Finally, the last in our reasons to invest in China series looks at health.

China's population currently stands at over 1.4 billion.1 That's a lot of people to keep fit and healthy. Unsurprisingly, China's healthcare market is enormous – and expanding rapidly. An aging population (life expectancy is up from 69 in 1990 to 77 today), economic growth and improved basic health insurance are all driving demand.2 The government has substantially increased investment and introduced Common Prosperity policies designed to strengthen the healthcare system. Spending currently accounts for 5% of GDP and is set to increase over the next decade. The government's stated goal is to make healthcare cheaper and more accessible to all.

At the same time, China's gross national income per capita has grown more than ten-fold since 2000, reaching $11,880 in 2021.2 And this newly affluent middle class is placing greater emphasis on health and wellbeing. Younger generations in particular desire healthier lifestyles. Many are willing and able to pay for preventive measures to protect themselves. This has led to a growth in specialist care, high-tech devices, and top-end therapies.

Given all these factors, it's no wonder investors are increasingly taking notice of the Chinese healthcare system. For our part, we're finding investment opportunities across sectors and the market-cap scale.

How does this look in practice?

For a doctor, a good bedside manner makes all the difference. In the past, however, many Chinese hospitals suffered from a lack of investment and a paucity of trained staff. Service was poor. Happily, the situation is improving thanks to companies like China's largest private eyecare operator.

As China's largest private eyecare operator, it knows that quality doctors are a key to success. That's why it offers incentives to attract and retain quality staff. It also provides university tuition courses, helping cultivate the healthcare professionals of tomorrow. Their services are affordable and, as a result, receive tacit government approval as valuable and necessary. The company is also well-placed to benefit from China's rising wealth.

China's medical device market is dominated by foreign players. There are signs, though, that this is changing. The China-US trade war that started in 2018 meant many Chinese healthcare companies had to look inward to develop their own products. Meanwhile, the pandemic and associated lockdowns underlined the need for improved self-sufficiency in numerous sectors, including healthcare.

This newly affluent middle class is placing greater emphasis on health and wellbeing

Enter an innovative global provider of medical devices and solution. The company designs and produces medical equipment and accessories for both human and veterinary use. It has three main businesses: patient monitoring and life support, in-vitro diagnostics, and medical imaging systems. It's one of the many Chinese companies underpinning the roadmap to localization, while seeking to gain overseas market share. New products and its ongoing platform business model (design, distribution, R&D, cross-selling) should help drive the company's long-term growth outlook.

Clinical research is the backbone of medicine. Through research, companies gain vital insights into the effectiveness of drugs, therapies, and devices. It also ensures products are safe. Research is big business, too. One company to highlight here is one of China's leading domestic contract research organizations. It mainly conducts phase I-V clinical trials for the biopharmaceutical and medical device industry. The company has a long track record of delivering quality service, with a large, experienced employee base. What's more, customers need consistency and so stick around when the service is good. This gives consistency to the company's earnings. Meanwhile, recent reforms should also see R&D spending ramp up on innovative drugs, which could be a boon for such a company.

What’s the long-term outlook?

The Chinese healthcare system is huge and growing. China's National Health and Family Planning Commission aims to expand the size of the country's health service sector to around US$2.4 trillion by 2030. The number of people aged over 60 is set to double to 324 million by 2027 - equivalent to the population of the US. At the same time, disposable incomes are growing. Companies that can cater to this rising demand, should be in line to make healthy profits. 

1 Worldmeter 2023
2 Macrotrends 2022
3 Businesswire July 2022


Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance. Past performance is not a guide to future results.

IMPORTANT INFORMATION

The information contained herein is current at the time of distribution, intended to be of general interest only and does not constitute legal or tax advice. abrdn does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials. abrdn reserves the right to make changes and corrections to its opinions expressed in this document at any time, without notice.

Some of the information in this document may contain projections or other forward-looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own assessment of the relevance, accuracy and adequacy of the information contained in this document, and make such independent investigations as he/she may consider necessary or appropriate for the purpose of such assessment.

Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither abrdn nor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document.

AA-090523-162478-1