Delve into Chinese healthcare's diverse sectors, growth, and challenges amid an aging population. Explore investment opportunities in biotech, traditional medicine, and medical devices. Learn about government regulations, innovation, and market trends affecting Chinese healthcare companies.
Chinese healthcare sector offers strong investment potential due to innovative companies and aging population driving demand growth.
Medical devices sector in China presents significant growth opportunities, with domestic companies gaining market share globally.
Deep dives
Overview of Chinese Healthcare Sector
China's healthcare sector encompasses diverse sub-sectors such as pharmaceutical companies, traditional Chinese medicine, and medical equipment. There is an increasing demand driven by the aging population, with projections indicating potential annual healthcare spending of $2.5 trillion by 2035, compared to $500 billion in 2014. Chinese healthcare companies are expanding globally, with opportunities in emerging markets.
Significance of Healthcare in Investment Portfolios
Despite the healthcare sector constituting about 4% of the China index, it offers strong investment potential due to a variety of innovative companies and the country's rapidly aging population driving demand growth. Government policies, including the National Health Insurance Fund, play a crucial role in shaping the sector. Chinese brands are gaining global market share, particularly in emerging markets.
Opportunities in Medical Devices Sector
The medical devices sector in China presents significant growth opportunities, especially post-COVID, with the government focusing on healthcare infrastructure upgrades. Domestic companies are gaining market share from multinational firms, particularly in higher-ticket items requiring quality and technology. This sector offers potential for domestic leaders to compete globally, making it an attractive investment area.
Comparison with Global Healthcare Innovation
Chinese healthcare companies are rated as moderately innovative, with a focus on evolutionary innovation to enhance existing products. The shift towards innovative drug development in 2015 marked progress in response to regulatory upgrades. Chinese biotech companies are showcasing best-in-class drugs and focusing on advanced therapies like antibody drug conjugates, mirroring global trends in healthcare innovation.
Chinese healthcare is a vast universe, spanning everything from biotech to traditional medicine. It is also increasingly important as a growth driver for the economy as China's population gets older.
But recent policy shifts - both domestically and internationally - have obscured that structural story. Is it time for investors to pause and rethink their approach to the sector? Or should they double down for the growth opportunity at current valuations?
To help answer these questions, Marty Dropkin, Head of Equities, Asia Pacific, is joined by two of Fidelity International’s portfolio managers who invest in Chinese healthcare: Hyomi Jie and Tina Tian.
With additional contributions from healthcare analysts Duanting Zhai and Lizheng Zhu.