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Healthcare: The next China boom?

China’s move from an emerging industrial nation to one with a large middle class society, and an ageing population is likely to see many Australian Healthcare companies benefit.

According to the Australian Financial Review, China plans to triple annual spending on healthcare to US$1 trillion by 2020, to become the second-largest healthcare market in the world, behind the US. China’s Ministry of Health has said that government spending on healthcare has nearly doubled in just three years to $113 billion by 2011.

With a population of 1.3 billion people, (more than 4 times the US), it’s not hard to see the potential opportunities in China, and with the government providing basic healthcare for 95% of the population, many healthcare companies have set their sights on this relatively new market.

Cochlear Limited (ASX: COH) has been providing services in China for 12 years, with its hearing devices subsidised by the government. Cochlear is already the leading provider of hearing devices in the US.

Sleep apnoea device maker Resmed (ASX: RMD) has reported that it is seeing double digit growth in China – but was also facing increased competition from local companies, and copycat products. Resmed has stated that China will be a significant part of its business within four to five years, despite the issues it has to overcome.

British drug making firm AstraZeneca recently decided to expand its facilities in Australia, because of difficulties building a sterile factory in China with its poor air and water quality. The company expects Australian exports of its asthma drug to China to increase five-fold, from $50 million today to $250 million by 2015.

For other healthcare companies like CSL Limited (ASX: CSL) and Sirtex Medical Limited (ASX: SRX), China appears to offer a compelling opportunity to expand their businesses. Both companies offer critical services and products that could be in high demand by China’s ageing population.

The Foolish bottom line

Healthcare in China could be the next boom, and Australian companies with a presence there already appear well situated to take advantage of the increasing spend on healthcare. There may be life after the resources boom after all.

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Motley Fool writer/analyst Mike King owns shares in Cochlear and CSL. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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