(SINGAPORE) AS the world's most populous nation gets richer and older, Singaporean players have put their finger on the pulse of China's healthcare sector.

Despite the inevitable challenges, medical services providers like Parkway Holdings, China Healthcare and Pacific Healthcare Holdings have stepped up their presence in China over the past 18 months. They have either bought up majority stakes in local healthcare firms or set up joint ventures there.

The size of China's healthcare pie is large and growing, says Ronil Sujan, regional head of Rabobank's life sciences team.

'It is a fast-growing market with rapidly rising disposable income and an ageing population,' he told BT. 'Public healthcare expenditure grew from US$41 billion in 1997 to US$96.9 billion in 2004. It now represents 5.55 per cent of China's GDP and is expected to rise further as healthcare expenditure is expected to outpace economic growth.'

According to Frost & Sullivan, China has one of the largest patient pools in cardiovascular diseases, diabetes and oncology. 'Thus, specialised healthcare services in these areas would be most attractive,' said Frost & Sullivan vice-president for healthcare practice Reenita Das. 'Besides that, healthcare management and healthcare information technology management are also fast moving segments.'

However, Singapore's healthcare players seem to prefer partnerships to going it alone. Parkway, for instance, bought a 60 per cent stake in World Link Group back in May for US$42 million. The latter runs four 'expatriate-focused' medical facilities in Shanghai and is seen as complementary to Parkway's newly-opened Shanghai Gleneagles Medical and Surgical Centre - a 32,000 sq ft site in which it has a 70 per cent interest.

Similarly, Pacific Healthcare is taking up a 70 per cent interest in Kanglian Hospital in Shanghai and recently bought a majority stake in a chain of cosmetic and wellness centres in Guangzhou. On the other hand, China Healthcare, formerly known as Econ Healthcare, owns a 20 per cent stake in a Chinese firm that makes hospital equipment in Zhuhai and, last year, signed a pact to invest up to $20 million in a joint venture with a hospital, nursing home and medical school under its assets.

Unfamiliarity with the local environment and an evolving healthcare policy are among the factors preventing Singaporean players from making bolder moves.

'It is best to have a local partner who can help you navigate unknown waters,' said Pacific Healthcare CEO William Chong. 'There are many differences to be looked at in regional operations - cultural differences, business practices and ethics, licensing and other regulatory issues, market penetration - all of which require local knowledge. Hence, our preference to work with a local partner.'

Payment issues also come into play. Frost & Sullivan estimates that only 5 per cent of the private hospitals in China are allowed reimbursement on medical fees of patients by the state-run medical insurance programme - a factor that hinders the growth of private hospitals in China.

CLSA analyst Zhuo Zhengjie, too, is of the view that it is not an easy market to penetrate. Many locals still turn to traditional Chinese medicine for treatment or tend to stay on for weeks at hospitals for full recuperation - a habit that may drag down the profitability of the service provider since 'most of the revenue-generating activities, such as their tests, scans and so on, come in during the first couple of days', he said.

Thomson Medical Centre, for one, is not too eager to jump on the bandwagon. Chief executive Allan Yeo was once quoted in this paper as saying: 'China, as we know, is a market with good potential but at the same time we feel we do not understand it well enough.'

But the sheer size of the market makes it hard to ignore. Raffles Medical Group is aiming to announce 'something on our China activities in the next year'. And even other services firms want a slice of the China pie. Keppel Facilities Management and Operations last year announced that it will head a consortium to provide healthcare and hospital management expertise to Shandong's Linyi People's Hospital, while Singapore Computer Systems has reportedly said it is targeting the China healthcare IT solutions market.

Said Frost & Sullivan's Ms Das: 'There were around 1,477 private hospitals in China by the end of 2005 which is less than 10 per cent of the total number of hospitals in China. Hence, there is a lot of potential for companies to invest and grow.'