Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 138

Capitalising on China’s healthcare trends

China has proved a powerful partner in supporting the growth of Australian businesses, aided by our geographic proximity, political stability and governance-led business practices. We have a long and reliable history of high quality, reasonable cost goods and services manufacture which has led us to be ‘first-hand receivers’ of China’s attention when it comes to meeting the demands of its growing population.

Australian business sectors that have to date benefited from China’s attention have included the mining and resources sector, the tourism sector and most recently, those involved with the manufacture of health supplements and vitamins.

Changing Chinese demographics

Like many countries, China has an ageing population. According to an article, ‘How can China Care for its Ageing Population?’ distributed by the World Economic Forum, its population aged 65+ is forecast to grow to 167 million by 2020, accounting for 11.5% of the population or nearly double what it was in 1995. In addition, studies undertaken by the Wharton Business School state that China is now also facing an epidemic of chronic diseases and lifestyle issues (such as hypertension, stroke, diabetes and heart disease) that were typically associated with the ‘West’, mostly due to economic changes such as a growing middle class, rising GDP per capita and rising disposable income.

The cost of China’s evolving health and demographic trends has been enormous. It has been estimated that the country’s annual expenditure on health will grow at an average rate of 11.8% a year from 2014-2018, reaching a total spend of $892 billion by 2018. Yet according to a recent research paper issued by Deloitte, China’s healthcare spending, estimated at 5.4% of GDP in 2013, is still lower than other OECD countries, as shown in the chart below.

Growth and competition in healthcare

In response to the rising cost and need for healthcare services, the Chinese government recently announced several initiatives aimed at promoting growth and development in the health sector. According to research by Deloitte, ‘Projects that meet strict operational guidelines are expected to receive full government support, especially around land transfer, preferential financial and tax policies and related subsidies’. The research states that private and wholly owned foreign hospitals account for almost half of China’s total number of health care facilities and growth from this sector in China will bring the benefit of ‘leading medical technologies, advanced management, clinical practices and service models’. Additional service providers are considered good for competition, potentially leading to better pricing and satisfaction levels for patients. It may also help with raising the profile and use of private health insurance in the country, as commercial insurers develop plans to help consumers meet the rising cost of hospital care.

Of course, growth in the service and provision of healthcare services in the hospital and insurance areas in China will also promote growth in the supply chain such as in aged care, medical tourism and medical devices.

Australia’s recently agreed Free Trade Agreement (FTA) with China promises unprecedented access for our healthcare providers to expand their services into China. The benefits of the FTA to the sector were summarised in a recent article published in Business Spectator titled ‘The China FTA is just the tonic for Australia’s healthcare operators’, by Kim O’Connell and Suzy Madar.

The article outlined the key benefits as:

  • For hospital providers, China now offers Australian businesses the opportunity to establish wholly foreign owned hospitals.
  • Medical and dental service suppliers can also establish Australian majority-owned joint venture hospitals and clinics with Chinese partners, provided the majority of medical professionals are Chinese.
  • In the aged care space, Australian providers may now establish wholly foreign-owned aged care facilities with tax incentives and fee waivers.
  • For R&D service providers, Australian companies looking to conduct R&D in China will be permitted both to carry out and offer R&D services through Australian-owned subsidiaries based in China.

Those ASX listed companies set to benefit from the growth and development of the healthcare service sector in China and the introduction of the FTA include Cochlear Limited (COH), CSL Limited (CSL) and Ramsay Healthcare Limited (RHC).

 

Sebastian Evans is Chief Investment Officer and Managing Director of NAOS Asset Management. This information is general only and does not take into consideration the investment objectives, financial situation or particular needs of any reader. Readers should consider consulting a financial adviser before making any investment decision.

 


 

Leave a Comment:

RELATED ARTICLES

Concerns about China's rise to power seem overblown

Aged care star ratings are a ‘fail’

China is primed for a comeback

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.