China in charts - II
Taking the pulse: China’s healthcare sector
The significance of China’s healthcare market
In our last “China in charts”, we illustrated how consumption and innovation are transforming China. In this edition, we continue to focus on China’s new economy, by narrowing into the nation’s healthcare industry. Through easy-to-understand charts, we illustrate why the remarkable growth of China’s healthcare is expected to continue and how innovation is increasingly being built into the sector’s DNA. Below we highlight key takeaways from the charts that follow:
- Rapidly evolving socio-economic factors and ongoing institutional support have catalysed the role of healthcare in China, placing the sector in a favourable position for continued growth
- With China undergoing the transition from an investment led economy to a consumption-driven one, new economy sectors – including technology, healthcare and consumer discretionary – have seen their equity index weight increase over the years
- Bottom up equity investors can potentially capitalise on the structural changes occurring within China’s healthcare sector as leading healthcare companies are increasingly placing more focus on innovation and moving up the value chain through research and development
- HSBC Global Asset Management’s China equity and Asia ex Japan regional equity strategies invest in both offshore and onshore healthcare opportunities
China healthcare’s extraordinary growth
China’s healthcare expenditure has grown at an extraordinary rate
China healthcare expenditure (RMB billion)
Healthcare industry has grown to more than 10 subsectors
Biotech innovator
First to market biosimilar drugs / generic
Contract research organizations (CRO)
Online services / Telemedicine
Diversified pharma
Specialty hospitals
Medical devices
Traditional Chinese medicine
Marketing / in-license
Distribution
General hospitals
China’s pharmaceutical market is the second largest in the world
2018 spending on medicine (USD billion)
Source:
1. National Bureau of Statistics PRC, HSBC Global Asset Management, as of May 2019
2. JP Morgan, HSBC Global Asset Management, as of May 2019
3. IQVIA Institute for Human Data Science as of January 2019
High potential to grow from relatively low levels
China’s healthcare expenditure per capita lags behind other major markets
Healthcare expenditure per capita (USD)
China’s healthcare spending is comparable to that of the U.S. in the 1970s
Healthcare expenditure (% of GDP)
Healthcare representation in China’s equity market is low but rising
Healthcare sector weight in index
Source:
1. World Health Organization, latest available data as of May 2019, based on 2016 data. WHO’s comprehensive and comparable database on health spending for 190 countries is updated annually and released in December of each year with a 2-year lag
2. National Bureau of Statistics PRC, U.S. Bureau of the Census, latest available data as of May 2019
3. Bloomberg as of May 2019
Healthcare sector has strong government support
Substantial government spending on healthcare
China government healthcare expenditure (RMB billion)
Loosening restrictions on foreign ownership has boosted investment
Foreign direct investment actually utilized in China’s health, social security and social welfare (USD million)
“Healthy China 2030” targets to grow health services market to RMB 16 trillion
Size of health services market
Biotech and high tech medical devices are a national priority
“Made in China 2025” - 10 strategic sectors
- New advanced IT
- Automated machine tools & robotics
- Aerospace and aeronautical equipment
- Maritime equipment & high tech ships
- Modern rail transport equipment
- New-energy vehicles & equipment
- Power equipment
- Agricultural equipment
- New materials
- Biotech and high tech medical devices
Source:
1. National Bureau of Statistics PRC, latest available data as of May 2019
2. Ministry of Commerce, as of May 2019
3. NHFCP as of January 2019
4. “Made in China 2025” action plan as announced by The State Council, PRC in May 2015
Demographic trends create immense demand for healthcare
Aging population adds to healthcare demand
Population aged 65 and above (million) in China |
% of population aged 65 and above in China |
China has the largest diabetic population in the world
Diabetic (adult)
population as % of world
Adults with diabetes
114 million
Prevalence of diabetes
10.9%
China’s diabetic patients as % of world
27%
Rapid rise in chronic diseases
Of the top 10 causes of premature deaths in 2017 in China, eight are caused by non-communicable diseases
Listed by order; bar shows % change from 2007 to 2017
Source:
1. United Nations World Population Prospects 2017
2. International Diabetes Federation 2017
3. Institute for Health Metrics and Evaluation, as of 2019
Improvements in China’s healthcare are pushing the industry forward
Although China’s pharma market is at an early stage and still dominated by generics…
Breakdown of China’s pharmaceutical market
(excluding Traditional Chinese Medicine)
…Development of innovative drugs are on the rise
China biologics CRO market size (RMB billion)
Contract research organizations (CRO) provide research services to drug makers and are critical to the drug development process, including in drug discovery and drug research
Innovation in medical devices is increasingly backed by policy support
Innovative medical device projects under China Food and Drug Administration (CFDA) green path
The CFDA green path was implemented in 2014 as a fast track of review and approval for innovative medical devices
Policy has also been encouraging the private sector to expand its role in the system
Number of hospitals nationwide
Source:
1. JP Morgan as of May 2019
2. Nomura, Frost & Sullivan, as of May 2019
3. China Medical Device Evaluation Center (CMDE), JP Morgan as of May 2019
4. National Health Commission of the PRC, as of May 2019
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purposes only.
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