Doug Ferguson, KPMG’s National Managing Partner Asia & International Markets, discusses the latest trends from KPMG’s Demystifying Chinese Investment in Australian Healthcare report. Chinese investment in Australian healthcare companies has surged over the past three years. AUD5.5 billion has flowed into the industry since the first recorded investment in 2015 as Chinese companies focused their attention on the health supplements and medical services sectors. AUD1.6 billion was invested in 2017 alone. KPMG’s Demystifying Chinese Investment in Australian Healthcare report, released today, shows that Australia’s expertise of health professionals, availability of cutting-edge technology, and high regulatory standards appeal to Chinese companies and driven a surge in investment. A series of interviews with Chinese executives have also highlighted the attraction of Australia’s ‘clean, green and healthy’ image.
Whilst the continued growth in Chinese investment is contingent on capital market regulations, the market drivers underpinning healthcare suggest investment will continue to rise in the future. The increasing value of Australian healthcare businesses is driven by new government investment in research and development as well as growing demand from the ageing populations of Australia and Asia. The Chinese government’s new healthcare reforms have also created an opportunity for Australian companies to assist in the transition to ‘big health’ in China. This has increased the potential synergies between Chinese and Australian companies. Chinese businesses have been particularly focused on capturing synergies in the health supplements sector by pushing Australian products to Chinese consumers through their existing supply chains.
The focus on Chinese consumer markets is reflected in the 2016 healthcare deals statistics, with 77 percent of investments directed to companies who export. Demographic changes and technological improvements will increase the value of reciprocity between Chinese companies and Australian exporters into the future. In the medical treatments sector, Chinese businesses are generating value by combining their high level of market access with Australia’s high levels of specialisation and efficient management processes. Due to the rising income and age of the Chinese population, the market for high-end care and specialised treatments has grown significantly over the past decade.
The latest data reveals that Chinese investors tended to enter the Australian market through joint ventures and repeat investments. This was most evident in 2016, when 71 percent of healthcare deals were made through repeat investments, with the other 29 percent made through joint ventures. Chinese investors have emphasised the value of working with Australian management to understand how Australian processes and technology can be applied more broadly to the Chinese market. Chinese investment has an important role to play in the future of Australian healthcare. Both Australian and Chinese economies and consumers will benefit from further investment and cooperation between our countries.
From 2015-2017 of the $5.5 billion Chinese healthcare investment in Australia
49% – NSW
6% – QLD
It’s worth noting that there were no investments in the Pharmaceuticals & Biotechnology sector worth over $5 million in this period and investment in health products was dominated by investments in health supplements.