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Investing in China’s Healthtech IndustryChina’s healthcare industry is facing an onset of new challenges due to itsrapidly ageing population. There is now an ostensible gap between the medicalresources available and the current health needs of the nation.Still, China is uniquely placed. A combination of factors – its large middleclass, advanced technology capabilities, and strong government support –creates key capacity to produce innovative solutions for the market.China’s healthcare system has also made significant strides. Within the lasttwo decades the country has benefited from large-scale reforms of its medicalinfrastructure, insurance system, as well as the opening-up of its healthcaremarket.Future growth, however, depends on how the country chooses to respond to itscurrent set of challenges.In 2014, the Chinese government pitched its healthcare sector as an area forforeign investment – with the introduction of a new law permitting foreigninvestors to hold a 100 percent ownership of private hospitals.The government also made it clear that healthtech is now a strategic area ofdevelopment for China. It features heavily in both the 13th Five-Year Plan(2016-2020) and its Healthy China 2030 strategy.The objective is to improve the access, quality, and cost-effectiveness ofChina’s healthcare services.As the challenges to China’s healthcare industry grow and diversify, so do theopportunities – its healthcare market is expected to reach RMB 198 billion(US$28.59 billion) in 2026, increasing tenfold from 2016.Here, we identify the digital solutions making improvements to China’shealthcare industry and showcase the opportunities for foreign investment inthis market.## China’s healthtech solutions: Three key segmentsChina is home to the largest population of netizens in the world.Approximately 700 million people have internet access in the country – 86percent of which connect online through their smartphones.This internet spread and usage provides an essential foundation fortechnology-based growth, including across various healthcare subsectors.From pre-patient appointment registrations, online information inquires,making payments, to receiving test results – more and more of the patient’shospital experience is mediated by an online interface.The recently coined term ‘fingertip medical treatment’ describes this as thenew emerging healthcare model.Here, we look at three specific examples of how the introduction of digitaltechnology and innovation-based solutions improve the efficiency or quality ofhealthcare.### Online patient managementStreamlining a patient’s healthcare experience is now central to manyhealthcare organizations.According to a survey conducted by PwC, 49 percent of healthcare providerexecutives consider revamping the patient experience as one of their top threepriorities over the next five years.Using technology to enhance the patient experience is already becoming astandard operating procedure in several hospitals and medical businesses –online payments, digital communication tools, remote patient monitoring,online scheduling and task management, clinician tools and support, etc.Moreover, as the market becomes saturated with new healthcare players,consumers find it increasingly difficult to navigate the complexities of thesystem.New technologies like mobile healthcare apps are disrupting the industry tohelp customers select from a wide range of healthcare options available tothem.One such example is The CareVoice, a Shanghai-based insurance tech startupthat works with insurers to offer consumers a digital platform whereinformation about the healthcare facilities and services covered by theinsurance policy is clear and easy to process.The startup provides a triage feature service on their mobile platform thatguides users to the appropriate medical facility, according to their symptomand their insurance policy.Sebastien Gaudin, CEO of The CareVoice explains, “many people end up spendinga lot out-of-pocket and for this reason, people prefer to go to publichospitals, which is often considered more affordable and trustworthy.”He adds, “As a result, public hospitals often become overcrowded and theoverall quality of care decreases, and China is now tasked with trying toredistribute some of the weight from the public to the private sector.”Finally, Gaudin explains the app’s larger impact on the healthcare industry:“With The CareVoice, we are increasing the efficiency and transparency of theentire process and making commercial insurance products more appealing toconsumers, which is in turn engendering more activities in the private medicalcare industry as a whole.”### Wearable medical devices to monitor consumer healthChina’s population demographics have changed significantly over the past 20years. Two major trends are apparent.First, China’s population is ageing. By 2030, China is expected to have nearlya quarter of its population over the age of 60.Second, it is now reported that China has nearly 300 million patients withchronic disease, accounting for 86.6 percent of deaths in China. This meansthat the country has officially reached a tipping point whereby chronicconditions surpass infectious diseases as the leading causes of early deaths.Together, these trends have generated a higher demand for disease managementand ongoing monitoring.Here, wearables and medical devices aim to fill the gap in medical resourcesshortage by delivering healthcare information straight to the consumer.Many businesses are now capitalizing on this growing demand by investing inthe medical devices and wearables industry, which grew by 20.1 percent in2016, to reach RMB 370 billion (US$56 billion).For example, Hinounou, a Shanghai-based startup, aims to develop anintelligent healthcare device for the elderly to provide companionship,tailored insurance, and ongoing health monitoring services.One part of the multifaceted business is to provide home wellness kits forseniors. This kit includes various take home devices, such as a gene testingbox, a finger pulse oximeter, a blood pressure monitor, and an IoT scale thathelps users monitor for around 10 critical chronic diseases, blood oxygenlevels, weight, and blood pressure.These new devices are not only a great way to encourage patients to be moreproactive in monitoring their own health, but also aims to reduce themisutilization of resources in China’s tertiary hospitals.### Artificial intelligence to assist doctors with medical diagnosisAccording to the Organisation for Economic Co-operation and Development(OECD), China has 1.8 practicing doctors per 1,000 citizens.Further, hospitals that received a top “triple-A” ranking make up only 7.7percent of the country’s medical centers, but handle 50 percent of totaloutpatient visits.There are multiple reasons for this overcrowding.These include the concentration of the best hospitals in top tier cities, lackof qualified doctors available, and an inadequate primary care system thatcould reduce chances of needing to see a specialist in a hospital.While urban hospitals have undergone a rapid transformation towards moreadvanced and specialized medical care, rural hospitals suffer from a lack ofstaff, supplies, and patients.As a result, people from all over China continue to travel to big cities, suchas Shanghai or Beijing, to receive better quality healthcare.Artificial intelligence (AI) is one way of relieving the pressure on China’soverburdened healthcare system.The two tech giants, Alibaba and Tencent, recently found success in developingAI software to interpret medical scans and make diagnoses in order to speed upthe screening of medical images.In 2018, Alibaba’s health unit introduced AI software that could helpinterpret CT scans and an AI medical lab to help doctors make diagnoses.Shortly after, Tencent released its own AI software, Miying, which was firsttrialed in the southwestern region of Guangxi but is now used in nearly 100hospitals across China.Other smaller startups have also attempted to develop their own AI technologyas a tool to enhance medical provider efficiency. According to YiouIntelligence, a Beijing-based consultancy firm, some 131 Chinese companies arecurrently working on applying AI in healthcare.## Opportunities aplenty in China’s dynamic and growing marketHealthcare in China has long been a national priority, beginning as early asthe first healthcare reforms of 1980s.The sector is now witnessing rapid transformation facilitated by both, marketneeds and technological advances.In 2019, subsectors of both the pharmaceutical and healthcare industries wereadded to the 2019 Foreign Investment National Encouraged Catalogue.Foreign investors manufacturing raw materials for production of vaccines andcell-therapy drugs and those investing in medical institutions services canaccess preferential treatment, such as tax incentives, streamlined proceduresor discounted land prices.Together, these signal China’s unwavering commitment to improving healthcareservices in the country; it has also followed the government opening uprelated sectors to foreign investment.The State Council recently recommitted to its Healthy China 2030, releasing anexecution plan for the latter half of the strategy (Full version can be foundhere: Health China Action (2019-2030)).The document makes reference to technology close to 30 times and calls onrelevant parties to utilize technology to promote and advance the health ofthe nation.Leading private players, meanwhile, have been making significant progress indeveloping capacity for more efficient healthcare practices.For many years, China’s tech giants Alibaba and Tencent, have looked at waysto build diagnostic tools to make doctors more efficient.However, at present, the competition to develop these tools is no longer justbetween the tech behemoths. There is now an upsurge of smaller tech playerscapitalizing on the opportunities that China’s recent reforms have broughtabout.Businesses and entrepreneurs in the technology, infrastructure, or medicalcare industry should capitalize on the growing number of opportunities thathealthtech can offer – whether to provide knowledge, assist medical providers,or make the patient journey more efficient.* * *About UsChina Briefing is produced by Dezan Shira & Associates. The firm assistsforeign investors throughout Asia from offices across the world, including inDalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers maywrite to [email protected] for more support on doing business in China.