China’s aging population will benefit health care and insurance

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Chinese baby boomers are expected to retire in the coming years, and they spend differently than current retirees, according to a Credit Suisse report.These baby boomers – defined in the report as those born in the 1960s – are more aware of meeting their health care needs, and this should lead to a “very sharp change” in trends in the country, said Will Stephens, Asia. Responsible for the quantitative and systematic strategy of the Pacific bank.

The effects of an aging population will be felt across a wide range of industries, from healthcare and insurance, travel and e-commerce, according to the report, which surveyed 1,500 middle-aged consumers. and elderly in China.

Stephens said the group was “the largest cohort in history” – roughly 245 million Chinese, and highlighted the differences from the current generation of retirees.

“I think the main difference here is the breadth and size of the current generation of Chinese baby boomers who will be retiring in the next 10 years,” he said. “This generation of baby boomers has come of age just on the cusp of China’s inflection point towards what is essentially the biggest growth trend in history. So they have very different consumption patterns, different interests than what we see among current retirees, ”he told CNBC on Tuesday. .

Citing the survey, Stephens pointed out that 39% of baby boomers expect existing social security health care plans are unlikely to meet their needs.

“There is definitely concern among this cohort about this safety net,” he said. “Great interest in insurance products, and at the same time we also see that this is likely to act as a catalyst for further reforms in (the) social security system in China – things such as the increased transfer of state-owned shares, potentially the lifting of capital ceilings of government pension funds.The Chinese have become richer, with a gross domestic product per capita that has risen from $ 2,100 to $ 10,000 over the past 10 years, according to the report.

“At US $ 10,000, the middle class has started to emerge in China and it has a lot of ground to fill in insurance coverage,” analysts said in the report, adding that China has “one of the biggest protection gaps ”in Asia for life and health insurance.

A man is pushed in a wheelchair on a street in Beijing.

WANG ZHAO | AFP | Getty Images

As a result, they wrote, there is “huge potential” for the development of future commercial insurance, including pensions.

At the same time, the Covid-19 crisis “may have some kind of silver lining” in accelerating spending on healthcare infrastructure in China, Stephens told CNBC, adding that it was lower than the most developed economies.

Quality medical services in demand

Baby boomers demand high-quality medical services, according to the survey results.

“We believe that high-end integrated private hospitals are likely to benefit from an aging, quality-conscious population,” the report says. In fact, the compound annual growth rate of private hospital revenue reached 23.9% between 2014 and 2018, exceeding the 10.4% recorded by public hospitals.

As such, high-end medical consumables will also be in demand, such as coronary implants and stents. Orders for expensive medical equipment such as ventilators, dialysis machines and MRI equipment used in hospitals could also increase, according to the report.

The natural foods sector will be a “key beneficiary,” said Credit Suisse, which forecast annual growth of more than 7% for the next few years.

The sector is expected to be worth 340 billion yuan ($ 49.8 billion), which represents 20% of global sales – up from 17% in 2017, the bank said.

“Although China’s adoption of healthy foods is still in its infancy, we believe it will follow the trend of developed countries, specifically resembling its Asian neighbors, including Japan and Korea, in the long run. term, ”the report says.

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