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

Joe Hockey on the big investment influences on Australia

Michael Lewis on pandemics and Nigel Inkster on technology

China’s new model is a plan for a hostile world

banner

Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates

Superannuation

'It’s your money' schemes transfer super from young to old

Policy proposals allow young people to access their super for a home bought from older people who put the money back into super. It helps some first buyers into a home earlier but it may push up prices.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.

Superannuation

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Shares

Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.

Economy

Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.

Sponsors

Alliances

© 2022 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. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). 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.

Website Development by Master Publisher.