China's healthcare sector promising for 2020 and beyond
Different sectors of the healthcare industry are growing at a rapid pace in China. The reasons for this are multiple: urbanization, an aging population, a continuous rise in wages and living standards for Chinese citizens, as well as more innovation in high-tech and broader access to healthcare.
This article will take a look at some of the main trends in the Chinese healthcare and medical sector and observe the potential of some of its most promising developments, especially in the fields of health technology and medical artificial intelligence. The outlook will analyze the Chinese government's efforts and unique approach in promoting and improving healthcare and conclude why it might be one of China's most promising sectors for 2020 and beyond.
A look at health statistics: China constantly improving
If we look at the statistics for recent years, we can observe an increase in spending for healthcare as well as a drastic improvement in the overall health of Chinese citizens, indicating not only the economic growth of the healthcare sector but also its efficiency.
Per capita healthcare spending in China has risen from $42 in 2000 to $398 in 2016, according to World Bank statistics. However it has simultaneously remained comparatively low in relation to GDP per capita, which is considerably small at 4.9 percent, compared to the US at 17 percent in 2017, for example.
China has passed Japan in total healthcare spending in 2016 with $574 billion compared to Japan's $469 billion and passed the US in hospital beds per 1,000 persons, with 3.8 for China and only 2.9 in the US according to OECD data. Compared with 2.75 in 2011, China is seeing some of the fastest growth in this category, putting it ahead of countries such as Norway, Canada and the UK. This is in part due to Chinese government policies such as increased funding for hospitals in recent years.
The numbers of doctors per 1,000 inhabitants has also been continuously rising in China since 2002, from 1.13 to 2.01 in 2017, according to OECD health data, putting it above the East Asia and Pacific average. A similar development is seen in the number of nurses per 1,000 inhabitants, with 1 in 2004 rising to 2.7 in 2017.
The maternal mortality rate is equally impressive for China, having plunged from 97 per 100,000 births in 1990 to only 27 in 2015 according to the World Bank.
Life expectancy has also continuously risen in China. According to statistics for the United Nations World Population Prospects, the current life expectancy for China in 2019 is 76.79 years, a 0.22 percent increase from 2018, putting it significantly higher than the world average life expectancy of about 72 years. The UN projects a similar rate of increase for the rest of the 21st century for China.
Why China's healthcare sector is growing
The growing healthcare sector is in many aspects a byproduct of China's recent economic rise. Several hundred million people were lifted out of poverty in recent decades, which led to overall higher living standards and affordability of healthcare services. This in turn created the continuously rising life expectancy, with more people reaching retirement age than ever before, which further increases the demand for healthcare services.
However, the effect of government policies and measures is not to be underestimated in this trend. Within the last two decades China has benefited from large-scale reforms in the fields of medical infrastructure and insurance as well as the opening-up of its healthcare market. Focus has been laid on not only developing urban areas, but also continuously making healthcare more accessible in rural China, boosting development and the number of hospitals, doctors and medical equipment.
However, the most important contributor might be that, according to the State Council, China has created the world's largest network for basic medical insurance accessible for all and formed a healthcare service system encompassing both urban and rural areas. By the end of 2016, basic medical insurance has reached over 1.3 billion citizens nationwide, accounting for more than 95 percent of the total population. The World Bank also described China's achievement in extending health insurance to 1.3 billion people as an "unparalleled" accomplishment.
All these factors in turn create an interesting market for foreign investors in the healthcare field. Also, although the medical industry is growing fast in China, the demands for further healthcare services are growing even faster. This makes it even more attractive to investors, as it opens up new market opportunities.
The government has understood this, and initiated measures to boost foreign investment in this field. Manufacturers of raw materials for the production of vaccines and cell-therapy drugs and those investing in medical institution services can now access preferential treatment, such as tax incentives, streamlined procedures or discounted land prices. Furthermore, the Chinese government introduced a new law permitting foreign investors to hold a 100 percent ownership of private hospitals in 2014. In 2019, subsectors of both the pharmaceutical and healthcare industries were added to the 2019 Foreign Investment National Encouraged Catalogue.
Some promising industries for 2020 and beyond: Health tech and medical AI
To tackle overcrowded hospitals in an innovative way, the government made it clear that health technology is a strategic area of development for China. It features heavily in both the 13th Five-Year Plan (2016-2020) and its Healthy China 2030 strategy. In April 2018, the State Council also issued new guidelines to promote internet-based healthcare, encouraging medical institutions to leverage internet-based technologies to improve the efficiency of medical services.
China's large number of smartphone and internet users (700 million today) provides large potential for more technology use in healthcare subsectors. Everything can be done via apps in the future – also called "fingertip medical treatment". Data from the National Health Commission showed that in 2017, China's online healthcare market reached 32.5 billion yuan ($4.6 billion), 45.87 percent higher than that of the previous year. Industry experts estimated the market will grow to 90 billion yuan by 2020.
Tencent for example has already been steadily building up a network of participating hospitals – over 38,000 medical facilities as of 2017 – where users can book doctor's appointments through their WeChat Intelligent Healthcare to avoid long lines at medical facilities. Following their health checkup, patients can also conveniently access their medical reports through WeChat and pay for their medical bills.
Also, China is a frontrunner in the field of medical AI. In 2018, Alibaba's health unit introduced AI software that could help interpret CT scans and an AI medical lab to help doctors make diagnoses. Deep-learning algorithms trained through the data of billions can analyze medical outputs like CT and MRI images with a close to 100 percent accuracy. Tencent established the AI Medical Innovation System or AIMIS, an AI-powered diagnostic medical imaging service, available so far in over 10 hospitals across the country. The method works as follows: Images of patient tissue are fed into the AI software, which can then determine in under four seconds whether the body looks normal, inflamed or cancerous.
In 2017, a robot named Xiaoyi passed the written stage of China's national medical licensing examination. Sifting through more than 2 million medical records and 400,000 articles, it achieved 456 points – 96 points above a passing grade. In the future, a robot like this could help make an initial diagnosis. By scanning data, it would relieve some of the burden of doctors, instead of replacing them. Currently, over 130 Chinese companies are working on applying AI in healthcare, with their number expected to grow even further in 2020.
Outlook: China's healthcare sector has big potential for 2020 and beyond
We can observe that the government is supporting the growth of the industry by encouraging investment and innovation on the one hand, but also initiating measures to keep a lid on individual healthcare costs. This double approach contributes to ensuring the fulfillment of the sector's future potential: The healthcare market is expected to reach 198 billion yuan ($28.59 billion) in 2026, increasing tenfold from 2016, according to China Briefing.
However, it's important to assure that with the growth of the healthcare sector medical treatment remains affordable for all citizens.
A failure in affordability of healthcare can be partly observed in the United States. Although the US has an economically strong medical and healthcare industry on the one hand, the lack of regulations and government measures for the sector on the other hand has led to it having the highest per capita spending on healthcare in the world by far, reaching almost $10,000 in 2016, compared to China's $400. This amounts to 17 percent of the US GDP, outperforming second place Switzerland with 12 percent, and China, with 5 percent, by an incredible margin, contributing to a growing inequality and medical discrimination in the country.
This shows how important it is to assure that with the growth of the healthcare sector, medical treatment remains affordable for all citizens. It is the government's duty to further regulate the market in China through innovative measures and policies. The programs of Healthy China 2020 and Healthy China 2030 for example both outline comprehensive health care reforms which aim to ensure universal healthcare access as well as improve the overall health situation of all Chinese people.
New innovative technologies, as those described in this article, seem to be a promising element to achieve equality, access in remote areas as well as effectiveness and affordability in healthcare in the future, and should thus be further promoted and funded. Also, the development should be continued to further increase the number of doctors and quality hospitals also outside of the major cities, distributing healthcare more evenly among the population and preventing overcrowding of hospitals. The development toward a fair and effective healthcare system has been largely successful in China for citizens but also the business sector, as the statistics indicate.
We can observe that through extensive government measures, China has managed to progress in three fields simultaneously to ensure stable growth of the healthcare sector: reducing overcrowding of hospitals, increasing quality of healthcare, and at the same time keeping healthcare affordable and accessible to all. If this current development is maintained or even increased, China will be well on track for 2020 and beyond.
The author is a masters' degree student in Economy and Society of East Asia at the University of Vienna.
The opinions expressed here are those of the writer and do not represent the views of China Daily and China Daily website.