China Life Private Equity Investment Company, the equity investment platform of China’s largest insurer China Life Insurance, set up the country’s largest healthcare-dedicated private equity fund in November 2016.
China Life Chengda Healthcare Investment Fund, which has 12 billion yuan ($1.9 billion; €1.6 billion) of capital from China Life’s subsidiaries has so far made about 5 billion yuan of investments across 12 companies, including A share-listed Wuxi Apptech and medical equipment company United Imaging.
With more than half of the capital to deploy and plans to allocate another 50 billion yuan to healthcare in the near-term, Wang Qiying, chief executive of China Life Private Equity discusses the firm’s strategy, favoured healthcare sub-sectors, and the expected growth of China healthcare with Private Equity International.
How does China Life differentiate itself from other China healthcare-focused GPs?
China Life is one of the largest insurance groups in China. When we make private equity investments, we have better vision and we are more patient, because our funding is from China Life, which has a longer duration. That helps a lot when we build our investment strategy and make investment decisions.
Also, we are a research-driven investment firm, unlike many other firms which spend most of their time chasing deals. China Life’s huge customer base, broad network and branding put us in a very competitive position among other players in the market.
What other parts of China Life Private Equity do you plan on building up?
We aim to be a world-class private equity investor. We will extend our business from onshore investment to offshore investment, from direct investment to fund investment, from private equity investment to mezzanine investment, from healthcare to business services and consumer technology, etc.
We understand China very well and our team has an international background. We are created by a state-owned enterprise, but our business is run like a private enterprise. We compete with other private equity firms, but we have abundant resources from out parent company.
How would you characterise China’s healthcare sector?
China’s healthcare sector is at its best time in history. During the past 20 years the sector has had a two-digit annual growth rate. We expect the growth rate to continue with our ageing population, higher income and urbanisation, as well as favourable government policies.
According to China’s national initiative “Healthy China 2030 Guidance”, the market size of the healthcare sector and its related industries will reach 8 trillion yuan (about $1.2 trillion) by 2020 and will double to 16 trillion yuan by 2030.
Another driver of the sector is rapid development of related technology, especially life sciences and biotech. China companies are still far behind the leading international players, but they are catching up quickly and the gaps are narrowing, especially in gene editing, gene therapy, cell therapy and artificial intelligence. In gene therapy, China has had nine clinical studies of cancer and HIV infections versus only one in the US. In cell therapies, based on data provided another comparison, there are 116 clinical trials for cancer treatment therapies taking place in China, compared with 96 in the US and 15 in Europe.
Abundant capital into this market is also serving as an engine to the development of the sector. The total disclosed investment in China’s healthcare sector reached over 95.8 billion yuan in 2017.
Is China’s healthcare tech scene overheated? Where are you finding opportunities?
China’s tech sector is highly competitive. Biotech is very attractive right now but it is crowded with capital. The valuations of some firms are being hyped up far beyond their fair value.
On the other hand, with the recent implementation of new banking and financial regulations, private equity funds are having more and more difficulties in fundraising. Data from Shenzhen Capital Group show that the number of newly raised funds declined by 25.6 percent year-on-year in Q1 2018; that might get worse in 2H 2018. The second half of 2018 will see high valuations cooling off – that will be good news for us.
We find opportunities in companies and teams who have realised the role of technology in their business. We are ready to help those companies to grow and we have the resources to accomplish that.