Expanding Hospital Market in China

China’s hospital sector, both public and private, has expanded rapidly in recent years and is set for continued strong growth. According to the China Hospital Industry Report, 2016-2020 by Research and Markets, the total number of hospitals in China rose to 28,584 in October 2016, an increase of 7,666 or around 37% since 2010. During the same period, it is estimated that total revenue generated by the sector jumped to RMB 2,708 billion (about $430 billion) in 2016, up 163% over 2010.

As of 2016, private hospitals made up less than 10% of total hospital revenue in China. By April 2017, there were 16,900 private hospitals, accounting for 57% of the country’s total. Recent reforms by the Chinese government are presenting tremendous opportunities for foreign investors in the healthcare sector to build private hospitals or related facilities to meet the heightened demand for better care and higher-quality of services. As a result, the market research firm is forecasting the number of private hospitals in China to grow to 20,262 by 2020, generating revenue in the amount of RMB 639.6 billion.

For instance, China’s National Health and Family Planning Commission (now known as the National Health Commission) released a circular in August 2017, allowing the establishment of five new types of healthcare institutions by private and foreign investments, namely rehabilitation centers, nursing centers, sterilization supply centers, and small or medium-sized ophthalmic hospitals. Previously, these facilities were mandated integral parts of large hospitals. This policy should lower the barrier to entry for private and foreign investments.

Contributing factors for the expected ongoing expansion of the hospital sector in China include:

• China is expected to become the nation with the higher number of elderly around the globe by 2030. It is projected that the number of people beyond 60 years of age in China will be more than 185 million, representing approximately 15% of the country’s population. Hence, demand for various types of services at hospitals overall should be increased by leaps and bounds.
• The per-capital spending on healthcare in China was just $367 in 2015, far below the $9,416 in the U.S. Thus, there is ample of room to grow. In particular, the Chinese government has vowed to increase healthcare spending in coming years for improving the wellbeing of its constituents.