China’s healthcare market, the second-largest globally, is undergoing a transformative shift driven by the nation’s dual circulation strategy, introduced in 2020. This economic framework emphasizes strengthening domestic markets while fostering selective international engagement, creating a robust ecosystem for innovation and investment. For B2B businesses, particularly those in venture capital (VC) and strategic partnerships, the dual circulation strategy offers significant opportunities to tap into China’s booming healthcare sector, valued at over 10 trillion yuan ($1.37 trillion) in 2021. This article explores VC funding hotspots and partnership entry points in China’s healthcare market, providing actionable insights for business leaders aiming to navigate this dynamic landscape.
Understanding the Dual Circulation Strategy
The dual circulation strategy prioritizes domestic economic cycles as the primary driver of growth, with international cycles playing a complementary role. In healthcare, this translates to policies that bolster domestic innovation, reduce reliance on imported technologies, and encourage global collaboration where it aligns with national priorities. The “Healthy China 2030” initiative, launched in 2016, further supports this by promoting investment in biotechnology, digital health, and medical devices, creating a fertile ground for domestic innovation.
For B2B companies, the strategy signals a shift toward self-reliance in critical areas like pharmaceuticals, medical devices, and healthtech, while opening doors for strategic partnerships that bring cutting-edge technologies to China. The focus on domestic innovation has fueled VC funding and created new entry points for global businesses to collaborate with local players.
VC Funding Hotspots in China’s Healthcare Market
China’s healthcare sector has seen a surge in VC investment, with $7.3 billion raised across 811 transactions in 2024, despite a 33% decline from 2021’s pandemic-driven peak. Investors are increasingly selective, favoring later-stage, high-certainty projects in innovative subsectors. Below are the key VC funding hotspots driving domestic innovation in China’s healthcare market.
1. Biotechnology and Pharmaceuticals
Biotech and pharma are at the forefront of China’s healthcare innovation, supported by government incentives and a growing demand for novel therapies. Companies like Kelun-Biotech, which raised $200 million in Series B funding in 2022, are focusing on biologics and small-molecule drugs for oncology and chronic diseases. Similarly, MediLink Therapeutics secured $70 million in 2022 for antibody-drug conjugates, highlighting investor confidence in targeted therapies.
B2B Opportunity: VC firms and B2B suppliers can provide contract research organization (CRO) services, active pharmaceutical ingredients (APIs), or AI-driven drug discovery platforms to support biotech startups scaling their R&D pipelines.
2. Medical Devices and Robotics
The medical device sector is a hotspot, with surgical robots capturing 55.6% of the 2.6 billion yuan in funding in 2024. Companies like MedEdge Innovations, which raised 100 million yuan in an A+ round, are developing advanced devices for vascular and tumor interventions. The government’s exemption of innovative devices from centralized procurement ensures higher margins, making this subsector attractive for investors.
B2B Opportunity: Supply advanced manufacturing components, such as precision sensors or AI algorithms, to medical device companies, or offer regulatory consulting to navigate China’s approval processes.
3. AI-Driven Healthtech
China’s AI healthcare market is projected to exceed 70 billion yuan by 2025, driven by applications in diagnostics, imaging, and personalized medicine. Startups like Proxima, backed by Fosun Pharma, are developing AI-powered medical imaging solutions, while METiS Pharmaceuticals raised $150 million for AI-driven drug formulation. Shanghai dominates funding, raising $7.2 billion from 2018–2020, rivaling global hubs like San Francisco.
B2B Opportunity: Provide cloud infrastructure, cybersecurity solutions, or data analytics platforms to support healthtech startups scaling AI applications.
4. In Vitro Diagnostics (IVD)
The IVD sector is thriving, with companies like Virtue Diagnostics raising $100 million in 2022 for solutions targeting infectious diseases and cancer. The demand for rapid diagnostics, exemplified by reduced MDR-TB diagnosis times from two months to two hours, underscores the sector’s growth potential.
B2B Opportunity: Offer reagents, testing equipment, or software for diagnostic platforms to IVD companies expanding their product lines.
5. Digital Health and Telemedicine
The online healthcare market, including telemedicine and e-pharmacy, is valued at nearly 200 billion yuan. Companies like WeDoctor, backed by Qiming Venture Partners, are leading the charge in digital health platforms, connecting patients with services remotely.
B2B Opportunity: Supply secure APIs, payment gateways, or UX design services to digital health platforms aiming to enhance user engagement and compliance.
Partnership Entry Points for B2B Businesses
The dual circulation strategy encourages strategic partnerships that align with China’s innovation goals while leveraging global expertise. Below are key entry points for B2B businesses to collaborate with Chinese healthcare players.
1. Joint Ventures and Co-Development
Foreign companies can enter China’s healthcare market through joint ventures (JVs) or co-development initiatives, particularly in biotech and medical devices. The revised Drug Administration Law (rDAL) allows foreign entities to act as marketing authorization holders (MAHs) by designating a local partner, facilitating market entry for innovative drugs and devices. For example, Sanofi, one of the first multinationals to establish a presence in China in 1982, has expanded through JVs and R&D partnerships.
B2B Actionable Insight: Partner with local manufacturers or research institutions to co-develop products, leveraging China’s cost-effective R&D ecosystem and government incentives.
2. Public-Private Partnerships (PPPs)
The “Healthy China 2030” initiative encourages PPPs to expand healthcare infrastructure. The Global Health Drug Discovery Institute (GHDDI), launched in 2016 with Tsinghua University and the Gates Foundation, exemplifies successful PPPs driving innovation in infectious disease treatments.
B2B Actionable Insight: Engage in PPPs to provide technology transfer, regulatory expertise, or infrastructure solutions, aligning with national health priorities.
3. Licensing and Technology Transfer
China’s focus on domestic innovation creates demand for licensing foreign technologies to enhance local capabilities. BVCF, a leading VC firm, supports cross-border licensing to bring cutting-edge products to China, particularly in underserved areas like oncology.
B2B Actionable Insight: Offer licensing agreements or technology transfer services to Chinese firms, ensuring compliance with WHO prequalification standards for global scalability.
4. Strategic Investments via Corporate Venture Capital (CVC)
CVCs like Qiming Venture Partners and OrbiMed Asia are actively investing in healthcare startups, with OrbiMed managing over $1 billion in Asia-focused funds. These investments often come with strategic support, such as market access or regulatory guidance, making CVCs ideal partners for foreign B2B companies.
B2B Actionable Insight: Collaborate with CVCs to co-invest in startups, providing complementary services like supply chain solutions or market entry consulting.
5. Regulatory and Compliance Support
China’s regulatory environment, while stable, poses challenges for foreign entrants, particularly in cross-border deals. The 2023 anti-corruption crackdown has increased transparency, benefiting long-term innovation by redirecting spending from kickbacks to R&D. B2B firms with expertise in regulatory compliance, like Zhong Lun, can bridge this gap.
B2B Actionable Insight: Offer regulatory consulting or compliance software to help startups navigate China’s complex approval processes, including WHO alignment for global markets.
Challenges and Strategic Considerations
While opportunities abound, B2B businesses must address challenges:
- Regulatory Complexity: Navigating China’s regulatory landscape requires local expertise, especially for cross-border deals.
- Geopolitical Risks: Restrictions on outbound investments and scrutiny of strategic sectors like AI and cell/gene therapies necessitate careful planning.
- Market Maturity: Investors are shifting toward later-stage projects, requiring B2B firms to focus on scalable, high-impact solutions.
Conclusion
China’s dual circulation strategy is reshaping the healthcare market, fostering domestic innovation while creating strategic entry points for global B2B businesses. VC funding hotspots like biotechnology, medical devices, AI healthtech, IVD, and digital health offer significant opportunities for investment and collaboration. By leveraging joint ventures, PPPs, licensing, CVC partnerships, and regulatory expertise, B2B companies can tap into China’s $1.37 trillion healthcare market. Success requires aligning with national priorities, navigating regulatory complexities, and building partnerships that drive innovation. As China continues to prioritize healthcare under “Healthy China 2030,” B2B leaders who act strategically can secure a foothold in this dynamic and rapidly growing market.
