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Analysis: Chinese investment in Australian healthcare hits A$5.5 billion

Not having featured before 2015, Chinese investment in Australia’s healthcare sector has surged over the past three years. It has reached A$5.5 billion (US$4.5 billion) across 16 completed deals, according to a new report from KPMG and The University of Sydney Business School.

The report, Demystifying Chinese Investment in Australian Healthcare, which covers investments into Australia made by entities from China through m&a and joint ventures from 2015 to 2017, found that investment has been concentrated in the health supplement and medical treatment sectors in Australia. To date there has been no significant investment in pharmaceuticals, biotechnology or aged care.

According to the report, A$2.55 billion was invested in 2015, A$1.35 billion in 2016 and A$1.58 billion last year through several very large deals, including the A$930 million acquisition of hospital operator Healthe Care in 2015 and the acquisition of Swisse Wellness for more than A$1.5 billion across 2015 and 2016. Major deals last year included the A$800 million investment in Ansell’s Sex Wellness Division by Humanwell Healthcare and CITIC capital, and the A$337million investment in PRP Diagnostic Imaging by Hengkang Medical Group.

Advantageous international trade agreements combined with progressive domestic initiatives such as the Commonwealth Government’s Medical Research and Innovation Strategy and the National Innovation and Science Agenda are improving Australia’s comparative advantage in advanced health sector industries and helping drive further investment attraction.

Australia is doing well relative to many other countries. By comparison, Chinese investment into US health, pharma and biotech for the three year period reached US$4.7 billion.

According to report co-author, Doug Ferguson, head of Asia and international markets at KPMG Australia, the country’s success in attracting investment is due to Chinese companies’ seeking what he calls the complete Australia package. "Chinese investors have really shifted their investment interests to Australia’s high-tech, high quality health products and services sector in the last three years,” he said. “Australia presents a range of country-specific advantages that include advanced technology application, quality care facilities, strong management systems and the clean, green and healthy image for Aussie branded exports back to China. As China’s aged care industry develops and its medical treatment sector matures there will be a greater need for these qualities and more demand for the businesses providing them. There’s still a long way to go," he explained.

China’s central government’s “Healthy China 2030” plan provides a very clear framework for the country’s health sector development priorities. China’s healthcare spending is expected to grow by 8.1% a year over the next five years, representing a big opportunity for Australia’s health sector. “The patterns that are emerging in China’s domestic healthcare sector are likely to strengthen investment demand in the coming years as healthcare assets become a key component of many Chinese investor’s portfolios,” said Jenny Yao, KPMG China’s head of healthcare in Beijing.

Rather than general health services, many Chinese companies seek to invest in specialist services, such as oncology, radiology, ophthalmology, IVF, and aged care. These services are replicable in the Chinese market and customised to fit the specific needs of China’s middle-to-high end consumer markets. Australian healthcare brands have an initial advantage in China due to their reputation for high quality products with consumers.

The report predicts that investment will broaden across all sectors in the short-to-medium term. The patterns that have emerged in Chinese healthcare investment so far will likely strengthen in the coming years as healthcare assets become a key component of many Chinese investors’ portfolios.

The introduction of Chinese policies to establish a public/private healthcare system built on "big health" presents an opportunity for Australian companies to share their expertise and participate profitably in the industry’s transition and growth.

“For Australian companies, Chinese investment presents an opportunity to access capital and new markets with new supply chains with established local partners. The outcome of increased investment will be a highly competitive Australian healthcare sector that can accelerate exports as well as continue private sector investment in research and improve technological capabilities,” said Ferguson.

Posted on: 31/01/2018 UTC+08:00


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