Chinese hospitals and healthcare companies represent great investment opportunities, as their profitability is likely to improve going forward due to several factors, including inevitable consolidation of related sectors in the healthcare industry and ongoing introduction of favorable healthcare reforms.
With rising disposal income and increasing awareness of health, China’s demand for healthcare, particularly top-tier hospital services has exceeded supply. To address this issue without adding financial burden to the state budget, the Chinese government intends to welcome more private capital to the market as outlined in the 13th Five-Year Plan (2016-2020), which will probably lead to the expansion of capacity of private care facilities that offer higher-quality services. Meanwhile, as a supportive measure, physicians have been allowed to practice at multiple facilities, not just public hospitals, virtually eliminating the issue of shortage of prominent and experienced healthcare professionals at private hospitals.
Changes mentioned above, combined with the “inevitable” consolidation among healthcare providers and other participants in the value chain, as well as other relevant reforms, will have far-reaching and positive impact on the development of China’s healthcare industry, especially for the private sector. These factors will either heighten demand for healthcare services or improve operational efficiency of entities, eventually leading to higher profitability more noticeably in companies engaged in the fields such as hospital management, drug and medical equipment distribution, private supplemental health insurance, as well as new drug discovery and launch.
According to market research firm Frost & Sullivan, total revenue generated by China’s private hospitals is estimated to triple to $90 billion by 2019 from 2016 levels, evidencing the their promising prospects.
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