HK Medical firms see roadblocks in China market
Hong Kong-listed medical companies are trying to tap the huge potential in the mainland China healthcare market but found policy and cultural risks could be major roadblocks.
Getting into mainland
As China‘s economy is growing fast, many Hong Kong healthcare companies have plans to invade the medical market there. UMP Healthcare Holding Limited (0722) partnered NWS holdings (0659) and Phoenix Healthcare (1515) to introduce a joint venture called UMP Healthcare (Beijing) Group Limited in Beijing in 2016. It aims at providing a clinics network of comprehensive family medicine and also customized health management schemes to both corporate and individuals.
The business of Town Health International Medical Group (3886) is also extending in mainland China. The group now owns a subsidiary in Guangzhou called Guangzhou Yikang Medical Management Limited. It provides medical and management consultancy services to other medical organizations in the mainland and also invests in medical related projects. Moreover, the group also operates a chain of dental clinics in Hangzhou via Hangzhou Town Health Yamei Dental Hospital Limited.
Yip Sheng Zhi, the chief strategist at First Shanghai Securities Limited, said that as mainlanders are more confident on the medical structures and management of Hong Kong, so those medical companies selling “Hong Kong style” are attractive to them.
scholars are pessimistic towards the share price
However, Yip did not expect the medical companies’ share price will surge. “In this stage, we don't know whether these medical companies could fulfill the Chinese market demand or not,” he said. He reminds investors to consider the full portfolio of the companies before purchasing shares of these companies.
In fact, Hong Kong’s securities regulator on 27 November, 2017 ordered a trading halt in all shares of Town Health International Medical Group Ltd, without giving further details.
The companies said the Securities and Futures Commission (SFC) issued the trading halt under Rule 8 of Hong Kong’s listing rules which says trade can be stopped “on grounds that the market is misinformed, disorderly or unfair”. The market believes that there are suspected false or misleading information has been circulated by a company or such suspension is in the interest of maintaining market order.
Investing in Chinese market involves risk
Nevertheless, the medical companies also have operating problems investing in China market. “Opening a new hospital in mainland China is not a piece of cake, as we need 9 to 12 months to apply for operation licences and handle those official documents.” Dr Hui Ka Wah, Ronnie, CEO of Town Health Group, said in a TV program. "The worst is that we must prepare the facilities and staff before application. The front-end cost is very huge.” He urges the government to simplify all the application process and fully open the private medical treatment industry.
Hui also added that the healthcare industry in China is not freely available now and must follow the government's planning. “Different provinces have different regulations and limitation. It will affect the license distribution and supervision.” He suggests the Chinese government should take an open mind to welcome market competition.
However, Yeung Wai Man, Raymond, assistant professor in the department of Economics and Finance at Shue Yan University, thinks that the government will just partly open the market in the coming future. "There are many Chinese large corporations want to develop the local medical market. The government needs to balance the benefit between foreign and local medical companies," he said. In addition, he thinks that as China wants to introduce new technology and management structures, it may allow more foreign medical companies to enter China through joint-venture.
China undergoing a medical reform
In fact, China is in process of a medical restructuring. Premier Li Keqiang has said that the health service industry is an important part of China's supply side reform. “China still has immense market potential and demand for medical and health services, and we should take concrete measures to boost development in this sector in the face of international competition,” he said.
Yeung said as the demand on China's public hospital services is higher than supply and with an increasing number of middle class, the request of high-quality private medical service will keep rising. "In this stage, China government only provides basically medic service to the citizens for treating illness. However, the middle class needs body-check and other health care services. Private medical organizations can satisfy their needs."
《The Young Financial Post 新報人財經》
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