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China's hospital market promising for foreign investors

Staff writer |
The hospital market in China is providing huge opportunities for foreign investors although there are some risks, according to The Boston Consulting Group.

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China's hospital market is approaching a golden era of growth and ready to embrace additional private capital, including overseas funds, according to Chun Wu, partner and managing director of BCG Greater China and also co-author of the report.

Total revenue for hospitals in China exceeded 1.25 trillion yuan ($204 million) in 2011. Private hospitals have been growing rapidly and the number of private hospitals has increased by nearly 50 percent from 2008 to 2011, statistics from the former Ministry of Health show. The Chinese government has set a goal to increase the private service contribution to the whole hospital industry to 20 percent by 2015 from less than 10 percent today.

There are several hospital segments that have investment potential. As private hospitals, there are high-end, specialty chains, general, extended care and group hospitals. In the public sector, there are general hospitals undergoing privatization.

In the short term and also taking place now, high-end and specialty chain hospitals are in the vanguard of the change. In the middle term - within three to five years - high-end and specialty chains will continue to thrive, while general hospitals, both private and public undergoing privatization, will become key investment opportunities.

General hospitals will see further growth and large hospital groups should emerge through mergers and acquisitions and industry consolidation in the long term. Investors need to be mindful of the development trends within each segment and develop a deep understanding of segment-specific requirements, the competitive landscape and key success factors in order to identify the best targets.

In the high-end hospital sector, the key to success is the patient-centric mindset that is based on a very fundamental understanding of the needs of target users, which is then reflected in the branding, service and talent requirements.

Investors in the hospital market have four typical modes of entry, involving greenfield or organic growth, acquisition of private hospitals, privatization of public hospitals and the establishment of trusteeships of public hospitals.


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