There is constant talk about the expansion of China’s luxury market- growing by 18% annually, said to be the largest luxury market by 2020. And while I do see this rise, I think another aspect of luxury that is growing is the breadth of “luxury.” Most current figures focus on luxury goods: handbags, jewelry, clothing, cars. But in the future the term luxury will broaden to include experiences: luxury travel, luxury education, luxury hobbies (boating, arts, theatre). And luxury healthcare is going to be the largest and most fruitful of those segments.

The Chinese central government has dedicated hundreds of billions of dollars since 2009 to reforming its healthcare system with the goal of providing accessible and affordable health services to its citizens. Yet many Chinese are choosing to go to private clinics over state hospitals. In fact, according to the Ministry of Health, the number of private hospitals in the country has increased 20.6% year-on-year to 8,947 as of May 2012. Meanwhile, the number of public hospitals has decreased 2.8% to 13,441.

Nurses pose in front of the emergency evacuation helicopter now in service at a private hospital in Changyuan county, Central China's Henan province.

Nurses pose in front of the emergency evacuation helicopter now in service for members of a private hospital in Changyuan county, Central China’s Henan province.

I see two main trends that will push the healthcare sector to the forefront of spending for the Chinese market in the near future:

First, continuing economic and demographic trends. With one of the world’s largest elderly populations and a smaller working class due to the one-child policy, a shift is happening. More carers and medical alternatives are needed as a young couple copes with tending to the four aging parents as well as career ambitions and social pressures. Combine this with the rapidly increasing standards of living and we find higher demands from healthcare providers, therefore many will chose to pay extra for the added value of safe and effective services. Private clinics catered to expasts in the past but the number of Chinese clients has been swelling in recent years, especially in departments such as obstetrics, gynecology and pediatrics.

Second, further government healthcare reforms will open the market to foreign players. Such changes were highlighted as a key area of growth in the 12th five-year plan and in January this year the government revised its Foreign Investment Guide to actively introduce foreign investment to the healthcare service industry. This will increase competition and spur more Chinese companies to invest in research and technology to compete with global offers. These new government policies will push for improved infrastructure, broaden insurance coverage, and bring more support for innovation. Though with intensifying competition and the race to deliver products more quickly, quality may suffer. The ministry of healthcare has acknowledged current issues with corruption, price wars and unsafe medical environments and will need to tend to these problem before they can compete with private options.

With the support of both the government and the population, the healthcare sector is expected to continue booming. In March, the government announced its goal to have 20 percent of hospital beds privately owned in three years’ time. And according to a recent report by accountancy firm Deloitte, China’s medical services market is growing 18% annually and projected to reach 3.16 trillion Chinese yuan (US$500 billion) in three years. That 18% growth will be much more than what Louis Vuitton will see in the coming years.

With China expected to become the world’s third largest healthcare market by 2013 it’s hard not to see the opportunities.