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Top 9 sectors of China for Israeli tech enterprises

There's plenty of business opportunity for Israeli entrepreneurs in China, including healthcare, biotech, education, and more
Benjamin Netanyahu (center) talks to China's Premier Li Keqiang (right) at the Great Hall of the People in Beijing, May 8, 2013 (photo credit: Avi Ohayon/GPO/Flash90)
Benjamin Netanyahu (center) talks to China's Premier Li Keqiang (right) at the Great Hall of the People in Beijing, May 8, 2013 (photo credit: Avi Ohayon/GPO/Flash90)

As I mentioned in my previous article on Trade with China, Israeli companies have strong competitiveness in Chinese market, here I would like to list top 9 prosperous industries of China for Israeli business circle.

1. Healthcare

With a population of 1.4 billion, China is the most populous country in the world. Chinese people are always challenged by healthcare issues among which are: low access and high costs are the two major problems in China’s healthcare industry. China’s current healthcare system is primarily composed of large public nominal non-profit hospitals. They are supplemented by approximately 5,000 smaller private for-profit hospitals. China’s public hospitals are generally less sophisticated in their managerial systems and bureaucratic in their organizational structure, with weak planning and organizational efficiency. Moreover, they are not operated under the normal business principles found in international hospitals. Therefore, their capability to respond to market and social demands is rather limited.

Nevertheless, China is ushering in aging society and baby boom at present, the advanced healthcare services are in great demand, according to McKinsey, China’s healthcare spending is projected to grow from $357 billion in 2011 to $1 trillion in 2020, but China is short of savvy doctors with professional spirit, even though it has 600,000 medical students graduated from university or college each year. Earlier, China‘s Ministry of Health (MOH) released its plan to reform the country‘s healthcare system called Healthy China 2020 which seeks to provide universal healthcare and equal access for all of China‘s 1.45 billion people in 2020. Pivotal sub-sectors of this industry include pharmaceuticals, biotechnology, medical devices, health IT, medical services, and health administration, with the first three ones accounting for nearly 75% of the market.

Israel has advanced medical devices and world-renowned doctors, so China will be a good market for the ones who can provide sophisticated healthcare management and methods and good solutions to train Chinese young doctors.

2. Biotechnology

China Biotechnology industry can be divided into five subsectors: bio-pharmacy, bio-agriculture, industrial biotechnology, bio-energy, and bio-environment. Of these five sectors, bio-pharmacy is the most important and fastest growing one. Currently, biotech products are mainly used by the pharmaceutical industry, followed by the food, chemicals, plastics, textiles, and paper industries.

China’s biotechnology market is expected to reach a value of US$180 billion by 2015. Growth of the biotechnology industry in China has long been viewed as strategic by Chinese central government and is included in China’s core economic development plans. Chinese bio-tech industry is expected to continue its expansion for following reasons, first, with the deepening of china’s healthcare system reform, more people will enjoy the medical insurance, the rural and community medical service will be more extensive. Second, the increasing use of industrial biotechnology by the Chinese liquid bio-fuel and chemical industries is expected to offset energy safety and environmental concerns generated by China’s robust economic growth. The expansive use of bioprocesses to produce products such as fuel ethanol and bio-plastics is also likely to contribute to sustainable innovation, productivity gains, and cost savings.

3. Education

Over the past three decades, China has almost eliminated illiteracy among its 1.4 billion citizens; extended nine years of free basic education across the country, and dramatically expanded the number of students in higher education to 20% of the age group currently.

And the opportunities for pre-school elementary, middle, high school, university or college, and vocational training school have been growing rapidly in the wake of population and incomes increasing. As a manufacturing giant, China is still lacking of savvy blue-collar professionals, it generated lots of opportunities for higher education institutions and vocational training schools. Amid an increasingly internationalized business environment and significant shift towards a services and skills-based economy, China’s education system has become a high-priority for the government, and the Chinese parents are paying more and more for their children’s education. It means that this industry now provides investors and operators with a wide range of opportunities. Israeli education enjoys great reputation in China, and it boasts for innovative high-tech talent education, so it would be a very prosperous industry for Israeli education institutions, I suggest them to pay more attention on higher education, preschool education, innovation specialized training, vocational education and online education of China.

4. Farming

China has abundant agriculture resources such as fecund land and industrious farmers, but the average farming productivity is rather low. In contrast with the developed countries, China has a relatively high agricultural workforce proportion as a result of the poor agricultural production efficiency. 49% of Chinese working population (800 million in total) is engaged in agricultural production, comparing with Israel’s 3.7%, Germany’s 10% and America’s 15%.

And Chinese agricultural industry has been always dominated by family farms which heavily reckon on traditional farming methods instead of modern agricultural technology and management. According to the latest 12th Five-Year Plan (FYP) released by Chinese central government, the government will bolster Chinese agriculture mechanization and industrialization, and it will increase the investment on agriculture development, and develop more advanced agricultural technology along with introducing mature agriculture techniques and managerial experience from other countries, such as crops planting and output increasing techniques, breeding and cultivating techniques, irrigation, hybridization, milking and animal husbandry techniques. Israel enjoys consolidated competitive edge in those areas; hence, it would be fitting vast market for Israeli agricultural technology companies.

5. Green Technology

With the eye-catching high GDP growth, China has paid a heavy price for its environmental depredation and energy depletion, China is facing more and more serious air-pollution and water-pollution along with ascending dependence on energy importation. Now China is at a crossroads in its green-tech development, needing to take effective measures in order to solve growing pollution and energy challenges. Targets specified in the current 12th Five-Year Plan are being outpaced by the impact of rapid growth and urbanization, despite China investing over US $67 billion in green-tech during 2012, the largest amount in the world. China’s new leadership has repeatedly voiced both concern and commitment to change which, coupled with growing public concern, witnesses a historic opportunity for China to reverse environmental degradation during economic growing.

China’s green technology industry has great potential to develop in diverse areas such as new energy
utilization, energy saving, alternative energy, green agricultural, low-carbon Eco-cities and Eco-building, pollution controlling and abating and so forth. Israel has world-class green technology, expertise and products to apply to Chinese market.

6. Information Technology and New Media

The number of internet users in China now has reached 600 million, and McKinsey predicted 750 million Chinese will be online by 2015. Despite the cut-throat competition in China Internet and new media market, Information technology still ranks ahead among the best industries in China. Information technology has already entrenched itself in many areas such as communication and education, and the widespread development of technology such as mobile computing and information management and security in the coming years provides great prospects for innovative new entrants. The specific information technology business expected to grow fast include: mobile internet, telecommunication, information security, big data mining, augmented reality, virtual simulation, smart e-Commerce, e-learning social media and so forth. Earlier this month, Israeli startup, Waze, a crowd-sourced navigation app, was sold to Internet giant Google for $1.3 billion, I have a hunch that Israeli startup can create another Waze in short time if it captured the largest internet market of the world.

7. Public Security

With the impetus of the “Smart City Concepts”, “Safe City Project” and “Harmonious and Stable Society Project”, China security industry keeps a very high rate growth over the past years. According to statistics, the market size increased more than 40% reached about $32.62 billion. The industrial chain has been widened and the industrial structure also shows to a new feature. Security service provider has got a rapid development, on the other hand, various kinds of intermediary services, risk assessment services, construction supervision services, emergency management, anti-terrorism technology, performance assessment services and products & projects maintenance services all have started and developed.

Chinese government attaches more and more importance on public security, and the scope of public security applications become more and more widely. Market demand of government agencies, financial agencies, shopping centers, transportation agencies, education agencies, exhibition, museum, and other public places experienced sustained and rapid growth; there are large-scale applications in dozens of departments like telecommunications, oil, electricity, water, industrial and mining enterprises, forest fire prevention, also lots of new demands like communities and public facilities and so on; along with the growth of the “Safe City Project”, market demands from second and third level cities begin growth. Government is the biggest consumer of this industry, the police and prison purchased a large amount of safety and security products for its crime control system and correctional facilities.

8. Water treatment

With only about 5% of global freshwater resources, China needs to provide water to support 19.8% of global industrial output as well as 20% of the world’s population. China has about the same amount of water as Canada, with a population 100 times greater. China is facing more and more severe water pollution and scarcity problems, nearly two-thirds of China’s 640 major cities face water shortages. In some places, there are extreme water shortages. By the year 2010, the annual shortage was estimated to reach 50 billion cubic meters, while the residential wastewater discharge was 35 billion tones in same year.

China generated 57.2 billion tons of wastewater in 2008; municipal wastewater and industrial wastewater
account for 58% and 42% respectively. It is expected that total wastewater will continue growing due to rapid urbanization and industrialization, reaching 79 billion tons by 2015. In majority of the country, the water is heavily polluted.

According to a 2012 report, up to 40 percent of China’s rivers were seriously polluted, resulting from the “estimated 10,000 petrochemical plants along the Yangtze and 4000 along the Yellow Rivers.” And the Yellow and Yangtze are not even the most polluted of China’s seven major rivers. On top of whatever polluted wastewater might be leached or simply discharged into China’s rivers or coastal waters from factories like chemical, pulp&paper, dye printing, mining and metallurgy, according to a reports that there are almost 1,700 water pollution accidents annually. The market size for the China Water treatment industry is expected to total $10 billion in 2015, with no more than 1800 enterprises engaged in water treatment industry.

9. Artificial Intelligence

I’m going to talk about robotic technology instead of the real AI technology which is controversial, the modern robots can now replace humans to undertake industrial manufacturing and take care of human, Foxconn, the electronics manufacturing giant frequently criticized for poor working conditions, had reportedly begun replacing its factory workers with robots. Due to the ascending labor costs and descending robotics cost, I predict that there are more and more big manufacturers will consider robotic large-scale producing. And many relatively dangerous industries like the mining and metallurgy industry will also adopt AI technology. China has been progressively carrying out its space program, AI technology is one of the key technologies for the deep space exploration, but China is not well accomplished in this area.

On the other hand, China’s aging population needs more and more life-caring robots and medical robots, the related research and development are progressing very slowly in China, so there are some international AI leaders who are tapping into Chinese market. Generally speaking, the prospect of AI technology is very bright along with the development and progress of its related industries including IT and bio-technology.

Read Start-Up Israel to keep your finger on the pulse of Israeli high-tech and innovation!

About the Author
The author is the founder of Israel Plan Organization, the NPO organization supporting and promoting Israel in China, and the Managing Director of Cukierman Yafo Capital. He is living in Israel currently, and finishing his MBA in IDC Hertzliya.
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