China Health Care Reform Spurs Rise in Traditional Chinese Medicine Shares

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Shares were mixed in Asia Wednesday. In China, the Shanghai Composite Index rose 1.3% to 3,022, and in Hong Kong the Hang Seng Index fell 0.8% to 20,468. In Japan, the Nikkei 225 Index lost 1.5%, ending the day at 10,199.Reports that China will begin public hospital reform trials sent shares of traditional Chinese medicine company Yunnan Baiyao Group surging 4.1%.

The high cost of health care is an urgent issue in China as in the U.S., but unlike America where a plan to overhaul the system must be ratified before it can be applied, in China, the government often comes up with new plans and puts them to the test in certain areas before implementing sweeping changes throughout the country. In this case, 16 cities have been selected to test reforms of government-run hospitals, according to China Daily, and if all goes well, the reforms will then spread across the country.

In a country where over-prescribing of super-strong and expensive antibiotics has got out of control, the government has structured the reforms to favor hospitals with expertise in certain areas, including traditional Chinese medicine (TCM). According to Andrei Marks, a blogger who has spent time studying the Chinese health care system, "The majority of the Chinese population seeks out TCM and the government actively promotes it and integrates it into the national health care system." The promotion of traditional Chinese medicine could help reduce medical costs. In Hong Kong, it's not unusual for Chinese to bring steaming mugs of strong, bitter tinctures to sick neighbors and friends. I myself have been on the receiving end of such a drink, and once I managed to down the murky, brown liquid, I have to admit I was better the next day!

But medicine is indispensable, and commercial drug companies also rose today: Henan Taloph Pharmaceutical jumped 3.5%, Shenzhen Neptunus Bioengineering climbed 4.1% and Hualan Biological Engineering rose 2.0%.

In Hong Kong, metals companies followed the London Metals Exchange lower. Jiangxi Copper slid 1.5% and Aluminum Corp of China, otherwise known as Chalco, slipped 0.3%.

Warren Buffett-backed BYD Co., which makes batteries and electric cars, fell 2.4% in Hong Kong. According to Bloomberg, BYD will delay the release of its electric cars until the Chinese government determines the subsidies that will be available to buyers and the safety standards that will be required. It has been reported that a limited number of BYD's vehicles will become available in the U.S. this year. Hong Kong-listed DongFeng Motor fell 2.5% and Great Wall motor rose 1.1%.

In Japan, where the government has downgraded the assessment of expected exports, in large part based on the damage the Toyota debacle has caused to the reputation of Japanese cars, today's grilling of Toyota by a U.S. Congressional panel didn't help the value of Japanese carmakers. Toyota fell 1.5%, Nissan tumbled 3.4%, Suzuki lost 1.3% and Honda dropped 0.5%. Shipping companies also closed lower: Mitsui OSK Lines tumbled 2.4% and Nippon Yusen KK fell 1.8%.

On CNBC this morning, investor Enzio von Pfeil, CEO of Economicclock.com, said, "We've kind of given up on Japan's economic prospects, to be honest with you, just because it's frankly got stuck in a rut." Like pouring salt in the wounds of a country trying to claw its way back from a lost decade.
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