5 Stocks to Benefit From China's Health-Care Plan

By Brian Orelli
March 5, 2009

China isn't dead yet. Leaders may be keeping mum about the next round of the country's stimulus plan, but China still has a plan to expand and upgrade health-care benefits for its citizens.
Sound familiar? Unlike the U.S. plan that will hurt some companies as the government tries to save money to pay for the added coverage, it looks like the Chinese plan should be a gold mine for most health-care companies, with China's health-care spending expected to jump 38% this year.
Let's take a look at a few potential beneficiaries of that increased spending:

• Serial acquirer American Oriental Bioengineering (NYSE: AOB), which sells traditional Chinese medicine, wants to become the Johnson & Johnson (NYSE: JNJ) or Abbott Labs (NYSE: ABT) health-care conglomerate of China.
• Medical device maker Mindray Medical (NYSE: MR) expanded outside of China with its acquisition of Datascope, but still derived 43% of its revenue from sales in its homeland in the fourth quarter of last year.
• 3SBio (Nasdaq: SSRX) makes knockoffs of biotech drugs. President Obama wants to allow these so-called follow-on biologics in the U.S. to lower costs, and I don't see why they won't be in higher demand as China expands.
• Just like the U.S., China is gearing up to digitize medical records, and IBM (NYSE: IBM) looks ready to feed that need for 1s and 0s.
• Molecular diagnostics maker China Medical Technologies (NYSE: CMED) looks poised for growth, as rural China gains access to hospitals that diagnose medical conditions.

As China develops, drugmakers and medical device makers from all over the world will benefit from increased medical spending, but companies based in China will likely see the largest growth. Investing in China may be scary, but it's likely to pay off in the long run.