The double opportunity in Chinese healthtech

24 February 2025

China’s healthcare sector is being transformed by demographics. The country has one of the fastest-growing ageing populations in the world: the percentage of people over 60 years old is projected to reach 28% by 2040,^[1] thanks to longer life expectancy and declining fertility rates.

Healthcare spending in China is expected to surge in tandem, to about USD28 trillion by 2030.^[2]

This rapid expansion is fuelling demand for innovative medical solutions, giving a fillip to China’s healthtech industry – not only to meet domestic needs but also to position itself as a major force in the global market. For investors, the sector presents compelling opportunities, especially given that they can use securities-backed financing to navigate the market.

The recent performance of some of China’s most innovative drug companies offers a glimpse of some of those opportunities. Since the stock market rally in the country in late September 2024, the Innovative Drugs Concept Index, tracked by Chinese data provider Wind, has outperformed the major CSI Healthcare Total Return Index and the CSI 300 by 10%.^[3] This trend signals investor confidence in the future of healthcare and biotechnology, buoyed by advancements in technology as well as supportive policies from the government.

One key technological advancement that can help the healthtech sector flourish is the adoption of artificial intelligence (AI), which can play a critical role in areas like drug discovery.^[4] Chinese AI platform DeepSeek took the world by storm in January when it unveiled a free AI assistant that it claims uses less data and operates at a fraction of the cost of existing services, giving existing platforms like ChatGPT a run for their money.

AI has similar potential to disrupt the healthcare sector. Since 2018, more than 100 pharmaceutical companies that leverage AI in their operations have been established in China, each with unique algorithms and focusing on medical imaging devices, diagnostics and drug discovery.^[5]

The first drugs fully generated by AI entered clinical trials with human patients in 2023 in China – and many pharma groups are now investing heavily in research and development given the long-term prospects of using AI for drug discovery.^[6] With China’s chronic and autoimmune drug market expected to be worth some USD 20 billion by 2030,^[7] the role of AI will likely be vast.

This matters to China because of its need for new drugs to combat ageing-related conditions, such as neurodegenerative, heart and pulmonary diseases.

Fuelling investments

Work is already underway. The Chinese government has long stepped in to fill funding gaps in the AI sector, supporting domestic companies with capital and aid, while there is an emerging crop of AI start-ups supported by Tsinghua University that are pushing the boundaries on innovation.^[8]

China also already leads the world in generative AI patents, having filed patents for 38,000 generative AI investments between 2014 and 2023, versus about 6,276 from the US.^[9]

While the size of and investment support for the US AI market dwarfs that of China, China’s AI industry is proving highly appealing to Middle Eastern funds, including sovereign wealth funds, that see the potential for a healthtech boom.

For example, the Qatar Investment Authority was a cornerstone investor in the November 2023 IPO of Chinese biotech company WuXi XDC,^[10] while in mid-2024, Bahrain-based investment firm Investcorp and sovereign wealth fund China Investment Corporation launched a USD1 billion platform to invest in high-growth companies in the Gulf and in China across industries including healthcare.^[11]

The sector is also attracting foreign investment, following recent moves by China to open its biotech industry to overseas enterprises.^[12]

Local Chinese technology companies, which are already familiar with and ingrained in the world of cloud computing and AI systems, are jumping on the bandwagon, too.

More than one in 10 of the start-up investments made by internet company Tencent in the last five years have been in healthcare – of which about 72% were in Mainland China and Hong Kong – while Alibaba Group and JD.com are also making inroads in the space.^[13]

These companies’ tech capabilities make them particularly suited to the healthtech and digital healthcare industries. For instance, at Alibaba Health Information Technology, digital healthcare is a core pillar of its business – something it is keen to bolster while exploring further use of AI large speech models across the healthcare and medical fields.^[14]

Capitalising on opportunities

As China’s healthcare industry gains traction, investors have a double opportunity: new companies are emerging as start-ups mature and grow, while healthtech is providing names in other sectors with a new aspect to their investment story. This also means investors are faced with a challenge: how to capitalise on these new opportunities while maintaining exposures to existing high-performing assets.

Enter securities-backed financing, which allows investors to unlock liquidity from their existing portfolio. It works particularly well in a sector like healthtech, where timing is critical for capturing fast-emerging opportunities. By leveraging their securities, investors can deploy capital into promising healthtech firms while holding onto their existing blue-chip positions.

Careful risk management is critical. Given the inherent volatility in a sector like healthtech, investors should keep a close eye on everything from market fluctuations and regulatory shifts to company-specific risks and valuations before going down the securities-backed financing route.

But the long-term trajectory of China healthtech investing is promising, as the combination of AI-fuelled innovation, government support and growing international investment creates a fertile ground for growth. Navigating this strategically, including by using securities-backed financing, can put investors in a strong position to benefit from the market’s potential.

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[1] https://www.who.int/china/health-topics/ageing

[2] https://www.invesco.com/apac/en/institutional/insights/equity/china-healthcare-outlook-for-2025.html

[3] https://www.invesco.com/apac/en/institutional/insights/equity/china-healthcare-outlook-for-2025.html

[4] https://globalventuring.com/corporate/investment/tencent-china-healthcare-investment/

[5] https://www.chinadaily.com.cn/a/202403/18/WS65f7fb89a31082fc043bd3e3.html

[6] https://www.jpmorgan.com/insights/global-research/artificial-intelligence/ai-transforming-industries-china

[7] https://www.jpmorgan.com/insights/global-research/artificial-intelligence/ai-transforming-industries-china

[8] https://itif.org/publications/2024/08/26/how-innovative-is-china-in-ai/

[9] https://www.reuters.com/technology/artificial-intelligence/china-leading-generative-ai-patents-race-un-report-says-2024-07-03/

[10] https://www.bdapartners.com/wp-content/uploads/2024/04/2024-China-Healthcare-MA-Outlook_16Apr24.pdf

[11] https://www.al-monitor.com/originals/2024/04/bahrains-investcorp-chinas-cic-launch-1b-sino-gulf-investment-platform

[12] https://rouse.com/insights/news/2024/china-s-new-policies-on-foreign-investment-in-healthcare-and-biotechnology-catalyzing-innovation-and-strengthening-patent-protection

[13] https://globalventuring.com/corporate/investment/tencent-china-healthcare-investment/

[14] https://www1.hkexnews.hk/listedco/listconews/sehk/2024/1113/2024111300821.pdf