alerts picked it up, so I caught just before I heard from you.

    Jack