China's Healthcare Industry Opportunities

Philips, Bridgetech, Medtronic, and Chindex Target Asian Markets By Fei Wang
www.China-AsiaStocks.com and www.BiotechIndustryStocks.com February 2006

Most North American medical firms are currently facing a slow down and a
mature market in developed countries. In contrast, many Chinese medical
companies and companies doing business in China are realizing their highest
growth rates. Contributing factors: China is a country with an aging population,
a growing middle class population, and a lower quality and problematic public
healthcare system. Throw in health care scares such as SARS virus or Avian Flu
and the already existing problems in healthcare increase exponentially.

As a result, healthcare, one of the fastest growing markets in China, has
become one of the most attractive sectors to invest in. However, challenges like
redundant registration processes, lack of transparency in decision making, and
price control exist in parallel. Public companies Metronic (NYSE: MDT),
Bridgetech (OTC.PK: BGTH), Chindex (NasdaqSC: CHDX) and Philips have all gained
access and are experiencing great success in this market with significant
profits.

Current China HealthCare Market

China's healthcare and medical technology market represents one of the
nation's fastest growing markets. It is predicted that China's medical devices
market will overtake Germany, Japan and the United States by the year 2039,
according to new research by Research and Markets. The Advanced Medical
Technology Association (AdvaMed), indicates China's medical technology market at
$7 billion in 2004 and growing. According to China's Customs Statistics, the US
currently is one of the largest suppliers of medical devices, comprising 34% of
China's total medical device import market, the highest among all countries.

More than 50% of Philips's (NYSE: PHG) revenue in the U.S. is generated by
its medical business. Currently, Philips is expanding its reach into the China
healthcare market. As stated by company CEO Mr. Gerard Kleisterlee, in a speech
on Healthcare & China, "In China, healthcare market growth is expected to
reach roughly 10% over the next three years, making it the third largest medical
equipment market after the U.S. and Japan. In the next five to seven years,
China is even expected to surpass Japan, making it the second largest market.
For this reason, it is hardly surprising that healthcare companies are rapidly
moving into China."

Bridgetech Holdings International, Inc. (OTC.PK: BGTH) is capitalizing on
China's demand for Western Healthcare by establishing itself as the leader in
the transfer of Western technology to China. Michael Chermak, CEO and President
of Bridgetech commented, "The healthcare industry is just 4% of China's GDP.
This compares with over 14% in the US. The annual growth rate over the last 5
years has been between 12% - 15%. It is the fastest growing sector of China's
economy."

Lawrence Pemble, Executive Vice President of Chindex, a leading independent
American provider of Western health-care products and services in China
(NasdaqSC: CHDX), has similar opinions, "Chindex believes that the potential
market for foreign manufactured medical devices and international-standard
healthcare services in China has never been greater. The appetite of Chinese
hospitals for imported medical equipment has not waned over the past two and a
half decades, even with the improving quality of Chinese-made medical
equipment."

Opportunities

Aging Population

Due to all the problems caused by a large and fast growing population,
starting at the end of the 1970's, China began implementing "Single Child
Policy". This policy effectively helped with China's population problems.
However, it also leads to another potential crisis- aging population. According
to UN's prediction, "China will only have 2 working-age people for every person
over 60 in 2040, compared with 6.4 in 2000." Along with this phenomenon, are
healthcare issues. An increased elderly population creates a higher demand for
healthcare facilities pointing towards growing opportunities within the health
care industry.

Similar points are provided by Kleisterlee in the speech, "China is having to
face the important problems associated with the increasing proportion of elderly
people, which is mainly due to decreasing fertility, through also decreasing
mortality. This means that China's healthcare system will become increasingly
important if it is to continue its ascendancy as a world power so that it won't
be crippled by an overwhelming number of sick elderly patients."

Bridgetech is positioned to be one of the beneficiaries. As Chermak said in
the interview, "The population is aging, which the greatest driver of healthcare
utilization. This bodes well for savvy market participants and for Bridgetech
Holdings International, Inc., which is focused on introducing the latest western
oncology related diagnostics and therapeutics into China. Bridgetech's world
class partners - Johns Hopkins International, MD Anderson, Mary Crowley Medical
Research Center, Vanderbilt and others provide unparalleled access to world
class science and the latest innovations in medicine. China has welcomed us with
open arms."

Middle Class in China

Because western medicine is relatively more expensive than local Chinese
ones, the major consumers for western products are middle high income classes.
According to the Chinese Academy of Social Sciences (CASS), the percentage of
middle income class population in China is growing at approximately 1% each
year, from 15% in 1999, to almost 20% recently. It is believed by many
professionals that this phenomenon will drive growth in the health care market
even further.

As Chermak stated, "Consumers are growing in sophistication and wealth and
are increasingly demanding western healthcare." Pemble also agreed, "In the area
of healthcare services, there is a vast and growing need and demand for
international-standard healthcare, as the Chinese middle and upper classes grow,
and as more and more of these middle and upper class Chinese are exposed to
healthcare systems and service in the West through travel abroad. In addition,
with increased disposable income, demand has risen for preventative, aesthetic
and life-style oriented medical care treatments that are not available to the
average Chinese consumer. Seeing this demand, in 1997 Chindex opened its first
United Family Hospital (UFH) in Beijing, which was followed by the opening of
satellite outpatient clinics and a second hospital with outpatient clinics in
Shanghai. "

Problematic Public Health System

China started with a complete public health system in 1949. However, since
1987 economic reform, increasing hospital privatization and decreasing
government tax income (therefore a declining government subsidy for the
healthcare system), have pushed China to rely on a market-based health system.
According to WHO statistic, China ranks 144 out of all 191 public health system
countries. Only a small percentage of the urban and an even smaller portion of
the rural population are covered by the Public Health System, most of who work
for state owned firms or government. On the other hand, relative to the income,
hospital expenses are extremely high. A prescription for flu might cost as high
as 1 quarter of a Chinese's average monthly income. Rising medical costs mean
less sick people are going to see doctors, which leads to significant health
problems in China.

Detailed information is provided by Kleisterlee, "According to the 2005
working report of Mr. Gao Qiang, nearly 48.9% of Chinese people can't afford to
see doctors when they fall ill, and 29.6% are not admitted to hospital when
emergencies require it. Furthermore, only 20% of the country's medical resources
are available in rural areas while 80% are in urban areas. Consequently many
farmers have to go to hospitals far away, hence increasing the financial burden
on them."

However, from an investor's point of view, this means market potential for
private western medicine. As Yvan Deurbroeck, Senior Director International PR
and Communication at Medtronic (NYSE: MDT) explains, "Medtronic therapies can
benefit millions of patients in China. The potential is tremendous. An estimated
53 million patients in China with various heart conditions: there are 900,000
heart failure patients in China, compared to 570,000 eligible in U.S. and
approximately 2 million die from sudden cardiac arrests (in U.S., approximately
335,000 dies each year from SCA). Also, 2 million Chinese have Parkinsons (1
million in U.S.) and there are 40 - 50 million diabetes patients (20 million in
U.S.). Nearly all Medtronic businesses are represented in China, which started
making profit since 1998. Currently, Medtronic already has 500 employees in
China and many training centers and a pacemaker manufacturing plant in
Shanghai."

Areas of Concerns At the same time, investors should see that there are still
barriers in the market. According to a report by AdvaMed, three problems should
be addressed: redundancy in the registration process: more than three state
agencies' requirements should be complied; lack of transparency in decision
making; and inappropriate price control by state government. However, as the
Chinese government realizes and continues working on regulation within this
specific market, we can expect the situation to improve in the near future.

Competition from Local Rivals

There are three kinds of competition facing foreign health care device
manufactures: local Chinese western medicine/medical devices manufactures; other
foreign healthcare companies that export products to China; and traditional
Chinese medicine manufactures. The major competition for foreign healthcare
investors and companies comes from similar foreign rivals.

As explained by Pemble," The greatest competition for imported medical
equipment suppliers continues to be other imported medical equipment suppliers.
Foreign manufactured medical devices continue to distinguish themselves in the
market both in terms of quality and technical innovation. Chinese medical
professionals and institutions recognize the benefits of purchasing such devices
where quality and accuracy is assured and for this reason the American Chamber
of Commerce in China cites 79% of medical devices sold in 2004 were imported.
There is no real competitive threat from Chinese medicine. And many of Chindex's
customers for imported medical equipment are actually traditional Chinese
medicine hospitals, which also do have use for certain diagnostic medical
equipment. "

Future of the Market

China's healthcare market is ripe with potential, driven by an increasing
aging population, a growing middle class, and the government's awareness and
efforts to improve conditions in the healthcare market. Companies participating
in the medical and healthcare business exhibit confidence in the markets moving
forward.

In 2004 June, Philips initiated a joint venture with Neusoft to further
access China's medical market. Chiron has established sales offices in Beijing
and Hong Kong to support their three businesses, Chiron Vaccines, Chiron Blood
Testing and Chiron BioPharmaceuticals. As Pemble stated, "We predict that demand
for foreign manufactured medical products will remain strong and sustained for
the foreseeable future......"

Fei Wang Fei Wang holds an Honors Bachelor of Commerce from University of
British Columbia Sauder Business School, with double major in Finance and
Marketing. She has experience in investment banking and advertising in Canada,
China and Korea, with a firm academic background. Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp ©Copyright InvestorIdeas 2006