For medical device companies looking for future growth, Asia needs to be a primary target. The continent’s healthcare markets are large and will continue to grow due to a variety of ongoing developments, including a burgeoning middle class, rising wages, increasing government expenditures on healthcare, and the need for better medical equipment and drugs. Taking a closer look at new trends in established markets such as Japan and Singapore, as well as emerging markets such as China, India, and Indonesia, can reveal enticing opportunities for medical device companies.

Asia’s Expanding Middle Class

The rapid expansion of the middle class has been a driving factor of the accelerated economic growth in Asia. Given the dramatic differences in global income levels, life expectancies and quality of life, it can be difficult to define the term “middle class.” In an effort to capture individuals who have some level of disposable income and comfort that allows them to be defined as middle class, economists at the Brookings Institute define the global middle class as individuals whose daily expenditures range between USD $10 and $100 per day in purchasing power parity (PPP) terms.

Using this definition as a basis, the Brookings Institution forecasts that countries in the Asia Pacific region will soon have the largest share of middle class residents. The numbers speak for themselves. In 2009, the Asia Pacific had around 525 million people who fit into the middle class. This figure represented around 28% of the global share of middle class people. In contrast, Europe had around 664 million middle class individuals (36% of global share), while North America had 338 million (18% of global share).

However, by 2020, there will be more than 1.7 billion middle class individuals in the Asia Pacific, accounting for 54% of the global share. Europe is forecasted to have around 703 million (22%), while North America will have around 333 million (10%). By 2030, Brookings estimates that the Asia Pacific will be home to more than 3 billion middle class residents, an astounding figure that would encompass more than 60% of the global share.

While these are only market estimates, it is clear that overall economic growth is pulling more Asians into the global middle class. This emerging middle class will increasingly demand many of the same healthcare benefits, medical devices, and drugs that their European and North American counterparts enjoy.

Growing Healthcare Expenditures

Expenditures on healthcare services are also growing at a rapid pace. According to multinational consulting firm Deloitte, China’s annual expenditure on healthcare was approximately $511 billion in 2013. In comparison, Japan, a country that is nearly 10 times smaller, spent around $480 billion in 2013. It is clear that the Chinese public and private sector will need to spend more on healthcare in coming years. Deloitte estimates that healthcare expenditures in China will grow to $890 billion by 2018 as a result of increased consumer spending, government led healthcare reforms, and the increased incidence of harmful cardiovascular diseases that are oftentimes caused by obesity, smoking, and pollution.

China is not the only country heavily investing in healthcare products and services, however, as Southeast Asian nations (ASEAN) are also predicted to see growing healthcare expenditures in the coming years. Currently, health expenditure per capita in ASEAN is around 4% of GDP. This pales in comparison to healthcare spending in OECD countries that typically spend nearly 10% of their GDP on healthcare. But Deloitte estimates that average annual healthcare spending will continue to grow significantly throughout Southeast Asia. In Malaysia, for example, the healthcare market is projected to grow from an estimated $14 billion in 2014 to nearly $23 billion by 2018. Other ASEAN countries will experience similar growth rates.

Asia’s Booming Population

Shifting global demographics also point to promising growth in Asian markets. Currently, China is the most populous country in the world, but India and Indonesia rank as the second- and fourth-most populous countries, respectively. These countries will continue to grow rapidly and, by 2030, India will overtake China as the world’s largest country. Other countries with high population projections for 2030 include Vietnam, which is projected to have nearly 100 million residents, and Indonesia, which is forecasted to reach nearly 300 million.

The growing population in some emerging economies throughout Asia contrasts sharply with projected future populations of developed OECD countries. For example, the World Bank estimates that Germany will lose about 10 million residents by 2050, representing a decrease of around 13%.

Asia’s Developing Countries Need More Hospitals

World Bank statistics reveal that developed economies offer their residents greater access to medical facilities, with countries such as Germany (8.2 beds per 1,000), Japan (13.7 beds per 1,000), and Korea (13.2 beds per 1,000) having an especially large number of hospitals.

In emerging Asian economies, healthcare investment has not been able to keep up with demand for hospitals, and many residents are currently underserved by existing hospitals and facilities. According to the World Bank, the global average of hospital beds is around 3 for every 1,000 people; however, Thailand and Vietnam only have about 2 beds per 1,000 people. Countries such as Cambodia and Indonesia have even less, with current estimates indicating less than 1 bed per 1,000.

Asian countries are responding to the lack of hospitals by investing heavily in the construction of new facilities and the upgrading of existing facilities. In October 2015, China’s Ministry of Health announced that China will spend around $1.5 billion to subsidize private hospital reform in 2016. In addition, foreign firms are looking to form joint partnerships with local hospitals to tap into Chinese demand. These new private hospitals will supplement a public hospital system that is already creaking under the weight of China’s enormous population.

In Southeast Asia, governments are also looking at increasing hospital capacity. Frost & Sullivan estimates that Vietnam and Indonesia alone will add more than 60,000 new beds by 2019. In Indonesia, the country’s health minister recently proposed building 14 new national hospitals and more than 180 regional hospitals to better serve demand. Currently, most hospitals in Southeast Asia are located in major urban centers, so a large portion of new hospitals will be constructed in underserved rural areas.

As developing ASEAN countries and larger economies such as India and China grow wealthier and invest more in healthcare, they will have to spend to upgrade outdated equipment, provide basic hospital furnishings, and buy more advanced medical devices and drugs.

A growing middle class, expanding population, and the increasing demand and need for healthcare treatment are transforming Asia into one of the world’s biggest markets for medical devices and drugs. While established markets in Japan or Europe will gradually decline, increased demand from China, India, and ASEAN countries will more than compensate for this decrease in demand. Medical device companies should take note of these statistics as they look to expand or grow their businesses in Asia.