COVID-19: A Turning Point for Chinese Private Spending in Health?

COVID-19: A Turning Point for Chinese Private Spending in Health?
Author

Yifei Xu Yifei Xu

Date

September 14, 2020

4 min read

COVID-19 has underscored the importance of public health capacity in the fight against the pandemic and for future recovery. Investing in R&D provides a firm foundation for capacity building in the health sector. Accordingly, China has seen a tremendous increase in private donations toward health R&D since the outbreak. Chinese philanthropists have donated over $250 million to R&D investments in COVID-19 vaccines, diagnostics and therapeutics, accounting for an estimated 5-10% of the total private giving in pandemic response, compared to only 1.3% in 2018.[1]

R&D donations, however, are only part of a new wave of China’s health-related spending in response to the pandemic. Moving away from one-off giving to long-term and sustainable initiatives, the private sector is also exploring SDG-aligned business opportunities in the health sector. This shift may represent a potential watershed moment in reshaping China’s philanthropy and investment in the health sector. Here are three trends that we are seeing in Chinese private sector giving.

1. Embracing R&D investment and innovation

The growth in health R&D comes against a backdrop of considerable advances in China’s science and technology sector, said Angel Teh, the Associate Director at Bridge Consulting, during the webinar.

As global value chain shifts, China endeavours to transform its role from a world factory with low-skilled labour to a high-tech centre and thus underpin continuous development. Regarding innovation as the principal driving force behind the transformation, China has been growing its R&D investment at a remarkable pace to bridge the innovation gap.[2] Aiming to lead the world in innovation by 2050, its total spending in R&D reached $496 billion in 2017, which was only second to the US.[3]

There is aligned trend in the health sector. Brookings’ research shows that pharmaceutical R&D spending from Chinese private firms increased over 4400 percent from 2000 to 2016.[4] Yet the pandemic has shown the growth is not enough. There is still huge demand in the sector, especially drugs, vaccines, and therapeutics for neglected diseases.

Chinese philanthropists have realised this. During the pandemic, the increased R&D donations have been given to high-profile academics and institutions with great reputations for drug, vaccine and treatment development. For instance, Jack Ma Foundation has pledged $11.22 million to relevant R&D in China and Australia.

2. Calling for cross-sectoral and international collaboration

“Philanthropy directed into medical R&D is still very early in its journey. We do need to work together to keep building the giving culture, improve policies, and invest in giving infrastructure to maintain the momentum,” says Ruixi Hao, the Program Officer of Philanthropic Partnerships in Bill & Melinda Gates Foundation China Country Office.

Presently, the donations are dominated by corporate and individual foundations. While we are still waiting to see the real impact, collaboration between the public, private and social sectors globally has already shown its critical role in philanthropy. A proportion of China’s R&D donation from private companies in COVID-19 is directed outside the country. Additionally, the recent $2 billion Chinese funding to assist global pandemic response shows Chinese government’s willingness towards global collaboration. Only through partnerships and collaboration, we can foster a more supportive policy environment, increase the research pace across sectors and mobilise a larger amount of capital through collective efforts.

3. Guiding future investment in the health sector

Apart from philanthropic giving towards health R&D, China’s private sector also experiences acceleration in sustainable and responsible investing during the unprecedented crisis. Private investments are increasingly responding with SDG-aligned investment strategies and practice in sustainable assets, including health-related ones. As UNDP pointed out, China, one of the largest markets for SDG business, is shifting towards growth trend that promotes high-quality development, SDG prioritisation, and significant progress in innovation.

To further accelerate and guide such investments, in June 2020, UNDP launched the SDG Finance Taxonomy (China), a classification system with impact assessment and reporting criteria.[5] It makes sustainable development easier for investors to practice and aims at stimulating capital flow that advances SDGs in China. The Taxonomy identifies four primary areas of hot-spot markets for SDG-aligned investments, namely food and agriculture, cities, energy and materials, and health and well-being. The health and well-being sector is subdivided into remote patient monitoring, telehealth, healthcare training, and other ten categories.

The Taxonomy which has been tested in other countries is part of SDG Impact, a UNDP flagship initiative that leverages private sector capital to advance the SDGs. AVPN has been assisting the implementation of SDG Impact in China. We have also launched our own COVID-19 platform to convene social investors and drive better investment practice in response to the pandemic. We would like to invite our fellow members to join the journey and further promote social investment in China and across Asia.

At the recent webinar “Shifts in Chinese Private Sector Giving: Pandemic Philanthropy, China, and Technology”.

Panellists at the webinar

[1] http://bridgebeijing.com/en/Pandemic_Philanthropy_Report.pdf
[2] http://www.xinhuanet.com/english/2018-02/27/c_137003209.htm
[3] https://www.forbes.com/sites/niallmccarthy/2020/01/20/china-is-closing-the-gap-with-the-us-in-rd-expenditure-infographic/#7f14b8fa5832
[4] https://www.brookings.edu/blog/techtank/2018/04/23/whos-investing-in-health-care-rd/
[5] https://www.cn.undp.org/content/china/en/home/library/poverty/technical-report-on-sdg-finance-taxonomy.html


About Author
Yifei Xu
Yifei Xu Intern AVPN

Yifei Xu is a researcher at the Knowledge Centre.

Prior to APVN, she worked at the London School of Economics doing qualitative research on China’s drug and development policy. She also had 5 years of experience in investigative journalism and digital marketing in China, focusing on Asian social issues, policies and international development.

She obtains her second master degree in Development Studies from the London School of Economics. She also holds a BA in Political Science and an MA in Diplomacy from the Renmin University of China.