You Can't Afford to Ignore China Again

Robert Hsu, Editor

A Rise in Healthcare Spending

Do you remember the Severe Acute Respiratory Syndrome (SARS) outbreak that hit China in 2003? I know I do. Actually, I can still see the images of people walking around the streets of China wearing surgical masks. And after that outbreak, the Chinese government came under strong fire for trying to keep the outbreak quiet and not doing enough to protect its citizens.

Today, the Chinese government is now aware of the need to improve health care in China, and it is becoming a top priority. In fact, when the Chinese government revealed its stimulus package back in November, policymakers noted that the country's health care sector would be receiving a significant portion of the funds. And in April, the Chinese government unveiled its final draft of the highly anticipated health care reform plan. The plan calls for the Chinese government to spend a total of 850 billion yuan ($125 billion -- or about 3% of China's GDP) over the next three years to improve the health care system.

That's why one of my top picks for 2009 is China's leading medical device manufacturer.

This company is already the number-one medical devices company in China, and it is swiftly growing in the global medical device and laboratory instrument industry–which already rakes in more than $80 billion a year. The company manufactures more than 40 medical devices in three business segments–patient-monitoring, diagnostic laboratory instruments and ultrasound imaging systems.

Basically, this company has it all: great earnings growth, high profit margins, a large and rapidly growing end market, favorable government relations, fast-growing penetration into a giant global market, top-tier institutional sponsorship, reasonable valuation, tremendous international growth and a dominant industry position within China itself. And it is well-positioned to benefit from three of the greatest socioeconomic trends of the 21st Century: 1) China's health care boom, 2) the aging world population, and 3) rising health care costs.

Because this company operates in a large and booming market, it delivers superior and consistent earnings growth. In fact, in recent years, the company has seen sales and earnings grow more than 50% per year.

And as Chinese focus their spending on better health care, and the Chinese government provides more funding for the health care sector through its stimulus package, I wouldn't be surprised to see this company continue on its strong growth path. The stocks up nearly 100% since I recommended it!

To receive my latest buy advice on this medical devices company, join China Strategy today.

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