China's Expanding Health Care Industry

Miles Indest, The Health Care Law Firm, July 30, 2012

China's increasing health concerns for its aging population, combined with the government's proposed health care reform, has generated much optimism in multi-national corporations concerning the future of China's health care industry. Many US health care providers are already reaping the rewards of participating in China's health care investments, preparing for the promising boom that is sure to come. Any US health provider that is serious about expanding internationally and increasing its revenues should recognize that this enormous market is becoming ever more accessible. China has recently relaxed its authoritative grip on multi-national corporations seeking to do business, and has been much more welcoming towards US health care providers that promise quality service and products.

China Offers Many Opportunities for US Health Care Providers.

China has a vested interest in attracting US health care providers. According to Intercontinental Marketing Services (IMS), a pharmaceutical research company, the number of cancer victims in China is increasing, with an estimated 13.5 million sufferers by 2020. By 2025, China is expected to have the second largest population of type 2 diabetes patients. The number of citizens in China over the age of 65 is expected to reach a record high of 250 million by 2020. By opening up China's health care industry to the US, its government hopes to support the growing domestic demand for quality providers.

Increasing Senior Population in China Creates New Health Care Demands.
In China, traditions of the family taking care of the elderly in the home are becoming impossible to maintain. The rapidly expanding economy is encouraging people to seek more help for the elderly. According to Li Jianmin in "China’s Lopsided Population Pyramid," “The estimated number of seniors (over the age of 65) in 2035 will reach 391 million, or a ratio of more than 1-to-4 ratio of elderly to non-elderly persons.” Such an imbalanced population (largely due to the one-child policy and the rise in life expectancy) has greatly increased the demand for high-quality health care.

China's Health Care Reform.

Growing social pressures have motivated China's central government to focus more on health care reform. The government plans to establish a basic, universal health care system that can provide low-risk, high-quality, inexpensive services to the country's more than 1.3 billion citizens. Under the reform plan, the government promises universal access to basic health insurance, the introduction of an essential drug system, improved primary health care facilities, equitable access to basic public health services, and a pilot reform program of state-run hospitals. These reforms are aimed at improving and funding health care segments such as hospital management, public health, medications, primary care, and insurance. China has already committed $125 billion to support the reforms, a promising gesture towards the advancement of health care innovation and quality of care.

The demand for Western medical devices is also increasing. Annually, the medical device industry in the US exports $1.23 billion to China. China's market for devices is expected to double to $28 billion by 2014. If US health care providers can develop a strong business plan and vision, entering the Chinese market will be very rewarding in both the short and long term.

The New Frontier: China's Open Market.

From tort liability laws to stem cell research, China's Open Door Policy has produced a favorable business environment, promoting foreign trade and economic investment. Furthermore, Chinese product liability regulations and medical research guidelines are much more relaxed than those of the US. For example, while the US Food and Drug Administration (FDA) recommends "a major regulatory inspection/audit every two years, China's State Food and Drug Administration (SFDA) recommends one every five years. Additionally, the SFDA inspections and audits are conducted with a greater degree of scheduling and foreknowledge than with the U.S. FDA," (Nelson).

As a result of the growing competitiveness in the world market for science and research, China has established one of the most receptive embryonic stem cell research industries in the world. The technological opportunities, free from heavy regulation, have attracted scientists from around the world to develop molecular laboratories and genetic research centers. According to "Illiberal Biopolitics and Embryonic Life" by Kerstin Klein, "Research on both adult and embryonic stem cells is supported by (China's) government funds. There is general agreement that in China's liberal environment the access to human materials including embryonic and fetal tissues is relatively easy and that this offers an enormous advantage for researchers." Such liberal policies and accessibility provide ample opportunity for US researchers and scientists to further their work.

Manage the Dragon: Preparing for Business in China.

Conducting business in China is an entirely different experience from doing so in the US China's business culture values "guanxi" (relationships) above all other things. Due to the country’s vast size and regional diversity, meeting the right local officials is vital to a successful business startup. Learning to operate the Chinese way - utilizing patience, perseverance, and careful planning - will help you deal with the many issues that occur there daily.

Two must-read books for health care providers planning on moving their practice to China are “Managing the Dragon” by Jack Perkowski and “The China Strategy” by Edward Tse. According to Jack Perkowski, "Ninety percent of the problems that occur in China are due to miscommunication and misunderstanding." Perkowski stresses the importance of developing a local management team that has both Chinese experience and an instinctual understanding of the Chinese way of life. Perkowski also stresses unity and vision when transitioning into China's market. His ultimate goal was to "be able to lead our Chinese managers, not manage them, which meant that we had to be able to agree on and articulate what the company was all about," (Managing the Dragon). China is a marathon, not a sprint, and a health provider's first objective should be differentiating between their short term and long term goals.

Edward Tse agrees with Perkowski's implications in his insightful book, “The China Strategy,” offering the "4 C's" businesses must understand to be successful in China: customers, competitors, company, and, most importantly, context. Understanding how China is evolving and where you envision your company down the road is vital to your company's performance. Furthermore, in regards to China's size and regional diversity, Tse believes that coordinating your operations among markets is essential to long term success.
Thinking of China's regions as separate countries, but keeping in mind the Chinese unity that will develop from inevitable communication and transportation growth, can help you plan for the future.

There is No Better Time than Now to Find Your Market Niche.

IMS also predicts that China's spending on health care will leap up to 8 percent or 9 percent of Gross Domestic Product by the year 2020. Furthermore, according to The Economist, China still has only one family doctor for every 22,000 people. Nothing is impossible and the opportunities are endless. For those interested in making their practice internationally known, there is no better incubator than China. The companies that become successful in China and earn a respectable niche in the market will surely be a contender in global markets. If you do not begin preparing to invest in this growing market now, then be prepared for it to come to you. Don't underestimate domestic Chinese ventures. They are planning to establish Chinese enterprises among the ranks of the world's leading businesses. As Walt Disney famously quoted, "The way to get started is to quit talking and begin doing."

Sources Include:

Deloitte. "Life Sciences and Health Care in China." (July 18, 2012). From:

Nelson, Stacy, CCNA, PMP "Comparisons of SFDA and FDA Regulations Pertaining to LC/MS Instrument Software Validation." AB SCIEX. From:

Perkowski, Jack. Managing the Dragon. New York: Crown Business, 2008.
Tse, Edward. The China Strategy: New York, Booz & Company, Inc, 2010.