China's Future Signals: Looking Ahead 2-5 years
Health Improving Intelligence & Technology
China Skinny
14 April 2014
Table of Contents
Executive Summary .................................................................................................................................................. 3
1. Introduction .................................................................................................... ............................. ........................ 5
2. China's Pressing Health Issues ............................................................................................................................ 6
3. Government Health Reform .................................................................................................................................. 9
4. China's Urban Phenomenon ................................................................................................................................. 10
5. Consumer Health Intelligence & Tech Opportunities ............................................................................................. 13
5.1 The Growing Waistlines ..................................................................................................................................... 14
5.2 Getting Healthy Through Exercise ..................................................................................................................... 15
5.3 The Precious Only Child .................................................................................................................................... 17
5.4 China's Greying Population ............................................................................................................................... 18
5.5 That Pollution Problem ...................................................................................................................................... 19
6. Government and Business Health Intelligence & Tech Opportunities .................................................................. 20
6.1 Medical Equipment Made Better ....................................................................................................................... 22
6.2 Providing for the Affluent ................................................................................................................................... 23
7. The Last Word ...................................................................................................................................................... 24
Executive Summary
This report follows the 10 Future China Signals analysis delivered to Tekes in March 2014. It documents further
investigations into the selected signal, Health Improving Technology and Intelligence. This is a wide-reaching topic and
China Skinny has focused on just direct health-related products. Many of the insights and examples in this report should
act as a stimulus for further innovation and ideas.
China is not a healthy place to live. 99 percent of China’s urban residents breathe air considered unsafe by EU
standards. Research into the chronic air pollution has concluded that if smog persists, China’s agriculture and
horticulture will suffer conditions “somewhat similar to a nuclear winter.” The Government is focused on fixing pollution
problems, pledging 350 billion Euro for improvements over the next five years. Nevertheless, consumption of coal, the
biggest contributor to China’s pollution, still grew 2.5 percent in 2013, indicating that the region will be plagued with
pollution for some time yet.
Air pollution contributed to 1.2 million deaths in China in 2012. It has driven lung cancer deaths to rise 400 percent in
30 years, increased the number of Asthma suffers by 40 percent in the past five years, led to premature birth rates
growing at 1 percent a year and contributed to low fertility rates.
Unfortunately, air pollution isn’t China's only environmental issue. 90 percent of Chinese cities’ groundwater is polluted
to some degree and almost two thirds is severely polluted, feeding into all parts of the supply chain. In addition, 15
percent of arable land suffers from chronic soil pollution. 65 percent of fertilizer is used incorrectly in China. The
country's farms are predominantly made of millions of peasant farmers, making it difficult to educate and enforce
production standards across the country's vast supply chains.
Even if China’s environment was spotless, and farmers educated, China’s rampant corruption would still effect the
country's food safety and health. Scandals such as the 2008 Melamine crisis, which saw 300,000 babies fall ill, has
contributed to a lack of trust in China’s food supply.
Awareness of the mainland's poor state of health has risen significantly in recent years due to widespread adoption of
the Internet and social media and an increasingly state transparent media. Health is now the top concern for wealthy
Chinese consumers, air and water pollution are the two fastest growing concerns for Chinese, more than 80 percent of
Chinese have purchased vitamins and health supplements, and health is one of the main drivers behind China’s high
saving rates. China’s aging population and treasured only child are contributing to growing demand for health products
and services. 73 percent of Chinese consumers are willing to pay a premium for products that they deem are healthier.
The Government’s contribution to health has been historically low, however between 2009 and 2013 they spent more
than 267 billion Euro on health reforms. This has led to 95 percent of consumers being covered by basic health
insurance and individuals paying for 36 percent of their health expenses, down from 56 percent in 2009. However,
Chinese consumers are still generally dissatisfied with public health, contributing to a long history of self care which is
driving demand for consumer-focused health solutions.
China’s urbanisation rate has grown from 18.5 percent in 1979 to more than 53 percent in 2014. Urban lifestyles have
created a new slew of health issues such as stress from overwork. A change of diets has risen diabetes rates by 22
million to 114 million in six years and grown obesity rates 20 percent since 2010.
However, urban migration has been the main contributor to China’s growing wealth. Urban incomes are three and a
half times higher than those in rural areas. Urban households in China are forecast to grow from 256 million to 357
million between 2012 and 2022, and the share of affluent and upper middle class households will grow from 17 percent
to 63 percent. The affluent are more health sensitive than price sensitive, driving demand for premium health products.
Consumer-Targeted Health Solutions
China’s massive population makes niche groups significant markets in themselves.
Obesity is a growing health concern in China. This is represented by the 15.4 percent annualised growth in Weight
Management products and services between 2007 and 2012. Food technology solutions such as Hamkintatukku Oy’s
kidney bean extract that absorbs carbohydrates is an example of an ideal product for urban consumers in this category
as it is convenient, simple, transportable and ‘natural’.
To stay healthy, Chinese consumers are increasingly opting for exercise, with the number of 20-69 year olds who do
intensive exercise rising by 15 percent between 2007 and 2013. Finnish sports equipment and apparel companies such
as Suunto, Amer Sports and Polar Electro, are well placed to collaborate with Finland’s world class mobile telephony
ecosystems to create tools such as wearable technology. This type of technology will be popular in China as it will help
improve confidence of many consumers who are not overly familiar with physical activities. It will allow them to share
their ‘cool’ exercise on social media, and create milestones and targets that will help grow the platform virally and create
potential advertising platforms.
With most Chinese families only having one precious child, doted on by two parents and often four sets of grandparents,
children’s health is of utmost importance. There are significant opportunities for paediatric health technologies firms
such as Medixine. Health manufacturers should consider Chinese parent traits, such as ‘helicopter’ parenting, and
incorporate tracking and monitoring functionality.
China’s pensioner population has grown 50.7 percent over the past five years to 484 million. However pensioners are
generally poorer than younger urban Chinese, and are less likely to demand premium imported health products.
Examples of premium products that could find success in the old age category include variations of Finnish health
products such as Beddit that enable monitoring of pensioner health to be tracked remotely by their wealthy children.
Pollution protection is a fast growing industry in China, with respiratory products having some of the highest consumer
demand. Finnish respiratory companies such as Arc Dia should look to integrate smart, connected technologies into
products, to meet rising consumer expectations.
Government and Business Targeted Health Solutions
Government health departments remain the owners and managers of public hospitals, which provide 90 percent of
outpatient and inpatient services in China. However, changes in Government policy will see private businesses playing
a more significant role in offering healthcare services.
Medical facility visits and inpatients are growing at double-digit rates in China. This is driving increasing demand for
medical equipment, which grew 17.9 percent annually 2008 to 2013 to 7.7 billion Euro. During this period health
equipment imports, while growing 18.6 percent per annum, has decreased as a portion of total products. This is mainly
attributed to local manufacturers creating higher end products.
Basic health products account for the largest share of spending in China's health industry. There are opportunities for
Finnish companies such as Remote A to make basic products smarter and more efficient, to reduce the workload for
busy doctors and provide better customer experiences. Products that create Government intelligence for monitoring and
controlling Chinese will also find favour with the key customers.
Higher-tier Chinese cities are becoming increasingly serviced by premium hospitals with some of the most expensive
fees in the world. They are providing for China's fast growing affluent classes who are not prepared to fight through the
crowds at public facilities. Government policy relaxing foreign ownership rules and fee caps will see more facilities
competing for the growing health-concerned wealthy demographic. This will increase the incentive to provide
outstanding service and equipment. Finnish companies most likely to succeed in this market will include brands such as
Planmeca who adapt to provide Medical equipment that is customer-centric and integrates with patient smartphones to
improve the overall experience.
China's worsening health environment and rising wealth present significant opportunities in China's health market
between now and 2019. In both the B2C and B2B segments, Finnish companies that innovate and integrate online
platforms such as smartphones are most likely to realise the significant opportunities from the Chinese health market.
1. Introduction
This report is a follow up to the 10 Future Signal Forecasts provided to Tekes in March 2014. Following the initial
forecasts, Tekes recognised the vital importance of health in Mainland China and its relevance to Tekes recently started
Proactive Heath programme. They selected the topic of Health Improving Technology and Intelligence for further study,
which has resulted in this report.
Health Improving Technology and Intelligence is a wide reaching topic in China. Everything from food safety to water
purification to pollution protection and monitoring could be included in this discussion. For the purposes of this report,
China Skinny has focused just on direct health-related products in China, which is a substantial subject in itself.
Nevertheless, many of the insights and examples in this report should act as a stimulus for further innovation and ideas.
In each category, there is a section explaining the Takeouts from the Product that Make it Appealing to the Chinese
Market. This section should provide insights into purchase behaviour and motivations that can be applied across
numerous categories for wider health tech product development and beyond.
We trust Tekes and the intended audience receives value from the following report, and hope this is the start of long and
productive relationship between Tekes and China Skinny.
2. China's Pressing Health
Issues
China is not a healthy place to live.
Following another period of heavy
smog in Beijing in January 2013,
analysts compared Beijing's levels of
PM2.5 pollution - the airborne
particulate matter than raises risks for
lung and heart diseases, with the air
quality in 16 airport smoking lounges
in the U.S. For the first 30 days of
January, Beijing's level was 16 percent
worse.
Unlike smoking lounges,
where users finish their smoke and
leave as soon as possible, Beijing
residents were surrounded by the
pollution 24/7.
13
Beijing
Beijing
90.1
14
Wuhan
Hubei
88.7
646
339
15
Chengdu
Sichuan
86.3
374
16
Wulumuqi
Xinjiang
85.2
387
383
17
Hefei
Anhui
84.9
18
Taizhou
Jiangsu
80.9
474
19
Huai’An
Jiangsu
80.8
513
20
Changsha
Hunan
79.1
325
China is home to 16 of the world's 20
most polluted cities. 99 percent of
urban residents breathe air considered
unsafe by EU standards.
Chinese Urban Residents Breathing
Clean Air
A report released in February 2014 by
the Shanghai Academy of Social
Sciences, concluded that Beijing's
pollution is almost "uninhabitable for
human beings".
The air pollution has become so toxic
in the city, that many Beijing schools
do not allow pupils outside during
school hours. Some of the wealthier
schools have resorted to building airpurified domes where kids can play
during their breaks.
Whilst Beijing is the city best known
for China's pollution problems, there
are 12 cities more polluted in China.
Table 1: China's Most Polluted Cities
Rank
City
Province
Average
PM2.5
Highest
PM2.5
1
Xingtai
Hebei
155.2
688
2
Shijiazhuang
Hebei
148.5
676
3
Baoding
Hebei
127.9
675
4
Handan
Hebei
127.8
662
5
Hengshui
Hebei
120.6
712
6
Tangshan
Hebei
114.2
497
7
Jinan
Shandong
114.0
490
8
Langfang
Hebei
113.8
772
9
Xi’an
Shaanxi
104.2
598
10
Zhengzhou
Henan
102.4
422
11
Tianjin
Tianjin
95.6
394
12
Cangzhou
Hebei
93.6
380
The Far-Reaching Affects of China's
Pollution
China's chronic air pollution is not only
effecting
human
health,
but
considerable elements of China's
ecosystem. Research from the China
Agriculture University suggests that if
smog persists, China's agriculture and
horticulture will suffer conditions
"somewhat similar to a nuclear winter."
The inability of China's crops to
photosynthesize will have catastrophic
effects on the world's food supply
chains.
China's Pollution Isn't Going Away
Until Long After 2019
58 percent of Beijing's PM2.5 pollution
can be tracked back to coal
combustion in the power, steel,
cement and brick industries, according
to a Greenpeace study.
Leading into 2013, China's pollution
problems became a major concern for
both the Chinese Government and
consumers. Environment improvement
is a key pillar in China's current 12th
Five Year Plan, with 350 billion Euro
budgeted for environmental protection.
Regardless, even with such focus,
coal consumption in China still rose
2.5 percent in China in 2013.
China's Pollution Isn't Just Isolated
to the Air
China's cities' groundwater is far from
ideal. 90 percent of groundwater is
polluted to some degree, with almost
two thirds severely polluted.
China's Air Pollution is Affecting
China's Health
Air pollution contributed to 1.2 million
deaths in China in 2012 alone.
1983
2013
Lung cancer deaths have grown 400
percent in the past three decades. In
late-2013, an 8-year old girl in China
was diagnosed with lung cancer,
believed to be caused by pollution.
The number of Asthma
suffers in China have
grown 40% in the past five
years, with some cities
having rates as high as 11
percent
Premature
births
are
increasing at 1% a year.
1,172,300 babies were
born prematurely in China
in 2012, about 10 percent
of all births.
Two thirds of deposits in
Shanghai's largest sperm
bank don't meet WHO
standards. Pollution is the
leading cause of infertility.
7
The polluted water feeds into almost
all parts of the food supply chain, from
the crop irrigation, to the water that
washes the crops, machinery and
dishes, to much of what is drunken.
In addition to the air and water, more
than 15 percent of China's arable land
suffers from chronic soil pollution.
It is no surprise that 58 percent of
Chinese
consumers
rated
environmental quality as important
when buying food, versus 29 percent
in Britain.
The Environment Isn't All To Blame
Chinese
food
production
has
traditionally been grown by individual
peasant farmers on small plots of
land. These farmers are often poorly
educated about farming techniques
and their sheer number and dispersion
makes raising awareness of correct
farming practices and changing habits
difficult.
65 percent of fertiliser is used
incorrectly in China and 9 million
hectares of arable land are affected by
the overuse of pesticides in China. In
Guangdong in 2013, 44 percent of rice
contained
excessive
levels
of
carcinogenic cadmium.
In 2008, the average dairy farm in
China had three cows, with many
farmers pumping their stock fill of
penicillin hoping it will help their
animal's health.
With farmers so
vastly distributed and undereducated,
it is difficult to change and monitor
their habits for safe farming practices.
China's Corruption Issues with
Health
Even if China's environment was
spotless, and farmers educated, the
unfortunate reality is that the health of
food would still be vastly effected by
the corruption seeping into all levels in
China.
In April 2013, trust in domestic meat
plummeted in China, with rat and
ferret meat being sold as fake lamb
and beef, rotten fish packaged and
sold, diseased pigs washing up in the
Huangpu River, and the H7N9 Birdflu
virus in poultry. Toxic “thousand year
old” eggs, steroid-filled exploding
watermelons, bean sprouts bleached
using banned chemicals, toxic beer
additives and of course the infamous
melamine milk scandal in 2008 which
saw 300,000 babies fall ill are but a
few examples of corruption in China's
food supply chains.
News in China was once the realm of
state-run radio, newspapers and
television. With full control of these
channels,
the
state
could
communicate and
educate
the
population inline with their agenda.
Then the Internet and social media
were introduced to China. These gave
Chinese consumers a voice, and they
took advantage of it.
At the beginning of 2014, over 90
percent of China's 618 million Internet
users had used social media in the
past six months, versus around fifty
percent in Finland. This didn't just
raise Chinese consumers' awareness
of health issues, but also obliged the
state media to be more transparent on
the subject.
The increasing awareness is also
coupled with China's ever more
educated population. An estimated
195 million Mainland Chinese will hold
a Bachelor's Degree by 2020.
Increased knowledge of the health
risks of living in China is driving
demand for many aspects of health,
from products to services, from
consumers
to
businesses
and
Government.
Some key indicators of perceptions
about health in China:
•
Health is the top concern for
wealthy Chinese consumers;
•
Air pollution and water pollution are
the two fastest growing concerns
for Chinese consumers;
Increasing Awareness of Health
Issues
•
In recent years, Chinese consumers'
awareness of environment, food
safety and health issues has
increased significantly.
More than 80% of Chinese have
purchased vitamins & health
supplements;
•
Health is one of the main drivers
behind China's high savings rates;
8
•
China’s pensioners have grown
50.7% in five years to 484 million;
•
With just one child to provide for
them in the future, parents take no
chances where possible; and
•
73% of Chinese consumers are
willing to pay a premium for
products that they deem are
healthier.
3. Government Health Reform
The Chinese Government has a long
history of underinvestment in China's
health system. In 2009, China had 20
percent of the world's population, but
its health expenditure accounted for
just 3 percent of the world's total. The
Chinese Government contributed to
24.7 percent of the country's total
expenditure, far below the 75 percent
average of developed countries, and
less than half of the 55 percent of
developing countries. As a result, 56
percent of China's health care cost
was born by individuals.
The
remainder is covered by profits from
activities such as medicine sales.
In 2009, the Chinese Government
pledged to bring universal health to all.
Between 2009 to 2013, it spent more
than 2.3 trillion RMB (267 billion Euro)
on its health reform. The percentage
of Chinese covered by health
insurance surged from 30 percent in
2003 to 95 percent of China's
population by 2011. However the
overwhelming majority’s coverage is
basic health insurance coverage for
illness, injury or problems with
childbirth
–
although
this
is
significantly more basic than coverage
in countries like Finland.
By the end of 2013, individuals were
paying just 36 percent of China's
health care from their pockets.
Hospital bed utilisation increased from
36 percent to 88 percent.
9
Despite the universal coverage and a
seemingly rosy picture for China’s
inpatients and outpatients, public
dissatisfaction with the health service
is growing. One of the indicators of the
public’s frustration is demonstrated by
the average number of attacks on
medical staff per hospital, which
increased from 20.6 to 27.3 per year
between 2006 and 2012.
A survey released by Horizon
Research in 2013 found 81 percent of
survey respondents said it was difficult
to see a doctor, and more than 57
percent said it was more difficult than
four years earlier. 20 percent said it
was easier. 95 percent believed it was
expensive to seek care, with 87
percent claiming the cost was higher
than four years earlier.
Chinese consumers’ lack of faith in the
public health system has seen them
have a long history of self-care
awareness, driving demand for
consumer-focused health solutions.
The
aforementioned
awareness
around health is strongest amongst
China's urban areas, where the vast
majority of the demand for health-type
products is originating.
4. China's Urban Phenomenon
In 1979 when China began their
economic reforms, the urbanisation
rate was 18.5 percent.
35 years
later, more than 53 percent of Chinese
live in cities. A population almost
twice the size of Helsinki's migrates
from rural areas to cities every month
in China and around 60 percent of
Chinese are expected to live in cities
by 2019.
Urban Lifestyles are Contributing to
China's Changing Health Dynamics
Changes in lifestyle as a result of
urban living are influencing the state of
health in China. Busy lives, changing
diets and more sedentary lifestyles
have rapidly created a new slew of
health concerns amongst China's
urbanites.
75% of Chinese workers felt
more stressed in 2012 than
2011. 70% of white collar
workers suffer from overwork.
Changing diets have led
diabetes rates to rise by 22
million to 114 million between
2007 and 2013. There are
almost as many diabetics in
China as people in Japan!
Changing Trends for Urban Chinese
Consumer Behaviour Related to
Health
Urban Chinese consumers are
generally better educated, more aware
of health issues, and more likely to
have the means and intent to
purchase premium health related
products and services from Finland.
In developing health-related products
and services for individual consumers,
businesses and Government it is
important to consider trends for the
ultimate end customer - urban
Chinese consumers - and provide for
these changing needs.
Rising Wealth in China's Cities
Urban areas have contributed the
lion's share of wealth growth in China.
Urban Chinese earn more than three
and a half times the income of rural
Chinese and their incomes are
growing faster. They spend more
than double on food and beverage
and health related purchases.
Chart 1: China's Urban & Rural
Income Growth 2006-2019
11% of Chinese aged 20-39
were obese in mid-2013.
Obesity rates have grown
20% since 2010.
SOURCE: NATIONAL BUREAU OF STATISTICS
10
Chart 2: China's Affluent Urban
Households 2012-2022
percent of households in 2012 to 63
percent in 2022. Their share of urban
private consumption will grow from 31
percent in 2012 to 81 percent in 2022.
Although Chinese consumers are
inherently price-conscious, with health
becoming such a concern, it is one of
the categories that they are least price
sensitive. As they become more
affluent, they are more prepared to
pay for premium health-related
products and services. This trend is
illustrated in health and wellness
spending overall as indicated in Chart
3.
Chart 3: Chinese Consumer Health
& Wellness Spending
SOURCE: MCKINSEY
Chart 2 illustrates just how quickly and
radically the makeup of Chinese urban
consumer households are changing.
Not only will the number of
households grow from 256 million to
357 million between 2012 and 2022,
but the portion of affluent (
>229,000RMB / €26,550 in 2012 real
terms) and upper middle class
(106,000 - 229,000RMB / €12,29026,550) households will grow from 17
11
SOURCE: EUROMONITOR
The first section of this report has
established:
Why Chinese consumers are so
health conscious;
The environmental, production,
corruption and urban migration
effects on China's growing health
concerns;
Awareness of health issues are
rising; and
Increasing urban incomes are
enabling
more
Chinese
consumers to purchase premium
products and services in the
health category.
Consumer spending trends are
indicative of growth in the health
industry.
The following section
outlines how future consumer health
needs can be serviced by technology
and intelligence created by Finnish
companies.
12
5.Consumer Health Intelligence
& Tech Opportunities
China's massive population make
niche groups significant markets in
themselves.
China
Skinny
has
identified segments where Finnish
businesses are already leaders in their
field. Many of these categories are
market niches, making them an
accessible scale for many Finnish
businesses.
13
5.1 The Growing Waistlines
BACKGROUND:
China's obesity rates
are low compared
with countries like the
USA.
However,
rapid changes to more American-style
diets of processed and high sugar and
sodium
foods,
coupled
with
increasingly sedentary white collar
urban lifestyles and one child doted on
by six adults, obesity is growing at an
alarming rate. Obesity rates grew at
20 percent between 2010 and 2013.
Being overweight in China is less
accepted than in many Western
countries.
Females are especially
under pressure to remain thin and look
good, and spend a significant portion
of their incomes doing so.
MARKET INDICATORS:
Sales of Weight Management health
products and services in China grew
15.4 percent a year between 2007 and
2012.
Although annual growth is
expected to slow to 7.9 percent
between 2013 an 2017, the market is
forecast to be valued at 10 billion RMB
(1.2 billion Euro) by 2017.
Chart 4: Weight Management Sales
in China
OPPORTUNITIES FOR FINLAND:
There are unlimited opportunities for
technology solutions to assist with
weight loss, however one particular
area where Finland has demonstrated
leadership is in the food technology
field.
Hankintatukku
Oy has created
innovative products like the Figurel
Low Carb, a kidney bean extract
supplement that blocks absorption of
carbohydrates when consumed with
food.
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
Urban Chinese consumers are busy
people. 70 percent of white collar
workers suffer from overwork, and
products that are fast and convenient
ways to deal with problems are likely
to have the most appeal. By 2019,
this will only increase.
Convenience stores grew 19.5 percent
in 2013, the fastest growing retail
category in China, with the exception
of online shopping.
Sales of Chewing gum doubled
between 2009 and 2013. The product
is marketed as an oral hygiene
product, but grew much faster than the
oral hygiene segment overall mainly
because it is an simple, transportable
and convenient way to improve oral
hygiene for busy urban dwellers.
Health
products
such
as
Hankintatukku's that are convenient
and easy to use are likely to hold the
most appeal with China's urban
consumers. Natural products are also
popular. Finnish product development
teams should take this into account,
not just for food technology products,
but for many health tech categories.
14
5.2
Getting
Healthy
Exercise
Through
Chinese
consumers
are still a relatively
inactive
population.
Just 49.2 percent of
Chinese exercised in
the past year.
However as they
become more aware of their health,
they are increasingly turning to
exercise as a way to stay healthy.
As illustrated in Chart 5, health, sports
and sharing are considered the top
five applications for wearable tech.
Chinese consumer's love of gadgets
and the social capital gained by
having the latest tech accessory
means that wearable technology is
likely to be a key driver in China's
exercise and fitness industry.
Chart 5: Wearable Tech Applications
The number of Chinese aged between
20-69 who do intensive exercise at
least three times a week rose by 15
percent between 2007 and 2013 to
32.7 percent.
MARKET INDICATORS:
Although Sports Nutrition is China's
smallest consumer health category, it
grew the fastest between 2008 and
2013, averaging 16.3 percent a year
to total 346 million RMB (40 million
Euro) in 2013.
This growth
represents an overall increasing
interest in sports health in China which
is likely to continue beyond 2019.
OPPORTUNITIES FOR FINLAND:
With China's soaring smartphone
penetration,
and
openness
to
wearable technology, there are plenty
of opportunities for Finnish companies
to capitalise on its strengths. Sports
equipment and apparel sectors such
as Suunto, Amer Sports and Polar
Electro, could collaborate with its
world
class
mobile
telephony
ecosystems to create tools that will
appeal to the sporting Chinese.
Although wearable technology is still
in its infancy, a recent Baidu survey
discovered 93 percent of Chinese
Internet users were aware of wearable
technology, with 75 percent willing to
purchase.
15
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
As kids, Chinese don't play sports with
the same frequency and enthusiasm
as they do in the West. There are
fewer facilities for physical activities
and parents place much more
emphasis
on
education
and
homework, with free time often taken
up by activities such as piano and
violin lessons.
For that reason, Chinese consumers
are less confident in their approach to
physical activity.
Assistance and
measurement
from
technology
whether
it
is wearable
tech,
smartphone apps, or most likely, a
combination, will improve confidence
and education around physical
activities.
Many Chinese look to physical activity
as a Western lifestyle choice,
considering it 'cool' and even
aspirational. This means the ability
to share exercise on social media with
friends and family, provides social
capital for users, which should be
integrated into tools.
Chinese consumers also love offers
and promotions - just look at the
success of Single's Day online
shopping festival. This can be
translated into reward systems for
physical milestones and targets,
integrated into wearable technologies.
It provides an incentive for users, a
sharing opportunity on social media,
and a potential advertising platform for
businesses.
16
5.3 The Precious Only Child
With most Chinese
families having just
one child, doted on by
two parents and often
four grandparents, a
child's health and wellbeing is taken
very seriously in China.
Every minute, some 31 babies are
born in Mainland China, or around 1618 million per year. This presents a
significant and important market for
health products and services.
MARKET INDICATORS:
There are a slew of opportunities in
the early childhood health industry in
China, however budgets are relatively
tight for public-provided health.
Whilst many health technology
companies target the public health
service, the consumer market in China
presents
large
opportunities.
Consumers are becoming collectively
wealthier and are less cost conscious
for matters concerning their child's
health.
Paediatric Consumer Health was the
third fastest growing health category in
China between 2008 to 2013,
averaging 10.5 percent growth a year.
The market was valued at 9.4 billion
RMB in 2013 (1.09 billion Euro). By
2019, this is expected to grow to more
than 16 billion RMB (1.85 billion Euro)
Chart 6: Paediatric Consumer Health
Sales in China
SOURCE: EUROMONITOR
17
OPPORTUNITIES FOR FINLAND:
Finland already has an established
ecosytem of leading companies in
paediatric health technology, such as
Medixine.
Companies such as Medixine have a
wealth of experience in the high tech
paediatric segment which can be
leveraged to develop solutions for
China.
Utilising their innovations
provide an opportunity to tailor this
technology more to the end user
consumer - parents and grandparents.
Technology that allows the monitoring
and tracking of their child's health over
Internet-connected devices will have
widespread appeal.
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
Chinese parents have long been
known as 'Tiger Moms' and 'Helicopter
parents', as they hover over their child.
Monitoring-type products appeal to
this trait.
Children in China often live in the
village with grandparents as parents
work in the city. The ability for parents
to monitor they child's health remotely
over connected devices, will be
attractive.
Likewise, senior white collar workers
in China's cities often travel a lot with
their jobs. Even if their children live
with them in the city, the ability to
monitor them on the road is an
attractive proposition.
5.4 China's Greying Population
At the other end of
the age spectrum,
China’s
pensioner
population has grown
50.7 percent over the
past five years to 484 million
according to China's Ministry Human
Resources and Social Security. With
existing retirement policies and current
growth rates,
the number of
pensioners could reach 700 million by
2019.
In any society, old age consumers are
more likely to have health concerns
and require more health products to
meet these.
However, like most
places, elderly in China are less
familiar and open to technology from a
consumer standpoint.
OPPORTUNITIES FOR FINLAND:
Developing premium tech endconsumer health products for China's
elderly may have limited appeal to the
end user.
However integrating
remote tracking and monitoring into
elderly health products could enhance
their appeal to a much wealthier target
market - their affluent children.
The slew of Finnish companies that
are already creating health products
for the elderly should consider
integrating smartphone-type remote
monitoring
into
their
offerings.
Products
that
already
provide
significant monitoring and intelligence,
such as Beddit, should look to position
this as a tool for adult children to
monitor their parents.
MARKET INDICATORS:
Unlike in many countries, where
wealth and income generally grow
with age and experience, China's
older population are underrepresented
in the wealthy classes.
As illustrated in Chart 7, Chinese aged
18-29 have the highest incomes in
China, earning more than those aged
30-45 and significantly more than
older age groups.
Chart 7: China Income by Age
SOURCE: CREDIT SUISSE
18
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
Whilst the family unit is very important
in China, urban migration has
separated hundreds of millions of
families. Many elderly parents reside
in villages, often only seeing their child
once a year.
In most cases, it is the son or
daughter living in the city who has the
highest income and is the most techliterate. China Skinny believes the
most likely realistic strategy to sell
premium imported tech-based health
products to the hundreds of millions of
elderly in China, is by targeting the
children who are concerned about
their parent's wellbeing, but do not see
them often. They can afford to pay
for premium imported goods and
appreciate techology-based solutions.
5.5 That Pollution Problem
China's
pollution
problem isn't breaking
news. Yet consumer
concern is rising due
to worsening PM2.5
levels and increased transparency of
measurement and reporting.
80
percent of Chinese planning to
migrate cite pollution as the mean
reason for doing so.
Although the toxic air affects
everything from food supply to fertility,
the issue of most concern for
consumers is respiratory-related. In
January 2013 when much of
Northeast China choked on pollution
that was worse than an airport
smoking lounge, sales of face masks
and air purifiers both grew by more
than 100% from the month earlier.
MARKET INDICATORS:
97 percent of Chinese consumers
want
smarter,
Internet-connected
home appliances, especially TVs,
according to a report by the China
Household
Electrical
Appliances
Association (CHEAA).
products targeting pollution prevention
and monitoring.
Whether products are face masks, air
purifiers or another device to reduce
the health risks from pollution, there is
plenty of scope for smart features.
For example, face masks could
monitor pollution levels and adjust
protection accordingly, advising the
wearer, and even the wearer's family
of the conditions. It could measure
the condition of the respiratory tract
and advise of necessary health issues
and remedies. If the remedy can be
purchased, it will appear on the user's
smartphone and with one click, can be
purchased and delivered to the
wearer's home or office address.
Likewise, mask filters could have
sensors that advise the wearer when
they require changing. The mask
could also measure other health
concerns such as pulse, oral hygiene,
ailments that can be monitored
through saliva, and much more.
At the March 2014 Appliance World
Expo in Shanghai, over 90% of the
500 manufacturers exhibiting claimed
to offer smart devices. TCL recently
announced that it would be launching
an air purifier that can be controlled
and monitored by a smartphone.
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
By 2019, smart appliances will be the
norm. Smart connected technology
will be integrated into every consumer
segment, including respiratory and
pollution products.
Now the highly connected and
smartphone
engaged
Chinese
consumers are becoming more
expectant of products that are
integrated through online channels. At
the current rate of change, even
before 2019 smart products will be not
just a nice-to-have feature, but an
expected core function of most
consumer products.
OPPORTUNITIES FOR FINLAND:
Finnish businesses such as Arc Dia
that are already producing cutting
edge respiratory products, should
consider developing consumer-facing
19
Chinese consumers' expectations
have drastically changed in the space
of a few decades. Owning a watch
and single speed bike was a life
ambition for Chinese not too long ago.
6. Government and Business
Health Intelligence & Tech
Opportunities
Although China's hospitals receive
less than 10 percent of their revenue
from the Chinese Government, the
state is still the dominant decision
maker
on
purchasing
health
equipment.
2012
Year
6.90
Inpatients
10.0%
% Growth
(million)
2008
2009
2010
2011
2012
114.8
132.5
141.4
153.0
170.0
16.8%
15.4%
6.7%
8.2%
11.1%
SOURCE: CHINA HEALTH STATISTICS YEARBOOK
Chart 8: Visits to Medical Facilities
and anticipated growth
Government
health
departments
remain the owners and general
managers of public hospitals, which
still provide 90 percent of outpatient
and inpatient services. 43 percent of
hospitals nationwide are owned by
non-public entities. So for the
purposes of this report, this section
will account for both business and
Government considerations.
Private businesses will play a bigger
part in China's healthcare industry.
China’s 12th Five Year plan published
in 2012 proposed a significant role for
the private sector – both from local
and international investors and
operators, in healthcare reform.
Increasing Hospital Visits
Awareness of worsening health, rising
affluence and the Government's health
reform is seeing more Chinese visiting
and staying in hospitals. Increased
uptake of medical insurance is also
driving demand, with 95 percent of
Chinese having medical insurance at
the beginning of 2012. However the
vast majority of Chinese receive very
basic health cover.
Table 2: Visits to Medical Facilities
Year
Visits
% Growth
(billion)
2008
2009
2010
2011
20
4.90
5.49
5.84
6.27
47.1%
12.0%
6.4%
7.4%
Market Trends
Increasing hospital visits contributed to
a rise in demand for medical
equipment. Between 2008-2013, the
medical and veterinary equipment
industry grew 17.9 percent annually to
66.7 billion RMB (7.7 billion Euro).
Health equipment imports have been
concentrated around high value, high
technology products.
Although
imports have been growing at 18.6
percent annually over the past five
years, the proportion of the total
market value has decreased from
almost 19 percent in 2008 to 15
percent in 2013. This drop is due to
Chinese manufacturers developing
higher quality and higher tech health
products.
Chart 9: B2B/B2G Health Market
Segmentation
Health Market Segmentation
The main target market for premium
health technology and intelligence in
the B2B/B2G segment are the
specialised hospitals, wholesalers and
retailers, and general hospitals.
Traditional Chinese Medicine hospitals
mainly use medicines to treat patients,
and health centres are small, basic
facilities generally located in rural
areas, unlikely to be in the market for
high end imported equipment.
Chart 9: B2B/B2G Health Market
Segmentation
SOURCE: IBIS
What They're Buying
The majority of medical equipment
purchased by health facilities in China
is low-tech and lower value. Hence
imports account for 15 percent of the
total expenditure.
Nevertheless, China is becoming
increasingly sophisticated as a
market, particularly in the affluent
consumer segments, but also in other
areas if additional value can justify the
higher price.
21
SOURCE: IBIS
6.1 Better Medical Equipment Better
40%
of
China's
medical expenditure
goes
towards
common diagnostic
instruments such as
blood-pressure meters, pulmonary
ergometers,
stethoscopes
and
thermometers.
These instruments are generally basic
devices used in the same way that
they have been for decades.
MARKET INDICATORS:
As above, in 2013 the market for
common
diagnostic
equipment
accounted for 40% of the overall
health market, valuing it at 26.7 billion
RMB (3.1 billion Euro).
OPPORTUNITIES FOR FINLAND:
Finnish companies such as Remote A
Telemedicine are well placed to supply
medical equipment that can assist
busy Chinese hospitals to be more
efficient and effective. They have the
greatest chance of competing against
lower cost, locally manufactured
goods.
Medical equipment that automates
tasks and provides information that
can be used to assist hospital decision
makers, Government and patients,
could revolutionalise China's bloated
health system.
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
The
Chinese
Government
is
increasingly realising Big Data is the
only real way to understand their vast
and disparate population mass. It
provides more efficient ways to control
the population and make life better for
them.
22
The Government is already working
with companies such as Alibaba,
Baidu and China Unicom to combine
data for better decision making. No
other country stands to benefit more
from accumulation of data, and health
data from smart medical equipment
integrated
with
online
data
warehouses.
Although the Government contributes
less than 10% of China's public
hospital revenue, it still has a big
influence on health-related decisions.
Products should be designed with
intelligence that will not only assist the
patients and medical institutions, but
the Government as well.
Regardless
of
what
Western
commentators say about the Chinese
Government, their ultimate agenda is
to improve the lives of the 1.35 billion
Chinese citizens living in Mainland
China (and Greater China).
Equipment that not only assists
Government mandates, but also
provides
helpful
information
accessible
through
established
smartphone channels, is a win-win for
everyone.
Any Finnish company serious about
developing medical tools for Chinese
hospitals should visit a facility first.
General hospitals are teeming with
people, with doctors surrounded
pushing patients all wanting their turn.
Most Chinese doctors do not have
pleasant peaceful times between
appointments to enter data in a
civilised manner.
Tools that automate tasks and
information and create a more efficient
and quicker solution stand the best
chance at success. Nevertheless, to
realistically compete with price
competitive local manufacturers in the
general hospital segment, prices need
to be kept as inexpensive as possible.
6.2 Providing for the Affluent
China's
widening
inequality is creating
opportunities for elite
segments of China’s
urban
population.
Although the majority
of China's service offerings are low
cost, providing for the middle and
working class population, segments
such as education, and increasingly
health, have some of the most
expensive facilities in the world.
Since 2012, foreign enterprises have
been able to own up to 70% of health
facilities in China.
These are
generally premium hospitals and
clinics and are becoming increasingly
common in higher tier Chinese cities.
Government Policy is becoming more
liberal to encourage foreign entities to
invest in China's health industry. On
29 September 2013, the Shanghai
Free Trade Zone pilot scheme was
launched, allowing wholly foreignowned medical institutions. Additional
Free Trade Zones are earmarked for
other Chinese cities.
MARKET INDICATORS:
The number of Chinese with net
assets of at least 10 million RMB (1.2
million Euro) grew 3% to 1.05 million
last year. This is representative of a
rising wealthy class overall. These
consumers are becoming less likely to
tolerate common health facilities and
are prepared to pay more for premium
care.
The Chinese Government has set the
goal to grow private hospital health
contribution from 10% in 2011 to 20%
by 2015. Loosening policies such as
relaxing price controls on non-public
hospitals was announced in April
2014, and will drive investment in high
end facilities by 2019.
23
High end health clinics such as WA Health in Shanghai will
become an increasingly common sight in China's cities
OPPORTUNITIES FOR FINLAND:
Finland's many high end, high tech
health providers of niche technologies
such as Planmeca stand to benefit
from the rise of premium health
facilities in China.
Private hospitals will become more
common and competitive by 2019.
Web and social media rating of
facilities will be more widespread,
ensuring facilities have increasing
incentive to provide outstanding
service and equipment. Services will
become more customer-centric and
integrate with patient smartphones to
improve the overall experience.
TAKEOUTS FROM THE PRODUCT THAT
MAKE IT APPEALING TO THE CHINESE
MARKET:
The
Chinese
Government
is
increasingly looking to private and
foreign investment to cover services
that it is struggling to provide
effectively.
As the Communist Government is
unlikely to provide services that
appeal to China's elite, a large portion
of private and foreign investment will
cater towards the lucrative and fast
growing affluent classes.
These
services will demand premium,
customer-centric,
technology-based
services.
7. The Last Word
China's worsening health environment
and rising wealth present significant
opportunities in China's health market
between now and 2019, in both the
B2C and B2B segments. However,
the Chinese market is fiercely
competitive, and to compete Finnish
companies need to innovate to meet
the Chinese consumer, business and
Government's continuously changing
needs.
Integration with online platforms such
as web and smartphones are essential
for health product innovators.
Finnish health products should target
the higher end of the market. The
rising affluent classes in China are
more health conscious than price
conscious, and providing superior and
innovative health products will be well
received by both consumers in this
segment, and by businesses servicing
them.
China Skinny trusts that Tekes and the
intended audience have found this
report helpful and insightful.
We
hope to provide more insights in the
near future.
China Skinny looks forward to
following and supporting innovative
Finnish Health companies as they
capitalise on the opportunities that
China presents.
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