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This is why Chinese companies are suddenly targeting Australian healthcare businesses
2018-02-02
Brief:Chinese companies have suddenly taken an interest Australian healthcare companies, going from nothing to spending $5.5 billion on 16 deals over the last three years.
 Chinese companies have suddenly taken an interest Australian healthcare companies, going from nothing to spending $5.5 billion on 16 deals over the last three years.
 
About 80% of the deals are by privately owned Chinese companies seeking the Australian advantage, including advanced technology application, quality care facilities, strong management systems and that clean, green and healthy image Australian-branded products have in China.
 
Many have health sector experience back in China and they have shown a willingness to make repeat investments.
 
The significance of the sums being spent in Australia becomes clear when comparing the local spend to the $US4.7 billion ($A5.7 billion) Chinese investment into the much bigger US health, pharma and biotech market over three years.
 
According to a study by KPMG and The University of Sydney Business School, the investment surge is concentrated in the health supplement and medical treatment sectors. So far, there has been no significant investment in pharmaceuticals, biotechnology or aged care. And there’s more to come.
 
“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,” says Doug Ferguson, Head of Asia & International Markets at KPMG Australia.
 
“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.”
 
The price for healthcare increased by 6% last year, according to analysis by Macquarie Wealth Management.
 
And the Chinese government has started the process to make it easier for foreign pharmaceutical companies to get approvals to sell their drugs in China where approvals can take a long time because of capacity bottlenecks for certified clinical trials.
 
The KPMG report, Demystifying Chinese Investment in Australian Healthcare, says $2.55 billion was invested in Australia in 2015, $1.35 billion in 2016 and $1.58 billion in 2017 through several very large deals.
 
Among them was the $930 million acquisition of hospital operator Healthe Care, Australia’s third largest corporate private hospital operator, in 2015 and the acquisition of vitamins and supplements maker Swisse Wellness for more than $1.5 billion.
 
Major deals in 2017 included the $800 million investment in Ansell’s Sex Wellness Division by Humanwell Healthcare and CITIC capital, and the $337 million in PRP Diagnostic Imaging by Hengkang Medical Group.
 
China’s central government’s Healthy China 2030 plan provides a 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.
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