A couple years ago, I was on a panel at Northwestern’s Kellogg School of Business that was asked what we saw as the best opportunities for foreign businesses involved with China. We all agreed on the following five, in no particular order:

  1. Healthcare 
  2. Education
  3. Cleantech/Greentech
  4. Food
  5. Software/High Tech

Nothing shocking or earth shattering, obviously, but as time has gone on I have become even more convinced these are the top five. Last month I gave out this same top five list while interviewed on public radio and my interviewer expressed a bit of surprise at education.   

Whereas three years ago, the above five “industries” clearly made up less than fifty percent of my law firm’s China-related work, I now estimate that these five now make up well over 75 percent and it is in those five where I continue to see the most growth.

But I’m not the only one.  

Financial Times’ Beyond Brics Blog just did a post, entitled, “Chinese health care: big opportunities,” on a recent McKinsey & Company article, entitled, “Identifying private-sector opportunities in Chinese health care.” Quoting from the McKinsey article, the post notes how Beijing’s plans to “stimulate China’s health care market and create opportunities for private payers, providers, and IT vendors,” will make health care growth in China exceed China GDP growth:

If China’s health care spending simply keeps pace with projected GDP growth, it will increase to $480 billion by 2018. We, however, believe that it is likely to rise faster than GDP, as a result of better insurance coverage, improved access to high-quality care, and rising demand (tied to aging, urbanization, and lifestyle shifts). If health care spending hits 6.5 percent of GDP by 2018, the market could increase by an additional $150 billion.

McKinsey goes on to note that “private insurance could become cheaper and more accessible” in China, creating a $90 billion market by 2020 and that “regulatory reforms are making it easier for private hospitals to provide publicly-funded care.” McKinsey sees better health care requiring better IT as well. China is “set to overtake Germany to become the world’s third-biggest pharmaceutical market – with growth of 25-27 per cent next year, compared to an emerging market average of 15-17 per cent.” 

The New York Times did a story today on the booming foreign education business for Chinese students, entitled, the China Boom.  The story talks of how the number of Chinese undergraduate students coming to the United States to study has tripled in just the past few years. This increase in Chinese students attending college in the United States has led to a concomitant increase in the need for schools and tutoring both in China and in the United States to help these students prepare for their United States college experience.  

I have always seen education and health care as being somewhat similar as they both become very important to people once they get past day-to-day survival mode. And as millions and millions of new Chinese hit the ranks of the middle class, I continue to see both growing faster than China’s GDP as a whole and I continue to see a whole host of opportunities for foreign companies.  

What do you think?

  • David Wood

    It’s definately not “All Good” as you put it. There are serious problems in Healthcare with most doctors making additional money from being bribed to prescribe certain drugs over others in China. There is also stubborn resistance in China in identifying the active ingredients in TCM and until they can get their heads around that people will continue to die from dangerous concoctions, and the industry will continue to fail because they are not identifying the actual working ingredient. Bribery is rampant in treatment and that is a huge problem when dealing with a system that does not even uphold the hippocratic oath.
    As for education, that’s the US education system you’re talking about, not the Chinese one and your comment is not relevant at all to the Chinese education system.
    That too is largely corrupt with schools being used to generate income and not as centers of academic excellence. There is plenty of FCPA interest in both fields of investment and you’d better make sure your clients are not being dragged into industries where bribery, corruption and wealth generation over academia supposed to be non-profit are not going to get themselves in a world of hurt. You are actually talking about two very difficult industries here, but both with many inherent problems.

  • The Blue Scholar

    Foreign companies getting into education for Chinese and in China is absolutely huge AND growing rapidly. Even Disney is getting into the act. Disney is setting up English language schools for young kids to teach them English the Disney way, which I see as a great idea.

  • Dan.
    No doubt about it. these markets are BOOOMING… but, like everything else, firms really need to understand what is going on on the ground if they hope to succeed.
    From what I am seeing, and I have staff dedicated to elderly care, education, and BOP (bottom of pyramid) opportunities, there are a number of profit / non-profit models that are beginning to take shape.
    Opportunities that, if developed in the right way, offer a scale that is unrivaled in any other country.
    Of course, anytime you deal with China that is true … right?
    R

  • Chris

    @ David Wood
    “As for education, that’s the US education system you’re talking about, not the Chinese one and your comment is not relevant at all to the Chinese education system.
    That too is largely corrupt with schools being used to generate income and not as centers of academic excellence. ”
    There is a fundamental difference between schools / colleges / Universities generating income and corruption. Every educational institution in the world needs to generate income and Governments are notoriously unreliable and limited funding sources. Chinese educational institutions have been aggressively seeking to create income sources over and beyond very limited Govt funding. That appears to be perfectly normal behaviour and consistent with just about every educational institution in the world.
    From a social equity point of view, the Ministry of Education has been actively trying to limit institutions’ tuition fees and other charges. Primary school and junior middle school are now officially free and fully State (under)funded. There are limits on University fees and charges.
    These are policy level social equity issues, not issues of corruption.
    Corruption would be where payments end up illegally in private hands. While this is inevitably an issue in China, it is not the primary focus of domestic education debate in China which centres around what institions can officially charge.
    As for FCPA threats etc, the operations of Disney, Wall Street and other overseas educational providers are institutions directly selling to consumers. I can hardly see the dangers of corruption in such a business model. Quite different from pharmaceutical companies primary clients being medical practitioners employed by state run hospitals who write patient prescriptions and where the chances of corruption are high.
    US institutions recruiting Chinese students either do so directly or through overseas study agencies who are paid a commission either by the student or by the school. Overseas study agencies are private companies directly facing consumers. Again, I find it difficult to identify where corruption might take place.
    It appears your complaint is that Chinese education is excessively commercial. You’ve been drinking kool-aid if you think the same doesn’t apply to every educational institution in the world.

  • David Wood

    @Chris It is corrupt and immoral if the education charter forbids profit making (as many universities do), but then the income earned ends up in the hands of Chinese officials. Who then appear in big black Mercedes Benz at functions with their wives dressed in Prada.
    As for Disney & Wall Street that you mention, I’m sorry, but it had escaped my attention that they were involved in education or heathcare. If I’ve been drinking kool-aid, you’ve been at the methadone.
    They are notably corrupt and intensely biased against foreign participation. How do I know? I’m (1) involved in China healthcare and (2) have two children in the school system here (Beijing).

  • Feroz

    I heard that china is teaching Hindi Language in their Schools to make strong relationship with India in Future. Is there any other reason?

  • Rajiv Singh

    China is afraid India will invade T!bE7 and is preparing to be overrun by the Indian military and losing land from Yunnan, as well as Western and Southern Tibet. They’re preparing Chinese people for an influx of Indians.

  • Chris

    @ David Wood
    Disney and Wall Street are the brand names of two very large foreign-owned English language teaching chains in China. Disney owned by Disney Inc and Wall Street owned by Pearsons (owners of the Financial Times, Penguin publishing etc). The Disney chain focuses on teaching English to younger children and is apparently popular and quite profitable. Wall Street teaches adult English with a focus on white collar professionals. Their China operation was sold to Pearson for over US$100 million 2 years ago.
    My point was simply that income seeking activities of non-profit institutions such as Chinese Universities are not corruption. Such institutions, by definition, cannot make a profit either in China or in the USA. They may (hopefully) run a budget surplus, from a mix of publicly funded and entrepreneurial activities. This model is the way public institutions operate globally.
    Again, I emphasise that income seeking activities – research subsidies (either public or private), teaching or training, external use of facilities etc, are not inherently corrupt. They are normal activities of every University in the world. Any surplus generated by these generally goes to subsidize core teaching activities (undergraduate and postgraduate) which most Universities in the world cannot fully fund from govt subsidies for domestic fees or tuition.
    I have not seen Chinese University officials driving Mercedes or with wives dressed in Prada. Frankly, the Faculty would revolt. There have been incidents of corruption (eg. the Wuhan University Vice President arrested over corruption related to construction at the University). Nonetheless, compared to the over 13,000 arrests for commercial and official bribery in the construction sector in the first half of 2010, education sector corruption appears less a problem than in other sectors.
    I would guess, that given very limited budgets and rather vocal staff, there would be fewer opportunties for corruption in the education sector compared to many other sectors in China.
    You complain that the education and health sectors are “notably corrupt and intensely biased against foreign participation”. Almost every country in the world restricts: 1) for-profit, 2) foreign, 3) for-profit foreign, into these 2 sectors. China has both in the restricted, though not prohibited foreign investment categories, which means some investments/projects will get approved.
    China has significant restrictions on domestic for-profit investment in these 2 sectors, so let’s not presume a sole bias against foreigners.
    Regardless, Nottingham University has successfully establish a full not-for-profit campus in Ningbo, Liverpool has one in Suzhou and hundreds of foreign Universities have established joint-programs with Chinese Universities approved by the Ministry of Education.
    In education, there are large numbers of foreign enterprises with operations within China aimed at the 250,000+ Chinese students who go abroad to study each year.
    While there are significant restrictions on operations, there are also very significant restrictions on domestic capital entering the education field, particularly in primary, secondary and higher education. Vocational training much more open.
    Back to Dan’s point, there are enormous opportunties in education for foreign companies in education. Like all industries, you just need to understand where and how your business fits in the framework, both from a market perspective and a regulatory.