The Chinese healthcare industry has been one of the fastest growing healthcare industries in the world and is expected to become the fifth largest by 2010. However, government’s share in the total healthcare expenditure is declining gradually, while that of the private sector is increasing. This trend is expected to continue until 2010, creating growth opportunities for private participants in the healthcare industry (Source: Frost and Sullivan). Over the past 25 years, the government reduced its share of healthcare expenditures from 36% to 15%, with patients paying up to two thirds of their medical bills. State-owned hospitals are being changed into private nonprofit or for-profit entities. The vast majority, however, still remain state-owned with only some 1.6% of hospital beds being for-profit (Source: Genetic Engineering and Biotech News). The rapid growth of this industry, combined with the ongoing reduction in government spending, create tremendous opportunities for those who are positioned to fill the burgeoning demand in this high-growth sector.

China Health Management Corp. (OTC: CNHC) is a healthcare and management company focused on the operation and management of hospitals and the medical industry in China. The company's goal is to establish a leading position in the high-end medical market in Yunnan Province, China in three-five years and to secure a 40% market share of the private medical services industry. On April 28, 2007 China Health Management celebrated the grand opening of the Richland International Hospital in Kunming City, Yunnan Province, China. Since that time, the Company has been extremely active in augmenting the already impressive scope of medical services that Richland offers. Since the first of the year, Richland International Hospital has incorporated dental care services, Traditional Chinese Medicine (TCM), remote healthcare consultation and more into its modern healthcare management model. As the Chinese economy continues to grow, increasing numbers of the huge Chinese population are interested in leveraging their affluence to obtain more sophisticated medical services. In addition, because the Chinese government is actively privatizing the healthcare industry, there are exceptional opportunities for China Health Management Corp. to expand further in this region.

Company research shows that the health-sensitive high-consuming population in China is expanding by 30% every year with a large market potential. About 2%-5% of consumers in the medical market at present would opt for high-end medical institutions. These consumers are mostly white-collar employees or owners of private enterprises who are relatively better educated and have a higher income. They also have higher expectations for their medical services. However, neither public hospitals nor private medical institutions have met their expectations fully until now with China Health Management. According to U.S. pharmaceutical consulting firm IMS Health, China's pharmaceutical industry is expected to grow at a rate of 15%-16% to $1.5-1.6 billion in 2007, compared against a global average growth of 5%-6%. Jiang Feng, president of the China Medical Equipment Industry Association, says that the proportion of the whole healthcare industry, including hospitals, medicine and equipment, only accounts for about 3% of gross domestic production in China, while the proportion in developed countries like the United States and Japan is around 10% (Source: ChinaDaily.com). These indicators demonstrate tremendous room for development in this sector, and China Health Management is aggressively developing its business model in order to take advantage of the fortuitous conditions in the region.

Sales of Western-type pharmaceuticals in China were $19.2 billion in 2005, and currently, 97% of Chinese products are either generics or copies of new drugs. The market is highly fragmented, with the top 10 companies having only 15% of the business and established local or regional niches. The structure of hospital charges are dramatically different from those in the U.S. with a majority of it going to drugs (45–58%) and equipment and a small proportion to doctor and nursing fees. To promote the privatization of the hospital system, the government is trying to attract foreign companies, which can own up to 70% of a hospital joint venture (Source: Genetic Engineering and Biotech News). This active encouragement of the Chinese government and the high level of industry fragmentation are excellent indicators for the feasibility of China Health Management’s plans for expansion.