"People's health is a key indicator of a prosperous nation and a strong country. We must give strategic priority to ensuring the people's health and improve policies on promoting public health.”

- Xi Jinping, General Secretary of the Chinese Communist Party

At a glance

  • In Xi’s concluding speech at China’s 20th Party Congress, he positioned healthcare as fundamental to China’s modernization.
  • He laid out four priorities moving forward: taking pride in the world’s largest healthcare system, advancing the Healthy China Initiative, caring better for the elderly, and boosting the birth rate.
  • Companies should be asking themselves how to align with China’s healthcare priorities.
  • Healthcare companies still have new opportunities in China, but engagement with government officials is increasingly complicated amid geopolitical tensions.

General Secretary Xi positioned healthcare as fundamental to China’s modernization.

China’s 20th Party Congress, which concluded October 22, has significant ramifications for China on all fronts – politically, economically, socially and militarily.

Healthcare is no exception. Xi has positioned it as a critical building block to China’s “path to modernization” and fundamental to its “sense of fulfillment, happiness, and security for our people.”

Xi highlighted four healthcare priorities in his report to the Party Congress:

  • Take pride in the world’s largest healthcare system. Xi emphasized that China has “built the largest education, social security, and healthcare systems in the world. These achievements have allowed us to make historic strides in making education universally available, bring 1.04 billion people under the coverage of basic old-age insurance, and ensure basic medical insurance for 95% of the population.”
  • Advance the Healthy China Initiative. Xi highlighted key components of the initiative, including regulation reform on access to health, prevention and community care, improvement in medical capacity and hospital management in urban and rural areas, and enhancement in emergency response to major infectious diseases.
  • Care better for the elderly. Xi noted: “We will pursue a proactive national strategy in response to population aging, develop elderly care programs and services, and provide better services for elderly people who live alone. By doing so, we can ensure that basic elderly care is accessible to the entire elderly population.” 
  • Make more babies. Xi addressed concerns over China’s declining birth rates. First, he commented on the Party’s childbirth policy work over the past decade. “We have implemented a people-centered philosophy of development…Timely adjustments have been made to the childbirth policy.” He also noted that China will continue to advance its Healthy China Initiative by “[improving] the population development strategy, [establishing] a policy system to boost birth rates, and [bringing] down the costs of pregnancy and childbirth, child rearing, and schooling.”

Five questions healthcare companies in China should be asking

The impact on China’s healthcare industry will be determined by the policies and initiatives introduced by new provincial and municipal leadership in follow-up to the 20th Party Congress. As we closely monitor these shifts, healthcare companies have a unique opportunity to revisit their business and stakeholder strategies.

Companies should be reflecting on these five questions:

  1. Who pays for the world’s largest healthcare system?  Xi’s emphasis on further transforming and coordinating regulations of “medical insurance, medical services, and pharmaceuticals” will continue to assert price pressure on both the government and private sector. Healthcare companies should ask how they can be more creative and invested in building multi-layered, innovative and partnership-based financing methods to enable universal access to their products. Additionally, the broader economic downturn will induce more “trade-offs” within the overall healthcare budget. Can companies maintain a coordinated approach to prioritizing their target areas while competition is increasing in disease-specific spending advocacy?
  2. Do we have adequate stakeholder capital? Xi is committed to curbing corruption, using terms such as “zero tolerance,” “forceful action” and “no mercy.” In particular, he forewarned of a “crack down on any collusion between officials and businesspeople.” Healthcare has been a priority area for anti-corruption and will likely continue to be. Due to the anti-corruption agenda, party and government officials are sometimes cautious of policy innovation and engaging with individual companies. Companies must constantly assess stakeholder assets, partnership opportunities, and overall trust with government agencies, while also seizing opportunities by leveraging industry alliances. With the on-going leadership reshuffle, companies should evaluate if their systematic stakeholder analysis system can quickly respond to changes in leadership, shifting central government priorities, and a multitude of local nuances.
  3. Do the upsides of partnering in strategic industries outweigh the downsides? Biotechnology is an emerging strategic industry in which China will invest. China would highly value MNC involvement in its innovation ecosystem, and MNCs may benefit from more local partners and talent for their R&D initiatives. But biotechnology will also be a sensitive and competitive space, so companies need to weigh the opportunities against the geopolitical risks. 
  4. How can our company support “a Chinese path to modernization”? This overarching theme features in Common Prosperity, one of Xi’s core initiatives meant to address income inequality across all aspects of people’s livelihood, including income re-distribution, rural revitalization, housing and social welfare. The initiative is broader than the Healthy China Initiative, spurring businesses to build partnerships and engage with government and industry stakeholders. Companies should consider if their CSR programs align with this initiative and, if so, what unique expertise and assets they might bring to partnerships in China.
  5. Can our ESG efforts align with China’s healthcare priorities? Some local governments have already issued policies to support couples in starting or expanding their families, but companies can also play a formative role by improving corporate policies for longer maternity leave or flexible working hours. If supporting growing families becomes an emerging ESG initiative, what can our company do to align with that opportunity?

Three fundamentals beyond the congress

The future of China's healthcare industry is shaped by more than one political event. Regardless of how the 20th Party Congress directs the industry over the next five years, three fundamentals hold beyond specific sectors or business objectives.

  1. Healthcare companies still have new opportunities in China. The government is proactively pursuing efforts that support the Healthy China Initiative and overall population policies, ranging from birth rates to elderly care. Opportunities may also arise from sectors outside the traditional healthcare arena, such as China’s recent initiatives to improve finance and digital infrastructure. Leading up to the congress, China’s central bank announced that it has set up a re-lending facility worth more than 200 billion yuan (US$27.6 billion) to help organizations in sectors such as health, education and transportation upgrade their equipment and digital transformation. Following this development, the National Health Committee initiated guidelines that request hospitals to apply loans to improve their research and service equipment. Medical devices, digital health, and diagnostic companies may enjoy a boost from hospital procurement.
  2. Engagement with Chinese government officials on health issues is increasingly complex. While engagement is still possible, securing quick decisions and achieving results has become more difficult. Health does provide favorable topical opportunities to build common ground with stakeholders, however, conflicts of interest and complex power dynamics exist between government and business, among government bodies and across geographic areas – particularly when it comes to budgets. Navigating these complexities based on deep and timely understanding of politics, policy, people and process is more important now than ever to achieve meaningful and outcome-driven partnerships.
  3. U.S.-China geopolitics add another layer of business complexity. With both countries treating the biotech sector as part of national security, companies will find it increasingly difficult to operate outside their home countries. For example, U.S. President Joe Biden’s recent executive orders to heighten regulatory scrutiny on foreign investment and launch a National Biotechnology and Biomanufacturing Initiative suggest the biotech sector has emerged as another battlefront in the U.S.-China tech war. Expect regulatory hurdles for Chinese pharmaceutical companies looking to conduct acquisitions in the U.S. Further, Alan Estevez, U.S. Commerce Department undersecretary for industry and security indicated that additional export controls to China may be introduced, which might include biotechnology and artificial intelligence. Companies involved on the tech side of healthcare, including applications of AI and biotechnology, need to keep a close eye on national initiatives that may reset trade policies to inhibit access and limit their ability to partner in the U.S. and China. Successfully navigating these complexities will require engagement with the government of both the U.S. and China.