The Putian phenomenon

How a city in Fujian came to dominate Chinese private healthcare


Putian entrepreneurs own around 8,000 private hospitals

Just across the strait from Taiwan, Putian is best known to executives at Nike and Adidas as a major manufacturing base for knock-offs of their shoes. (Alibaba even warns buyers on its business-to-business platform to show caution when dealing with the city’s suppliers.)

But aside from suspicious-looking sneakers, Putian’s entrepreneurs are also some of China’s most active investors in private hospitals. As of October last year, 10,877 private hospitals were reported nationwide. Of the total, at least 8,000 were run by Putianese, according to data from the National Health and Family Planning Commission. More than 60,000 residents in Putian are also engaged in the medical and healthcare industries. “Not one hospital owner from Putian has had a medical background or knows how to treat patients. But they have singlehandedly transformed the private hospital industry,” an industry insider told Oriental Outlook.

Putian got its start in hospitals thanks to Chen Deliang. In the early 1980s Chen came up with a remedy for treating scabies – a painful and infectious condition caused by mites that was widespread at the time. To make his living, he travelled around town selling his homemade cure for as little as Rmb1 per bottle.

“It was after the Cultural Revolution and the country was just opening up. The hygiene situation was terrible and people’s knowledge about healthcare was also very limited so skin infection was very common. Many patients went to the hospital but the infection would come back so many turned to me. My remedy was very effective, and I became more and more famous,” Chen told the magazine.

As Chen became well known, he started taking on pupils. Soon they were treating all kinds of ailments albeit with their limited medical knowledge. Then they stumbled into another bucket of gold: treating sexually-transmitted diseases.

Even as late as the 1990s, many public hospitals refused to treat such diseases. But even if they did, many patients were too embarrassed to seek assistance. This created a lucrative niche for Putian’s medical practitioners, says Southern Weekend. Soon physicians were opening clinics across the country, boosted by their promises of confidentiality and discretion.

They were also one of the first groups to advertise medical treatments on TV and radio broadcasts. “We were treating less than a handful of patients every day but after we started advertising during primetime, people started lining up outside the door. It was worth the investment,” one of the largest hospital owners, Zhan Guotuan, told The Founder.

Putian businessmen now own about 80% of China’s private hospital network, but they generally keep a very low profile. Few have spoken publicly about their business interests and most companies are privately-held so exact ownership details are sketchy.

Zhan, for instance, is widely believed to have invested in over 30 hospitals, although his exact holdings aren’t clear.

Even within the same business empires, it can be difficult to trace ownership of individual hospitals. One reason is that if one hospital was exposed for medical malpractice, it would not hurt the reputation of other medical institutions in the same company, reckons Southern Weekend.

But Zhuo Chaoyang, another Putian businessman, has built the Angel Hospital in Chengdu into a high-profile hospital for obstetrics and gynecology, says the China Daily. Chen Xinxian, another Putian-based tycoon, has established the Sacred Pearl Dental chain of clinics. In November last year, Putian’s Weng Guoliang combined with Liu Yonghao, chairman of New Hope Group, a leading agribusiness company, and Feng Lun, chairman of the real estate company Vantone, to form The Strategic Alliance for the Medical and Healthcare Industry of China, aiming to become the leading hospital and healthcare management corporation.

The private hospitals founded by Putian residents do share some characteristics. They tend to target treatments that have higher margins and that can be performed at relatively lower risk. Fertility treatment, plastic surgery and dental care are popular. More importantly, these sectors aren’t normally included under the national medical insurance system, so patients tend to choose private hospitals that specialise in these categories.

According to Bain, the consultancy, China’s healthcare industry will more than triple to $900 billion by 2020 from $275 billion four years ago. The central government also wants more private capital in the sector to increase the supply of medical services. Private hospitals could also help with the reform of public hospitals by increasing competition. In April, the State Council gave private hospitals the right to set prices for treatments that had previously been government-controlled.

But Putian’s businessmen could face some serious competition themselves from the country’s property developers. Earlier this year, real estate giant Vanke announced that it is opening three children’s hospitals in Guangzhou, Shanghai and Shenzhen. It says it plans to include hospital facilities in some of its residential developments in the near future too. Another developer, Evergrande Group, will soon be building private hospitals as well, under a cooperation agreement with Brigham and Women’s (BWH), a major teaching hospital at Harvard Medical School. BWH will provide management and medical personnel for facilities to be built by Evergrande.

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