As China develops its digital healthcare system and promotes impactful policy coordination across the Belt and Road Initiative (BRI), turning towards Israeli innovation could enable win-win cooperation. On the domestic front, the digital health sector will help advance objectives stated in China’s 13th Five-Year Plan. This includes the distribution of health resources and the promotion of healthcare quality at the local level. On the international front, advancing the digital health sector can solidify China’s geopolitical role as a global leader in healthcare reform. Forming a model healthcare template for nations participating in the BRI is important given that the initiative promotes cooperation in scientific and cultural exchange to improve the quality of life in health and medicine of all citizens in BRI nations.
With Israel’s advancements in medical technology and digital health, the Sino-Israel partnership will apply the uniqueness of Israel’s innovation market, and will alleviate inefficiencies in China’s healthcare system. Thus, potential business-to-business (B2B) cooperation in this area will be a compelling means to promote progress in Sino-Israel relations.
China’s Healthcare Challenges
Recent reforms launched by the Chinese government have extended healthcare to over 95 percent of the Chinese population, but there is still room for improvement in areas of access, quality, and cost. With a population of 1.3 billion, demand for healthcare services has exceeded supply, creating long wait times for patients at major city hospitals and academic health centers. This increased strain on doctors and other medical professionals has created a decrease in the quality of health services. Other stressors on China’s healthcare system include its rapidly aging population and its growing demographic of middle-aged Chinese males, many of whom suffer from hypertension and diabetes.
In 2012, the Chinese government released a government White Paper to address growing challenges within its healthcare system. The Paper put forward policies to “make rural areas the focus of our work; put disease prevention first; support both traditional Chinese medicine and Western medicine; rely on science, technology and education; and mobilizing the whole of society to join the efforts, improving the people’s health and serving socialist modernization.” Much progress has been made in the past five years, but of course, there is still much to be done.
Furthermore, one of the goals in China’s 13th Five-Year Plan involves improvements in its healthcare system. The goal reads: “This plan will continue to push towards a harmonious society and will improve accessibility and affordability of healthcare services, increasing rural and urban healthcare coverage, and expanding general access to healthcare services.”
Digital Health and Medical Technology as a Solution
According to the U.S. Food and Drug Administration, “digital health is the convergence of digital and genomic technologies with health, healthcare, living, and society to enhance the efficiency of healthcare delivery and make medicines more personalized and precise.” It includes categories such as mobile health (mHealth), health information technology (IT), wearable devices, telehealth and telemedicine, and personalized medicine. The use of technologies such as smart phones, social networks, and internet applications is not only changing the way society communicates, but is also providing innovative ways to monitor health and well-being, and providing greater access to information.
A powerful driver of the digital healthcare revolution in China is the widespread adoption of new technologies such as mobile devices, cloud computing, and big-data analytics (See SIGNAL Notes 19, 20, 22, 24). A report in 2016 from the China Internet Network Information Center (CINIC) stated that the number of Chinese people online had reached 688 million, accounting for over half of the population. Of these Internet users, 620 million people, or 90.1%, have mobile access to the Internet. Combined with the increasing availability of high-speed Internet access and big data, companies now have the ability to offer digital solutions to large swaths of the population in China.
For example, remote physician and online booking applications can help to mitigate imbalanced patient distribution in hospitals. These applications can also solve the challenges of overutilization of large hospitals and the underutilization of small hospitals. Digital platforms that allow for the continual communication between physicians and patients will efficiently and effectively improve the quality of patient care over the long term, at a low cost. Renming Zhu, President of Truth Enterprises, a smart healthcare technology company, stated: “The best way to save money is to bring healthcare to the home, to enable people to better take care of themselves. With mobile and video technology, patients will be able to connect with many specialists at a minimum cost.”
Following recent trends of Chinese investment in digital health platforms, the Boston Consulting Group estimates that this market will expand from 3 billion USD in 2014 to 110 billion USD in 2020. Thus, investing in digital health and medical technology will help China achieve its goals stated in its 2012 White Paper, and in its 13th Five Year Plan.
How can an Israel-China Partnership Improve China’s Healthcare System?
The growth of China’s digital healthcare market has encouraged the growth of venture capital investors and a need for innovation in both the public and private sectors. As a result, China has turned to Israel to create a partnership in the healthcare sector.
Public Sector Cooperation
China and Israel signed a three-year healthcare cooperation agreement in March 2016 that sought to achieve two main goals. First, the agreement would utilize the knowledge and capabilities of the Israeli healthcare system. Second, the agreement would establish several working groups that coordinate the cooperation between both parties in the areas of medical research, emergency preparedness, telemedicine, digital health, healthcare services, and health system reforms. The agreement also established relationships on the local level, as every hospital in China now has available contact with hospitals in Israel.
Dr. Mordechai Shani, winner of the 2009 Israel Prize and member of the Israel National Institute for Health Policy Research, believes that this healthcare cooperation agreement would greatly benefit both Israel and China. “For China,” Shani stated in an interview for this article, “Israel’s healthcare system is very attractive because Israel has achieved the ideal system. Comparatively speaking, Israel doesn’t spend much money on its healthcare system–less than eight percent of its GDP–yet the quality delivered by the healthcare system is good.” Through this partnership, China hopes to improve the quality of its primary care.
Private Sector Cooperation
China has a vested interest in investing in Israeli digital health technology. This is indicated by a sharp increase of Chinese investment in Israeli medical technology and digital health startups. “This is a partnership that is just as valuable, if not more,” Dr. Shani stated.
Israel is one of the strongest innovation markets in digital health and medical technologies. Israel was one of the first countries in the world to integrate electronic medical records into its national healthcare system, a prerequisite for advanced digital health sectors. Today, the digital health sector is one of the fastest growing sectors in Israel, with over 500 companies in Israel advancing the field.
“Israel is leading the digital health revolution,” Dr. Shani explained. “Israel is currently working on the first virtual clinic where young patients will only go to the doctor once a year. Everything else is digitized. This is the next direction of healthcare, where healthcare is administered in the home. Once Israel achieves this, the sky’s the limit. It’s no wonder that China wants to invest in this market.”
Recently, China has stepped into the Israeli digital health market with several high-profile investments in the past two years. For example, in July 2015, Chinese-owned Merck acquired cCam Biotherapeutics, an Israeli cancer immunotherapy company, for 605 million USD. In November 2015, China’s Hefei Tianhui Incubator of Technologies Co. signed a 50 million USD licensing and investment deal of Israel’s Oramed Pharmaceuticals, for rights to Oramed’s oral insulin capsule technology in China. And in late 2016, Chinese IT corporation Neusoft and Israeli private equity fund Infinity Group created a 250 million USD joint fund for investment in Israeli medical technologies over the next three years.
Ruti Alon, General Partner at Pitango Venture Capital, Israel’s largest venture capital fund, explained: “The Chinese are very interested in medical devices and are looking for new technologies to bring to China in order to enhance their health care system. They are looking at Israel for innovation.”
This partnership will play a key role in the success of healthcare in the BRI. Given that many nations participating in the BRI have some of the lowest-ranked healthcare systems, China has taken the initiative to adapt a strong example of a model healthcare system to be eventually shared across Central Asia.
Examples of Israeli Digital Health Startups for Potential Investment
There are currently 54 Israeli digital health startups and counting with significant potential in the Chinese market. They have identified areas of improvement within the Chinese healthcare sector, and have developed solutions through an application interface. With great success in the domestic market already, these startups are looking for Chinese seed funding on startupnationcentral.org. Several of them are highlighted below:
Walana is a startup founded in March 2015 that has developed ViTUS, a chatbox that collects wellness and symptom data. It then analyzes the data, finds patterns and correlations, and then builds plans and tools that help patients with their daily functions. It also provides real-time data that assists physicians in tailoring treatment. Walana seeks to operate in the Chinese market, and will help in improving the quality and convenience of patient care.
Doctome is a startup that provides professional telemedicine services. It allows people around the globe to consult a doctor or medical professional in their own language by video and chat, anytime and anywhere. Doctome combines a CRM with an integrated electronic health record (EHR) system that generates documents such as clinical summary, referral to an emergency room, digitally signed prescriptions, and illness approvals. Doctome will help to improve the quality and convenience of in-home patient care.
GlucoMe is a comprehensive digital diabetes care platform that was launched in December of 2013. The platform consists of a Smart Glucose Monitor, Insulin Pen Monitor, Mobile App, and a cloud-based Digital Diabetes Clinic. Glucose measurements and insulin intake are automatically recorded by the patient’s smartphone and analyzed in the cloud, providing treatment recommendations for each patient, enforcing adherence and enabling digital or face-to-face intervention for the right patients at the right time. According to the World Health Organization (WHO), there are currently about 110 million adults living in China with diabetes, accounting for just over 10 percent of the population. The WHO predicts that this number will increase to 150 million Chinese citizens by the year 2040. GlucoMe can offer a solution to mitigate diabetes risk, and to ensure quality patient care for those in China with diabetes.
After reaching success in the Chinese market, these startups may see potential in the markets of BRI nations as a means of improving the quality of global healthcare.
Mutually Beneficial Cooperation
After decades of focusing most of its diplomatic and trade efforts on Europe and America, Israel is pivoting towards China. This decision comes after volatile markets in the Western hemisphere were viewed in comparison to the burgeoning economy of China, and after a general pivot to Asia by the West. The Israeli government has been keen on increasing business ties with China, and has extended invitations to Chinese businessmen and officials from all levels of government to come to Israel. In 2017 alone, dozens of Chinese figures have visited Tel Aviv and Jerusalem in the past few months. Fiona Darmon, a partner in a venture capital company, stated: “Israel has received a general blessing from Beijing to invest, and we hope to continue these ties going forward.”
With increased Chinese investment in the Israeli digital health sector, many Israeli companies and startups in this field have begun to respond positively. As Israel encourages its startups to pursue a global market and to become international companies, China is positioned as a potentially ideal partner in taking such startups to the global level.
Many of these companies are increasingly interested in pursuing Chinese investment and Chinese markets. This is indicated by a growing number of Israeli innovation fairs in various cities in China. In the past year, such fairs have debuted in Zhuhai, Guangzhou, Zhengzhou, and Qingdao.
Furthermore, in January 2017, the Times of Israel published an article titled “Four Crucial Insights for Medical and Healthcare Startups Looking to China,” filled with advice and tips to create the best business pitch geared towards a more risk-averse Chinese audience.
Both sides of this bilateral relationship are incredibly invested, and have created a promising partnership that will not only provide Israel with the financial capital it needs, but will also improve China’s geopolitical standing in the BRI.
Impact: Digital Health Cooperation Will Enhance Sino-Israeli Relations
With cooperation evident in both the public and private sectors, the digital health field presents a unique opportunity to further progress of the Sino-Israeli relations. With Israel’s significant lead in digital health innovation, the value Israel adds to China’s goals of international investment and healthcare improvement increases exponentially. The healthcare cooperation agreement signed between China and Israel solidified government-to-government (G2G) cooperation in healthcare, with particular interest in the digital health sector. This partnership is further strengthened by parallel action in the private sector. In recent years, Chinese companies have invested heavily in Israeli digital healthcare startups in order to import innovative technologies to the Chinese market, boosting business-to-business (B2B) relations in the two nations.
Therefore, as partnerships on the governmental and business level solidify in digital healthcare, it is clear that Israeli innovation will provide yet another launching pad for burgeoning relations between Israel and the Middle Kingdom. With investments in Israeli digital healthcare, China will observe marked improvements in its own domestic healthcare system, achieving goals laid out in its Thirteenth Five-Year Plan. But more importantly, China’s new and improved healthcare system will become a model for nations involved in the BRI. By sharing such healthcare technologies across the BRI, China will lay the foundation for stronger societies in Central Asia, and will help with capacity building to create a stronger, more successful BRI union.
Related SIGNAL Notes:
SIGNAL Note 19
SIGNAL Note 20
SIGNAL Note 22
SIGNAL Note 24
1. Rise of Chinese Investment in the Israel Medical Device Industry
2. Medical and Health Services in China 2012 White Paper
3. State Council Circular Private Healthcare Services May 2017
18. Interview with Dr. Mordechai Shani