FDI Opportunities in China’s Internet-Based Healthcare Sector.


By Dezan Shira & Associates


June 22, 2022


(Photo credit): Gettyimages.com/Oscar Wong

As China’s elderly population steadily increases alongside public demand for high-quality healthcare services, internet-based healthcare could provide short-term solutions, increasing opportunities for foreign investment.

China’s healthcare industry has entered the digital era, facilitating changes for many hospitals and private sector entities. Internet health care, with online medical consultation, is becoming a new reality for more and more Chinese citizens. The development of the sector has been significantly boosted by the COVID-19 pandemic, receiving particular attention from government authorities and technology companies to expand market access.

What is Internet Healthcare?

Internet-based health care is a subcategory of digital health sector, which involves artificial intelligence and machine learning for diagnosis and treatment. Unlike traditional environments, where patients and providers interact in clinics or hospitals, internet-based healthcare takes place through virtual platforms accessed through mobile devices and computers. These platforms enable a wide range of health services and products, including medical consultations, hospital appointment scheduling, drug prescription, health information management, health insurance and telemedicine. .

By easing the burden of visiting overcrowded hospitals, internet-based healthcare services provide more convenience to consumers seeking medical treatment. With more instant feedback, consumers who are concerned about their symptoms can get reliable information for self-monitoring and self-medication, reducing the need to meet with a doctor in person. Such a service is also transforming the healthcare industry from its traditional focus on treatment to prevention.

Internet health care prices vary by type of service. The most common channel is text and image consultation, which allows patients to have access to certain interactions with their doctor for a specific period of time. Other services are voice and video consultations.

According research data, the average price of a 48-hour text/image service package is 65 RMB ($9.64), while 8.32 RMB ($1.23) per minute for voice consultation and 17.56 RMB ($2.6) per minute for video viewing. Pricing also varies widely across platforms, reflecting differences in vendor quality, marketing power, and consumer willingness to pay.

A key innovation in internet healthcare marketplaces is the development of a reputation system to systematically collect and publish user feedback, helping consumers to assess the quality of providers more transparently. Internet-based healthcare can also provide a solution to alleviate geographic disparities in access to high-quality medical services, thereby reducing the strain on the system due to regional disparities in the state of healthcare infrastructure. health.

What are China’s Internet Healthcare Policies?

Internet-based health care is an integral part of the “Healthy China 2030” plan to achieve the country’s long-term economic and social development goals. Since its introduction in 2016, the Chinese government has intensified its efforts to support the development of the health technology industry through a series of policies and regulations.

In April 2018, the General Office of the Council of State published a document entitled “Internet Plus Medicine and Health”, detailing a comprehensive framework for integrating the Internet and information technology into healthcare. The regulations have advanced supply-side structural reform to mitigate the unbalanced and inadequate development of the sector. China’s health technology boom has followed the implementation of the global framework.

In August 2019, the National Healthcare Security Administration (NHSA) launched the electronic medical insurance system—regulate prices and insurance policies to allow medical services on the Internet to be covered by the country’s health insurance system. Patients can access hospital services through WeChat and Alipay platforms. This incorporation was further strengthened with NHSA guidelines in October 2020 to actively promote the “Internet+” medical service.

In May 2020, the National Health Commission (NHC) released a statement to encourage provincial governments to establish their own regulatory statutes to manage online medical providers and expedite market access for internet-based hospitals. Later in September of the same year, the State Council again stressed the need to expand Internet-based health clinics. Since then, many provincial governments have enacted regulations to improve market conditions for e-healthcare.

Internet health is also a core part of the 14th Five-Year Plan (FYP), which calls for greater connectivity between regions, balanced development between cities and countries, and the use of big data. The government’s next goal is to accelerate the incubation of the Internet-based healthcare market and promote the industrialization and large-scale application of big data in precision medicine, health management, research and drug development and medical insurance.

Market Status and Outlook of the Internet Health Sector: An Ecosystem in the Making

Internet-based healthcare has seen explosive growth during the COVID-19 outbreak, with a drastic increase in the number of users. As access to hospitals became restricted with the closures, many turned to online sources for medical services. Alibaba Health says it has more than 15,000 contracted medical facilities, including nearly 400 Class III hospitals in 17 provinces, which are connected to medical insurance payment services. The company reported in the first quarter of 2020 that the total net frequent active users of Alipay’s healthcare channel exceeded 390 million.

Many tech giants, sensing the opportunity, are rushing into this emerging industry. Currently there is 1,748 healthcare startups on the internet in China. Among all those sharing the pie, Ping An Good Doctor, a Hong Kong-listed subsidiary of insurance giant Ping An, saw a 26.7% year-on-year growth in the average number of daily online visits to 831,000 in the first half of 2020, with online medical services revenue doubling to RMB 694.9 million ($101.56 million).

Lessons learned from handling the pandemic can profoundly shape the direction of China’s healthcare market, which is expected to nearly triple from 6.5 trillion RMB ($960 billion) in 2019 to RMB 17.6 trillion ($2.61 trillion) by 2030. Despite this growth, the market currently remains relatively underdeveloped, China’s healthcare spending – including pharmaceuticals, devices medical, distribution, hospitals, pharmacies and insurance companies – representing only 7.12% of total GDP in 2021, while the United States reached 18% in the same year. The gap leaves enough growth potential for healthcare companies.

The Internet healthcare industry is still in its early stages of development. Nevertheless, the market still represents promising prospects. The Chinese healthcare industry showed an attractive performance with a 160% cumulative return over the past ten years. The success of digital health companies relies on the vast amounts of medical data from Chinese patients. China’s demographics are a critical factor contributing to the boom, with the elderly population (aged 65 or older) should double from 10% of the population in 2017 to 20% in 2037.

Moreover, the pace of urbanization and growing middle class population are also supporting the growth in domestic demand for higher quality healthcare products and services. With a rapidly aging population and citizens demanding better quality services, China’s healthcare industry is already positioned become a priority area of ​​attention for the government over the next decade. As a major industry branch, Internet-based healthcare, with its convenient access to the public, sees great potential for growth.

How can foreign investors get involved in the company?

Health care remains a positive area for foreign investment. In the latest catalog of industries to encourage foreign investment (2020 version), China encourages foreign investment in several sectors related to e-healthcare, including:

    • Digital medical system, community care, product development and application related to personal health maintenance
    • Medical information services such as medical consultation, health management and medical knowledge

All in all, internet-based healthcare, which has seen significant growth during the pandemic, presents great opportunities for investors.

This article first appeared on China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from its offices worldwideincluding in China, hong kong, Vietnam, Singapore, Indiaand Russia.

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