Welfare policy-Correct imbalances: China has transformed itself into a global economic power since it began to open up and reform in 1978-but has failed to broadly distribute wealth. Growth in state-owned industries and government-led investments
since 2000 have further exacerbated inequities, and the new administration has made better wealth distribution a key priority.

China's welfare policy aims to correct imbalances on three fronts: Region-vs-region, urban-vs-rural, and rich-vs-poor. The government plans to create jobs, guarantee employment for college graduates, foster SMEs, emphasize social responsibility at the corporate level, expand the social safety net, and improve the residency-permit system. This year, policies will likely focus on raising minimum wages, improving the census registration process for rural citizens, and land reform.

We expect China to keep raising minimum wages 6-13% pa for the time being, as per its 12th five-year plan. With a new urbanization model to be announced this year, there is much interest in whether efforts will be taking to eliminate census-taking and other practices that discriminate against migrant workers. Improving public services will be crucial in encouraging rural residents to move to urban centers, and an expansion of the social safety network should bolster consumption in second-, third-, and fourth-tier cities.

And:

Health care a key component of soft infrastructure: We expect demand for health care and environmental services to boom under the Xi Jinping-Li Keqiang administration, particularly given the recent issues with smog and H7N9. Medical services are key target in the country's plan to establish a social safety net and soft infrastructure. Health care will see the largest y-y increase in government spending in 2013 as the administration looks to prepare for rapid aging among low-income earners, improve living conditions, and boost consumption by overhauling the medical system.

By 2020, the government has pledged to increase medical insurance coverage (in terms of both drugs and people, the latter by 172m to 1b) and open the medical service market to privately owned institutions. This should spark explosive growth in demand for health care services, offering opportunities makers of health care equipment, drugs, and biopharmaceuticals. The US, Japan, and Korea have experienced a similar phenomenon as their populations have aged.

China's health care market is already growing rapidly-in the past five years, annual health care expenditures increased 128% and the public medical insurance participation rate has almost doubled to 95%. China's pharmaceutical market ranks third in the world in demand terms (up from ninth from five years ago), and per-capita spending on drugs stood at USD60 in 2012 and-compared to Korea's USD289 and the US's KRW1,096- has room to grow in the medium to long term.

China has been aggressively investing through reforms, consumer demand for health care services is surging, and the markets for cheap, quality drugs and medical equipment should growth quickly. The government has cited the biopharmaceutical sector as one of seven promising industries and plans to invest heavily in infrastructure for it-industry revenues amounted to an estimated 2% of the country's GDP in 2012, and the government has set a goal of increasing this to 6% (or CNY3t) by 2020. We expect this to result in a surge in demand for drugs and health care services.

David Fuller's view China's new government, led by Xi Jinping and Li Keqiang, is in the early stages of implementing some very significant economic changes which may persist for the duration of their ten-year rule. Basically, manufacturing and exports will no longer be the top priorities.

Instead, China will focus more on consumer welfare issues, including affordable housing, healthcare, a significant reduction in pollution levels, plus wealth distribution to reduce poverty levels and considerably increase the growing middleclass. To succeed, the government also needs to tackle the formidable problem of corruption.

For investment opportunities in China, I think we should focus on industries that cater to Chinese consumers. One of them, mentioned on several occasions in Fullermoney during the last few years, is healthcare. It is at the top of Samsung Securities' list of welfare and consumer related issues. You can read about these on pages 19 to 36 in the report above, and I commend them to you.

It is not always easy for non Chinese investors to participate in specialist sectors within China's stock market. There are a number of generalist Chinese funds but the only one that I know of which successfully trades in the China Healthcare sector is the Dublin listed Atlantis China Healthcare (ATCHLTH ID), run by Yang Liu of Atlantis Investment Management, and apparently also Lai Yui Ben, according to Bloomberg.

Atlantis had a torrid time in the last decade and beyond, as some veteran subscribers will recall, following the separate and untimely deaths of its key founders. Atlantis' funds also had rollercoaster performances, largely due to swings in China's stock market and some unlisted positions which Yang Liu held. These became temporarily unmarketable in 2008 and part of 2009.

As they resumed trading, I was fortunate to switch my Atlantis positions into the Healthcare Fund in 2010, as did some subscribers. The costs remain excessive, in my opinion, being a management fee of 1.41%, a high on high performance fee of 20%, and a back load of 3% when sold. Nevertheless, the performance has been good this year and should benefit from Xi Jinping's and Li Keqiang's policies. Therefore I am likely to retain this position in anticipation of a medium to longer-term recovery by China's stock market.