Good health and well-being, as one of the sustainable development goals set by the United Nations, is one of the key focus areas for future development. In this regard, China should deepen and widen the scope of international cooperation in healthcare industry, taking the Belt and Road Initiative (BRI) as an opportunity.
In 10 April 2018, a roundtable named “The Belt & Road Initiative: Healthcare” was held at the Boao Forum for Asia Annual Conference 2018. It aimed at building an ecological platform for the whole industry chain in the healthcare industry, as well as providing opportunities for the development and transformation, industrial cooperation among BRI countries in the healthcare industry. Through this roundtable, the BRI was for the first time linked with the healthcare industry at the national level in China. From then on, a discussion has emerged on how China’s healthcare industry can participate in the BRI, how to optimize the policy environment and how to strengthen international cooperation.
Opportunities for China’s healthcare industry in BRI cooperation
On 7 September 2013, China’s President Xi Jinping in his address in Kazakhstan proposed the idea of a Silk Road Economic Belt. One month later, as he was addressing the Indonesian parliament, Xi proposed the creation of a 21st Century Maritime Silk Road. The Belt and Road Initiative was therefore set, which brings enormous opportunities of international cooperation to China’s healthcare industry.
- Industrial opportunity
International cooperation in the healthcare industry is not only an implementation of the BRI, but also a need arising from current development needs: In recent years, many countries have attached greater importance to developing their healthcare industries. China can pursue going-global through exporting medical technology and services to BRI countries, which would improve the medical security conditions of the local people while enhancing inter-governmental relationships. Outbound investment and international cooperation could, on the one hand, deepen and widen the connotation of the BRI, and on the other, respond to the needs of BRI countries from a holistic point of view.
- Market opportunity
At present, healthcare industries in BRI countries generally face high demand but a relatively low industrial level, resulted from limited financial investment and cross-border cooperation. This, from another angle, constitutes a vast market space for China’s healthcare resources. Compared to BRI countries, the healthcare industry in China has been growing fast and still has strong potential for continuous growth. It is anticipated that by 2020, China’s healthcare industry will reach up to 8 trillion RMB, becoming an important growth factor for China’s sustained economic and social development and laying a solid foundation for relevant overseas investment and international cooperation.
- Policy opportunity
According to the Three-Year Implementation Plan for the Belt and Road Health Exchange and Cooperation proposed by China, BRI countries will be able to carry out in-depth industrial cooperation and trade cooperation in the health sector. This will provide opportunities to develop and transform China’s healthcare industry. The Plan formulated policies from eight aspects, including key areas of cooperation, cooperative mechanism development, infectious disease prevention and control, capacity development and talent cultivation, and health system and policy, providing policy support for China’s healthcare industry to participate in overseas investment and international cooperation under the BRI.
Goal-setting for China’s healthcare industry in BRI cooperation
The initiation of the BRI opened a new door for China’s healthcare industry. Chinese hospitals should respond positively to the BRI and make development plans based on their own condition, instead of following the trend blindly and running in a disordered way.
- Goals for cooperation platform
Due to the rapid development of China’s healthcare industry, short-term goals should address international focus by playing its comparative advantages. Projects should be designed based on the Three-Year Construction Plan of the Silk Road Economic Belt and Maritime Silk Road of the 21st Century. Strategy research and planning under the BRI should be carried out in surrounding key areas set by the Plan. For cooperation, China should establish a cross-border telemedicine service network with neighboring countries, carry out teaching, research and personnel exchanges, and form mechanisms such as remote consultation platforms. An example of such work is the treatment of nearly 20,000 international patients from Russia, etc. in traditional Chinese medicine in Sanya.
- Goals for cooperation fields
Medium-term goals should be to establish domestic and overseas health recuperation centers on the basis of cooperative projects. The Hainan Boao Lecheng International Medical Tourism Pilot Zone, for example, is the only medical tourism zone in China approved by the State Council. The Zone consists of a super-hospital run in the “1+X” mode, meaning one shared hospital (platform) and various clinical medicine centers. The first phase of the project has been completed and put into use. Through this platform, future focus will be on medical treatment, medical research and development, and talent cultivation. Based on this, building cooperation platforms such as alliance of public health, alliance of hospital clinical specialty and health policy research network under the BRI will add to China’s core competitiveness in terms of regional and global medical treatment and research on medical prevention.
- Long-term sustainable goals
Together with BRI countries, new projects for healthcare cooperation should be initiated based on the goals of reciprocity and common security. For example, in the future China’s Silk-Road Planning Research Center plans to cooperate with domestic and foreign top research institutions in the healthcare industry to integrate world’s health concepts into Chinese traditional ones. Alongside, participants in the healthcare industry should also contribute to progress, such as talent cultivation, capacity building for public health management and disease prevention, joint formulation of industrial standards, in the fields of medical infrastructure, drug research and development, joint scientific research and advanced hospital management, which are expected to substantially benefit people of BRI countries.
Model innovation for China’s healthcare industry in BRI cooperation
“Health China” is one of the development strategies of China, while the healthcare industry is one of the emerging industries that China and BRI countries are eager to develop and one of the key areas for international cooperation. Based on the economic foundations, industrial characteristics, health needs and policy systems of China and involved BRI countries, China’s healthcare industry could play a critical role in BRI cooperation and industry cultivation.
- Positive exploration
In the past three years, China’s healthcare industry has participated actively in cooperation with BRI countries and accumulated better cooperation models and experience. For example, mergers and acquisitions (M&A) in China’s healthcare industry basically realized the goal of achieving win-win situations of the BRI. Demonstrated by the top 10 M&A cases taken place in India, Singapore and Israel (see Table 1), the transactions by Citic Industrial Investment Fund and the Singaporean Healthway Medical totaled more than 1 billion USD, concentrating on heart stents and intensive care which are commonly emphasized in the world, and produced positive influence globally.
Table 1: Top 10 M&A cases in BRI countries (Source: Mergermarket, PwC)
|Time||Buyer||Target||Amount (in billion USD)||Details|
|07.2016||Fosun||Gland Pharma (Indian pharmaceutical company)||1,090||Fosun acquired about 74% shares in Gland Pharma to internationalize itself in the field of generic drug exportation|
|11.2015||CITICPE||Biosensors International (Singaporean medical equipment provider)||1,050||CITICPE acquired Biosensors – a Singaporean cardiac stents and ICU-related medical equipment developer, manufacturer and seller – to gain competitiveness in the Asian medical equipment market|
|08.2015||Tencent||Practo (Indian Internet-based healthcare company)||90||Tencent led the C-round financing, to support Practo’s mobile products in doctors resource searching for patients|
|11.2014||SanPower||Natali (Israeli medical service provider)||70||SanPower acquired 100% shares of Natali – the largest private medical service provider in Israel (major services: remote monitoring, telemedicine, home help)|
|05.2017||Lippo China Resources Limited||Healthway Medical (Singaporean medical service provider)||68||Lippo acquired 82.5% shares in Healthway which owns over 80 professional medical centers in Singapore and provides medical services including family doctors, dentistry, ophthalmology, and medical cosmetology|
|07.2016||SanPower||Cordlife Group (Singaporean umbilical cord blood bank)||64||SanPower acquired 20% shares in the Cordlife Group to accelerate the growth of its medical and elderly care service and to expand its worldwide cord blood business|
|04.2017||Tencent||Practo (Indian Internet-based healthcare company)||55||Tencent led the C-round financing, to support Practo’s digital medical management product PractoPay for doctors|
|03.2016||SanPower||A.S. Nursring (Israeli elderly care service provider)||35||A.S. Nursing has over 30-year experience in providing elderly care service, owns 25 branches in Israel and manages about 6000 nurses, and holds long-term partnership with Israel’s Social Security Agency and other ministries|
|09.2015||Haisco Pharmaceutical Group||SMI (Israeli medical equipment provider)||18||Haisco became the largest shareholder of SMI (Sensible Medical Innovations) and the exclusive sales agency in China in the following 20 years for SMI’s core product ReDS (a new generation of non-invasive medical testing and imaging equipment)|
|06.2015||Haisco Pharmaceutical Group||MST (Israeli medical equipment provider)||11||Haisco acquired 26.7% shares in MST (Medical Surgery Technologies) and the exclusive sales agency in China in the following 15 years for MST’s core product AutoLap (mainly used abdominal surgery)|
- Top-level design
From the perspective of industrial complementarity and resource integration between China and relevant countries, a cooperation group should be set up at the national level to make overall plans for the development of the BRI healthcare industry in the next 5-10 years. Project-oriented cooperation should be carried out based on national conditions of different BRI countries in the Public-Private-Partnership (PPP) mode or other similar modes. This means that a project requires joint participation of the government, enterprises and social organizations of the host country and development and investment companies of China and other countries. Top-level design should reflect China’s current policy that supports private enterprises. As can be seen in Figure 1, private enterprises account for the vast majority among those Chinese mainland enterprises, which participate in healthcare industries in other countries, especially those in pharmaceutical business.
Figure 1: Outbound pharmaceutical business of Chinese state-owned enterprises and private enterprises – a comparison in terms of M&A transaction amount (in million USD) (Source: Reuters, PwC)
- Business model
In BRI cooperation, China’s health industry should adopt the market-oriented mechanism and explore profitable models for further development. One possible business model could be the project development model focusing on medical treatment, which helps mitigate weak industrial base, large gaps in medical infrastructure and high market demand in healthcare industries in BRI countries. The industry-driven model could also work, which introduces healthcare projects in certain countries under the financial support of international development loans, international fund for poverty alleviation, the China-Africa Development Fund, the Silk Road Fund, the National Development Bank and the Asian Infrastructure Investment Bank. Another possible model could be the model supported by cross-border e-commerce, in which global ecological chains and platform circles are built in healthcare industries through “one-to-one”, “one-to-many” and “many-to-many” industrial radiation and cooperation.
On May 14, 2017, the General Secretary Xi mentioned in his speech at the opening ceremony of the 1st BRF for International Cooperation, “Industry is the foundation of the economy. We should deepen industrial cooperation, improve the compatibility and mutual benefit of industrial development plans of various countries, focus on major projects, strengthen international cooperation in production capacity and equipment manufacturing, seize new opportunities of the new industrial revolution, foster new forms of business, and maintain the vitality of economic growth.” Accelerating the development of the healthcare industry and promoting international economic cooperation in this industry could not only increase the supply of healthcare services and products while encouraging innovation of healthcare services, medical products and technology, but also facilitate economic restructuring and stimulate consumption and trade.
(Dr. Zhu Qinlei, member of the Healthcare Finance Research Group and teacher of the Research Office of the Chinese Academy of Medical Sciences also contributed to this article.)