The Experts’ Choices: Some Long-Term Growth Industries in China

China’s biggest areas of growth are mainly consumer products and financial services, but they also include real estate, transportation, retailing, pollution control, and much more. In an economy growing as rapidly as China is, you see a great deal of long-term growth industries. Here we’ve made a short list of areas that experts have identified as having particularly bright long-term growth prospects.

Services

You can make good money by providing services either to Chinese people and companies or to other foreigners. On the Chinese side, here are some areas expected to grow substantially over the long-term:

✓	Travel
✓	Financial services
✓	Education

And here are some growing areas in catering to foreigners:

✓	Legal
✓	Consulting
✓	Manufacturing support

If you want to focus on the foreign consumer business, you can also find good niches there, depending on your business’s location.

Healthcare

China’s healthcare market should continue to grow rapidly for a number of years because of China’s aging population, increased wealth, wider availability of insurance, and greater interest in health issues. Also, China’s massive number of smokers (see Chapter 5) may boost demand for healthcare.

You should see opportunities across the board in healthcare — from opening medical clinics to making and selling pharmaceuticals and medical devices. Some analysts estimate that the size of the Chinese pharmaceutical market will be the same size as that of the United States by 2020 — and pharmaceuticals are still rapidly growing in the U.S.!

You may find opportunities in hospital and medical clinic operations in China (and with such a large number of elderly people in China, long-term care facilities may be quite attractive to investors). The quality of China’s hospitals varies quite a bit — especially between the cities and rural areas. For several years now, most Chinese hospitals have been profit oriented. However, many of them lack modern management methods to both deliver solid care and generate strong profits. Businesspeople or investors with managerial skills should find a large, growing market.

If you’re thinking about bringing more-advanced healthcare to China through foreign doctors and/or high-tech equipment, make sure you understand whether the market in your target location can afford such services.

Environment and energy

As China continues to develop, industrialization leads to increases in energy consumption and pollution. Your business may be able to help China address these issues.

A need for clean energy

China’s economic growth is already straining its energy resources. Much of the increase in oil prices from $25 per barrel not too long ago is due to China’s growing demand. China’s economy is highly energy dependent — lots of factories, machines, and mega-cities. And improving standards of living are demanding ever more energy, too, with millions of people buying cars for the first time and hundreds of millions of people buying new electronics. If your business can bring more power or increase power efficiency, a big market may be waiting for you in China.

China gets most of its electricity from coal, a resource that China has plenty of. But here’s the major problem: China’s coal-burning plants are clouding the air not only in China but also as far away as Los Angeles. The government is making big efforts to produce more energy in less environmentally harmful ways.

China provides business opportunities for companies that can provide clean energy sources, such as “clean” coal, natural gas, wind power, hydropower, solar power, and so on. The government has already enacted laws that provide incentives (such as tax breaks) to investors in those fields. In addition, because clean energy programs help local governments achieve political goals, your company may be able to negotiate additional sweeteners. (For more on developing government relations, see Chapter 8.)

The energy business in China is difficult in part because the various grid operators make transmitting electricity quite costly. The government controls the energy sector fairly tightly. One solution is to build power supplies at the site of the end user. Or you can be a component supplier or build and operate a power plant.

Getting back to green

China has serious pollution problems throughout the country. Unfortunately, pollution has badly affected the country’s air, soil, and water supply. China may be a gold mine for businesses that can help it clean up. Whether your business performs remediation or can give China a cleaner way to do things, you’re likely to find a warm welcome from the government and a lot of potential business.

Agribusiness

With 22 percent of the world’s population but only 7 percent of its arable land, China has too many people to feed. As Chinese people get wealthier, they’ll want to eat more — and more expensive — food. Many experts are projecting that over the next couple of decades, China’s growing affluence will make the demand for food soar. At the same time, China’s farmland is rapidly giving way to factories and industry. China’s usable water is also decreasing due to pollution and overuse. All of this means that China is going to need a lot more food from abroad, making agribusiness a good place to be.

This trend is already noticeable. During the past several years, prices for many food commodities, such as soybeans, have gone up quite a bit. Much of the increase has been due to growing demand from China.

One of the nice things about doing agribusiness with China is that you can do it from anywhere in the world where you can grow crops and produce food. Of course, you may also produce food within China, where most farms and agribusinesses use outdated technology and techniques. Affluent Chinese — particularly those with children — are now starting to get interested in organic food out of health concerns, so if organic’s your niche, some of these old techniques may not need much modification.