NAB’s Chief Economist, Alan Oster provides his thoughts on the Australian and Global economy.
China faces some interesting healthcare challenges over the next few decades – and Australian companies are well placed to be part of the solution.
Many countries are grappling with the healthcare challenge of rapidly ageing populations. But in China the scope and scale of the issue is particularly daunting. It is compounded by the escalating medical and aged care needs of a population transformed by demographic and cultural change, rapid urbanisation and a concomitant rise in chronic disease.
To meet these challenges, China is set to grow its healthcare and ageing industries considerably over the coming decades – a fact which could well offer Australian companies some unique opportunities
Certainly the ageing of China’s 1.4 billion people is a problem of itself. Between 2015 and 2050, the number of those over 65 years old is expected to increase by 180 per cent, or 240 million people.
At the same time, however, China’s healthcare and aged care systems have to meet the demands of rapid urbanisation. Social and cultural shifts have resulted in smaller families that are no longer able (or prepared) to look after their parents. Meanwhile, a Westernised diet and more sedentary existence are taking their toll on the nation’s health, as is its highly polluted environment. Consider the fact that China’s 16 million cars in 2000 jumped to 93 million in 2011 – and that its residents smoke one third of all cigarettes consumed worldwide. Not surprisingly, the country is seeing a rise in obesity, while chronic disease now affects one in five people.
Conversely, there is also a greater expectation for higher quality services from China’s burgeoning middle-class. “All these things compound what is already a global phenomenon,” says NAB Head of Institutional Banking, Hong Kong, Michael Ball.
China’s central government is acutely aware of what’s at stake. “Aged care and health care are front of mind in terms of its policies,” says Ball. “They’re up there with food security and defence.”
But while China is intent on reform, and has ample capital to enhance and expand its facilities, it lacks the necessary intellectual property – and time.
That is where Australian companies can play an important role, says NAB Health General Manager Cameron Fuller. “China is seeking technical expertise and experience, something Australia is particularly strong on. We’re recognised as having well-balanced public and private healthcare systems that deliver quality clinical outcomes at a relatively efficient cost. For our business community, this spells a golden opportunity to expand and regionally diversify their businesses.”
Australia’s strengths include private sector aged care and private hospitals, diagnostics, general practice and health IT, all of which are slated for reform in China. “It’s a matter of companies looking at the unique IP capabilities they have in place – whether in hospitals, pathology, aged care – and working out how these can be monetised in scale,” says Ball.
In fact, a number of Chinese companies have purchased Australian healthcare businesses of recent months, including hospital operators and specialist groups in such areas as ophthalmology and radiation oncology. “There’s a great interest in investing into Australia so they can then leverage that expertise back up into China,” says Fuller.
Yet the urgency of the situation also means there are ample opportunities for Australia to invest directly into China. The government has made it clear it will welcome foreign investment in the areas of healthcare and aged care. It has already decided to privatise 7,500 public hospitals with no requirements as to the method of acquisition or ownership. “There’s a very real, very imminent need for implementation of these healthcare reforms that creates opportunities for Australia that otherwise might not have been there,” says Ball.
Of course China will also require a highly trained workforce to run any new, improved facilities and a lack of suitably skilled people is already a pressing issue. Today, the country has 1.6 physicians per thousand people – half the OECD average – and only 1.8 nurses per thousand, well below the OECD’s 8.8.
Again, Australia can offer significant expertise here and, in fact, Monash University and Sydney University have already received licences to operate in China, collaborating with local counterparts.
However, Ball warns against being overwhelmed by the sheer scale of the issue. “We have to realise there is only a certain amount we can do to problem solve for what is a massive challenge ahead for China. It’s important not to be the scale.”
His advice: “Australian companies need to focus on where they have a particular competitive niche. They need to find the right partner, ensure they have an understanding of the legal framework and, critically, ensure they understand how to protect their intellectual property.”
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