Haier Industrial Finance Files IPO Prospectus: Deploying Over RMB 5 Billion to Empower Private Hospitals Through an Ecosystem Approach

The moves of large corporations always attract more attention, as their strength often enables them to steer the development direction of an industry.。Furthermore, their actions are not focused on short-term gains but rather on long-term strategic positioning; by entering the market, they aim to influence the industry through an ecosystem-based layout.

Haier Industrial Finance, backed by Haier Financial Holdings, provides financial services across six key sectors: agri-food, healthcare, green environmental protection, intelligent manufacturing, transportation and logistics, and education, culture, and tourism. Since entering the healthcare sector in 2014, Haier Industrial Finance has consistently adhered to its strategic direction of “deep vertical industry focus, comprehensive value chain deployment, and open ecosystem building,” fostering a “new model of co-creation and win-win cooperation” and a “new ecosystem of symbiosis and shared benefits.” To date, it has disbursed over RMB 5 billion in funding, connected with more than 2,000 private hospitals, and achieved a market share of nearly 50% in private healthcare debt financing, securing a leading position in the industry.

After a period of development, beyond the “white goods” label, under the integration of industry and finance,What strategic moves has Haier Industrial Finance made in the healthcare sector? How does it achieve long-term integration between its strong capital capabilities and the relatively closed healthcare industry, identify common value among dispersed and independent stakeholders, and complete an ecosystem-oriented layout that links the entire industry?To this end, VCBeat (WeChat ID: vcbeat) conducted an exclusive interview with Mr. Jing Guangchao, General Manager of the Healthcare Division at Haier Industrial Finance. The discussion explored how Haier Industrial Finance leverages the symbiotic relationship between industry and finance to cultivate an ecosystem for growth.

 Mr. Jing Guangchao delivered a speech at the “2018 Industry-Finance Co-Creation Summit on the New Ecosystem for Private Healthcare,” jointly organized by Haier Industrial Finance, the Investment and Financing Branch of the China Non-Public Medical Institutions Association, the Hospital Management Branch of the China Non-Public Medical Institutions Association, and DXY.

Compared with other investment firms, Haier Industrial Finance positions itself as an industrial investment bank, distinguishing itself from general financial investors.Haier Industrial Finance aims to establish long-term partnerships with enterprises, leveraging the inherent liquidity and connectivity of capital to build a robust ecosystem platform, ultimately achieving the reconstruction of value within the healthcare ecosystem.

Currently, Haier Industrial Finance’s Healthcare Division focuses on the broader health sector, actively deploying across multiple domains including healthcare services, pharmaceutical distribution, pharmaceutical manufacturing, medical devices, and smart hardware. Within this expansive landscape,Haier Industrial Finance is currently focusing on the development of private hospitals.

Why Target Private Hospitals and Break Through the Non-Public Healthcare Sector? First, due to the inherent characteristics of the healthcare industry; second, in light of Haier Industrial Finance’s capability to provide diversified services.

As a sunrise industry, the healthcare sector has attracted numerous financial institutions. Against the backdrop of favorable policy dividends, private hospitals have maintained an annual growth rate of over 10% in number. According to the "2017 Statistical Communiqué on National Economic and Social Development," there were 18,000 private hospitals across China, surpassing public hospitals in number, with their bed capacity accounting for 24% of the total beds in all types of hospitals.

At the policy level, since the implementation of the new healthcare reform in 2009, the state has issued a series of policy documents to encourage social capital to enter the healthcare market.

During the influx of capital into private hospitals, much of it has flowed into chain specialty sectors such as dentistry, ophthalmology, and hemodialysis, due to their greater ease of standardization and replicability. However, Haier Industrial Finance has opted for the less-traveled path of general private hospitals, pooling resources from various parties to develop distinctive specialty departments.

Why Choose a Different Path? Jing Guangchao told VCBeat, “Hospitals have always been the core of healthcare. The coordinated reforms of medical services, health insurance, and pharmaceuticals are all centered around hospitals.”The vast majority of hospitals invest more funds in building additional wards, but hospital expansion has its limits and cannot grow indefinitely. It must shift from extensive expansion to intensive growth, which means focusing on specialty development.”

This point is also corroborated by data. According to relevant data from Boston Consulting Group, in 2016, the number of inpatients at private hospitals accounted for only 16% of the national total; in 2017, VCBeat learned at the “Summit on Co-creating a New Ecosystem for Socially Run Healthcare through Industry-Finance Collaboration” that this proportion currently stands at 17.6%, representing an increase of only 1.6 percentage points.

In other words, private hospitals are not yet compelling enough in attracting patients.For private hospitals to achieve both critical acclaim and strong patient volume, enhancing the quality of diagnosis and treatment services through intensive growth is an inevitable path. The route of expanding scale will quickly encounter a saturation point for growth.

In 2017, the 41 private hospitals that published their annual reports reported a total revenue of RMB 6.08 billion, representing a year-on-year increase of 35.36%. The total net profit attributable to parent company shareholders amounted to RMB 144 million, with an average of RMB 3.52 million per hospital, marking a year-on-year decrease of 35.22% (data source: Guangzheng Hengsheng Research Report). While revenue grew, the growth rate of net profit declined, primarily due to increased operating costs driven by chain expansion and advertising and marketing expenditures.

The path focused on expansion and advertising marketing is clearly unviable, as it closely mirrors the trajectory by which the Putian medical network expanded a decade ago.

Pursuing a path of intensive growth, mere capital inflows cannot solve the problem; private hospitals require comprehensive financial solutions.

Jing Guangchao stated to VCBeat, “The capital needs of non-public healthcare have two characteristics. First, with national policies encouraging private investment in healthcare, the non-public healthcare sector is experiencing rapid growth and has an urgent need for capital. Second, the funding requirements of non-public healthcare are actually quite diverse.”

Jing Guangchao further explained, “This diversification is reflected in many aspects, including the diversification of financial products themselves, such as debt, equity, or other forms. It also encompasses the diversification of the nature of capital.”We often say that one renminbi note is the same as another, but in reality, money originating from different institutions carries different implications.“Private hospitals have limited capacity to link resources, and what connects these resources? In fact, the most effective connector is capital, as it integrates all relevant stakeholders. Through this financial channel, stakeholders can identify demand-side partners and establish collaborations.”

In simple terms, Haier Industrial Finance is able to provide differentiated and customized financial services for various types of customers, but it does not stop at financial services. In the process of connecting multiple parties, Haier Industrial Finance acts as a platform, transforming originally isolated single-point resources within industries into an industrial ecosystem based on user needs. By leveraging its connectivity capabilities, it brings new pathways for industrial transformation.

This is precisely what Haier Industrial Finance is committed to: leveraging finance as a link to empower the industry and build a sustainable, closed-loop healthcare ecosystem. In this process, Haier Industrial Finance relies on its brand strength and capabilities to connect hospitals, physician groups, digital health providers, pharmaceutical supply chains, and other stakeholders, thereby creating a sustainable, closed-loop healthcare ecosystem.

In addressing user pain points, the healthcare industry is characterized by long investment cycles and slow returns. Consequently, Haier Industrial Finance has chosen not to acquire customers through project-based financing or simple capital lending, but rather by accompanying users throughout their growth journey, customizing business models according to customer needs, and providing differentiated solutions.

Take a private hospital group previously served by Haier Industrial Finance as an example. In the early stage, the hospital’s financing needs were focused on renovating and expanding its departments; in the mid-term, it aimed to develop specialized centers of excellence; and in the later stage, it sought to leverage capital for expansion.

Haier Industrial Finance provided RMB 45 million in standard financial leasing products during the first phase to upgrade the pediatric outpatient department; in the second phase, it offered RMB 2 million in operating lease products to establish specialized departments and achieve differentiated competitive advantages in the region; in the third phase, it subscribed to a 10% equity stake, introducing equity capital to expand the funding scale. Through self-built development, outward mergers and acquisitions for controlling interests, and strategic investments, it aims to build a comprehensive health service chain covering healthcare, medical treatment, rehabilitation, and elderly care, ultimately forming a regional health complex.

While this comprehensive financial solution is unique to the client, it is merely one of many standardized cases for Haier Industrial Finance, which serves private hospitals, pharmaceutical supply chains, medical equipment providers, physician groups, and other enterprises.

After addressing the distinct pain points of different users through differentiated and customized solutions, it is essential to identify value propositions that foster win-win cooperation among multiple stakeholders, thereby transforming isolated clients into participants in an open ecosystem. At the “Summit on Co-Creating a New Ecosystem for Socially-Run Healthcare through Industry-Finance Collaboration,” Mr. Jing Guangchao summarized the future strategic direction of Haier Industrial Finance’s Medical Division into three pillars: “ecosystem-oriented, specialized, and regionalized.”

“2018 Summit on Co-creating a New Ecosystem for Private Healthcare through Industry-Finance Collaboration”"Scene

While the specialized approach appears to primarily serve private hospitals, leveraging medical devices as an entry point and disease categories as a foundation, the development of distinctive specialty disciplines can connect multiple stakeholders—including the pharmaceutical supply chain, physician groups, and device manufacturers—to achieve win-win cooperation.

Private hospitals possess both advantages and limitations in developing specialized departments. Compared with the institutional constraints faced by public hospitals, private hospitals operate with greater flexibility and openness in their mechanisms; however, significant shortcomings such as talent shortages, insufficient funding, and inadequate equipment have become major constraints on their development.

These gaps also serve as entry points for establishing extensive connections. Compared to the constraints on production relations faced by public hospitals, the shortcomings in productivity at private hospitals are easier to address.

Jing Guangchao pointed out: “With such a flexible mechanism in place, how can private hospitals extensively leverage resources to build their own departments and create a win-win situation for all parties? Several key elements are required. First is the mobility of medical talent; models like physician groups are gradually maturing, with feasible pilot implementations already underway. Once talent is secured, private hospitals still need equipment and capital.”

“Traditional financial support could only assist private hospitals in terms of funding, whereas Haier Industrial Finance can connect numerous resources, including the medical device community, physician groups, and pharmaceutical supply chains, to provide flexible financial solutions for healthcare industry clients. Private hospitals can opt for direct leasing, sale-and-leaseback arrangements, commercial factoring, or customized financial products to introduce advanced medical equipment while mitigating financial risks.”

Capital flows rapidly among various entities, but what ultimately accumulates for private hospitals is technology and talent.。

In this process, Haier Industrial Finance has also completed its ecological and regional layout. The regionalization strategy is proposed based on the existing service radius constraints of healthcare, aiming to help private hospitals establish differentiated competitive advantages and secure technological leadership. The next step is to develop regional health complexes that cover the entire medical industry chain.

Finally, by building a medical ecosystem community and providing various essential resources, we empower the industrial ecosystem, facilitate the transformation and upgrading of the healthcare industry, and support the development of China’s health industry.

There is a classic case of product customization involving Haier. Many years ago, farmers in Sichuan Province used Haier washing machines to wash potatoes and sweet potatoes, which resulted in mud clogging the drain pipes. The farmers filed complaints with the manufacturer, alleging poor quality of the washing machines. After learning the true circumstances, Haier developed a washing machine capable of cleaning sweet potatoes, addressing the specific needs of the farmers.

Haier’s DNA of addressing customers’ core needs is also evident in Haier Industrial Finance. While building an ecological closed loop through a deeply vertical industry-line approach is a challenging endeavor, Haier Industrial Finance has chosen to rise to the occasion.

Jing Guangchao told VCBeat, “Our criterion for deciding whether to enter a field is not its difficulty or ease. Our primary consideration is whether customers have such a demand, and how significant that demand is. We also assess whether the endeavor has a certain degree of sustainability. It is evident that the entire healthcare industry is highly interconnected, where a change in one area can have far-reaching effects. Take the pharmaceutical supply chain as an example: policies such as the Consistency Evaluation and the Two-Invoice System impact numerous stakeholders, including pharmaceutical companies, retail pharmacies, hospitals, and physicians.”

In the broader healthcare ecosystem, addressing the needs or pain points of only a single link is merely scratching the surface.

Haier Industrial Finance possesses not only the courage to pioneer but also boasts a team that ranks among the most professional in the industry. The Haier Industrial Finance Healthcare Team focuses on the medical sector, providing diversified services and deeply cultivating the broader health industry. Having served over 1,000 clients, the team has accumulated extensive professional expertise.

Jing Guangchao said, "We hope that the services provided by Haier Industrial Finance go beyond mere financial offerings; finance serves as a vehicle, with the more critical objective being our integration into the ecosystem.”

In selecting partners, Haier Industrial Finance seeks true collaborators rather than mere transactional business relationships. Guided by the philosophy of “openness and mutual benefit,” Haier Industrial Finance recognizes that healthcare is an industry built on trust. As a platform with strong connectivity capabilities, it is committed to partnering with organizations that respect the inherent development patterns of the healthcare sector. These partnerships are not driven by short-term financial returns, but by a genuine commitment to advancing the healthcare industry. Amidst the favorable landscape for private healthcare provision, Haier Industrial Finance aims to join hands with such partners to foster the growth of China’s broader health and wellness industry.