China’s largest demographic is swiftly reaching retirement age. At present, there are just under 200 million citizens over the age of 60 and the numbers are only increasing. Current facilities, already under-serviced and under-equipped, will be called upon to support the long term health care needs of approximately 300 million senior citizens by 2050.
How will the Chinese health care system cope? In this article we will provide a basic overview of the current medical system and evaluate some of the opportunities for foreign companies in the elder-care health sector.
A look at China’s health care system at present
The current Health care landscape is mainly dominated by government-run institutions with a clear quality of care and access disparity between rural and urban areas. (Urban areas receiving much better care.)
Insurance. On the face of it, China has gone from basically no health insurance during the rapid economic boom of the past few decades, to being well on its way to providing universal health care coverage for all. However the depth of coverage differs significantly by region and a common complaint among Chinese citizens remains that the quality of care is low, expensive, and difficult to access.
Growing demographic, expanding market. The most looming challenge for Chinese health care and also its greatest area of opportunity for foreign medical care companies is China’s rapidly growing elder care market. Already the largest elderly population on Earth at approximately 200 million (about 14% of the total population) that number is projected to grow rapidly for the next 2 decades to eventually 30% of the population. The Chinese government is fully cognizant of the need to improve and expand its current system. Current spending in the health-care sector is projected to grow from around $357 billion to $1 trillion by 2020 and opportunities for foreign investment have expanded greatly in the past few years. According to L.E.K China’s medical device market alone (think MRI’s , X-ray machines etc.) is expected to reach $30-40 billion by 2015.
Opportunities and challenges for foreign companies
In other words, not all opportunities are advisable for foreign companies. Foreign companies need to concentrate on areas where they hold the most advantage over local Chinese competitors—specifically specialized areas where quality triumphs over price.
It is not so much the overall number of retiring Chinese citizens, but rather the steadily increasing economic prosperity within a certain segment of that population that will demand and be able to afford foreign companies’ high-end products and services.
Inherent difficulties in entering the market
The need for high end services and devices exists, but in the competitive and nuanced climate of Chinese business culture bringing business opportunities success is still by no means assured. Foreign companies need to carefully consider their market entry strategy and business development in China as well as pricing and local competition before they decide which of their products and services are best suited to the Chinese market.
“We’ve spoken to many Chinese investors and also many Western elderly care practitioners, and many of them are just trying to dive into this huge China elderly care ocean – but they haven’t looked to see what is in the water, and they haven’t learned how to swim in it.”–Jockey Yang is CEO of Shanghai-based Joyway Investment & Development Co., Ltd
East is not West. Nor can it be blithely assumed that what works in Western markets will work well in China. Local competition and China’s regulatory system require a unique strategic approach. Foreign companies would be well advised to adopt a local strategy when approaching the Chinese market. Part of the appeal of hi-end products for example is not just the quality, but also the customer and after sales services foreign companies can provide. Establishing local offices (and in some cases manufacturing capabilities as well) within China makes foreign companies more adaptable and responsive to local needs. Companies also need to take a careful look at the regulations surrounding their particular products to determine which type of entry mode makes the most sense.
Latest posts by Duco van Breemen (see all)
- INFOGRAPHIC: Chinese water pollution - 9th December 2015
- Exhibiting at a Chinese trade fair: 3 things to keep in mind - 16th September 2015
- Food and business scandals in China give rise to foreign brands - 26th June 2015