Analysis of Status Quo and Driving Forces in China Health Industry

From: China Biz Data
Published: Tue Jun 27 2017

China's health industry enjoys continuously fast growth. The scale of the industry grew by CAGR of 16.03% from 2011 to 2014, reaching CNY 2.5 trillion in 2014. Specific examination of the growth of sub-industries of pharmaceuticals, medical devices, healthcare products and medical cosmetics are as follows: The CAGR of the pharmaceutical industry was 19% (2010-2014); that of the medical device industry was 30.50% (2010-2014); that of the healthcare industry was 30.40% (2010-2014); that of medical cosmetics was 16.58% (2010-2014).
The rapid growth of the health industry is driven by three forces. Firstly, =aging population and environmental pollution resulted in people's rising healthcare demand. Secondly, people are spending more on healthcare out of enhanced health awareness. Thirdly, government policies are behind the development of a healthy China. These favorable factors will continue to promote the development of the health industry.
I. Accelerating aging and environmental pollution push up demand for the health industry
In 2015, as much as 10.5% of China's population was above 65 years old. The average life expectancy was 74.83 years in 2010. Looking ahead, the general trend will be characterized by accelerating aging and extension of life expectancy. Under such circumstances, elderly care and chronic diseases have gained much attention. Meanwhile, deteriorating environment is bad for people's health, thereby raising their health awareness. Three national studies on the cause of death indicated that the mortality of malignant tumor increased from 75.6/100,000 to 91.24/100,000 during the past three decades. The mortality of lung cancer, liver cancer and colorectal cancer, which are related to the environment and lifestyle, rose significantly.
II. Increased health spending out of enhanced health awareness
International development experience shows that when GDP per capita exceeds USD 6,000, consumption upgrading typically begins and non-necessity consumption becomes the major consumption. China's GDP per capita exceeded USD 6,000 in 2011 and people's disposable income increased from CNY 15,780 in 2008 to CNY 29,381 in 2014. Increasing income leads to increasing healthcare expenditure. From 2011 to 2014, healthcare expenditure of urban residents grew at an average annual rate of 10.66%, higher than the growth of consumption expenditure at 10.35%. Healthcare expenditure has been growing significantly in recent years. In 2014 ,it grew by 14.91%, substantially higher than the growth of consumption expenditure by 8.01% and that of residents' disposable income by 8.98%.
III. Policies behind health development in China
The Thirteenth Five-year Plan proposed that "Healthy China" development should be promoted as a national strategy. It stated that developing a healthy China requires deepening the reform of medical and healthcare system, rationalizing pharmaceutical prices, connecting medical care, medical insurance and pharmaceuticals, building the basic medical and healthcare system and the modern hospital management system that covers both urban and rural areas, and implementing the food safety strategy.
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