The healthcare service industry is a building block in support of China’s economic growth and people’s well-being. Along with China’s economic transformation, the consumer industry and service industry have become increasingly important in driving China’s economic growth. As people demand better living standard and high-end medical service, the healthcare service industry is projected to maintain a rapid growth. From 2011 to 2015, China’s total healthcare spending grew from CNY 2,434.6 billion to CNY 4,097.5 billion, representing a CAGR of 13.9% during this period.
China’s total healthcare spending is projected to undergo a steady growth in the next few years. By 2020, China’s total healthcare spending is forecasted to increase to CNY 6,281.8 billion, representing a CAGR of 8.9% from 2015 to 2020. China’s total healthcare spending grew from 5.0% of GDP in 2011 to 6.1% of GDP in 2015, and is expected to reach 6.9% of GDP by the end of 2020.
By contrast, healthcare spending as percentage of GDP in China remains significantly low among the top 10 countries with the largest GDP. In 2015, China ranked second in total healthcare spending among these countries, but ranked ninth in healthcare spending in terms of the percentage of GDP, indicating that China still has ample potential for healthcare spending increment.
Drivers of the healthcare service market in China
The growth of China’s healthcare service market is expected to be considerable and be primarily driven by the following factors.
Accelerating trend of population aging
According to the National Bureau of Statistics of the PRC, China’s population aged 65 and above increased from 122.9 million in 2011 to 143.9 million by the end of 2015, representing a CAGR of 4.0% during that period. By the end of 2015, the number of individuals aged above 65 accounted for 10.5% of the total population of China. China has become an aging society. The aging trend is expected to continue and the population aged 65 and above is estimated to reach 186.6 million by the end of 2020, which indicates an increase in the demand for healthcare services in China.
Increasing chronic, common and/or frequently-occurring diseases
China’s increasing economic prosperity and urbanization have changed the epidemiological profiles of Chinese residents, resulting in a major shift from microbe-related infectious diseases to lifestyle-related chronic diseases in the past decades. In 2015, approximately one-third of the population aged over 15 suffered from at least one chronic disease, such as hypertension, diabetes and hyperlipidemia. As indicated in the 2015 Progress Report of China Disease Prevention & Control published by NHFPC, death toll caused by chronic diseases had reached 86.6% of domestic death toll. Also, there is an upward trend for the younger generation in China to be diagnosed with chronic diseases.
As chronic diseases require long-term treatment, rising chronic disease prevalence is expected to raise healthcare spending. In 2015 nearly 67% of in-patients in China’s urban hospitals suffered from common diseases or chronic diseases and such proportion reached 78% in county-level hospitals. Furthermore, chronic disease treatment requires lengthy therapeutic cycle results in sustainable medical revenue for corresponding healthcare institutions. The spending on treatment of common diseases, chronic diseases and frequently-occurring diseases accounts for over 70% of the total healthcare market in China, which makes up the major segment in the healthcare market.
Increasing affordability and accessibility of healthcare services
Per capita disposable income of urban and rural residents has risen due to the boost of China’s economy. In 2015, urban and rural per capita disposable incomes reached CNY 31,195.0 and CNY 11,422.0, representing a CAGR of 9.4% and 13.1% starting from 2011 respectively, and the healthcare spending of urban and rural residents reached RMB1,305.6 and RMB753.9 with a CAGR of 10.6% and 23.3% respectively, from 2010 to 2014.
Meanwhile, the PRC Government has dedicated strong effort to increase the accessibility and affordability of healthcare services through healthcare reform. Huge investment has been made to construct and upgrade healthcare infrastructures, and to expand medical insurance coverage. The public medical insurance system has been established to cover nearly all the population. Annual medical insurance expenditure per capita increased from approximately CNY 936.0 in 2011 to approximately CNY 1,398.8 in 2015 for urban residents, and from approximately CNY 205.6 in 2011 to approximately CNY 437.8 in 2015 for rural residents. Meanwhile, along with the rise in government funding for public medical insurance, per capita out-of-pocket spending by patients decreased at the same rate as the increase in the healthcare spending. The three core public health insurance systems, namely Urban Resident Basic Medical Insurance Scheme (“URBMIS”), New Rural Co-operative Medical Insurance Scheme (“NRCMS”) and Urban Employee Basic Medical Insurance Schedule (“UEBMIS”), have covered nearly 100% of the total registered population in China. By the end of 2015, URMBIS and UEBMIS covered over 86.3% of the total registered urban population and NRCMS covered approximately 98.8% of the total registered rural population in China.