SHANGHAI – At the 6th Annual China Healthcare Investment Conference, global health care investors and local biotechs met and mingled.

For the investors, many of whom traveled to China from the U.S., Hong Kong or Taiwan, they were looking for an answer to a deceptively simple question, coined best by the moderator: "If you had a million dollars and wanted to maximize your return by 2020, where would you put your money, in China or the U.S.?"

The answer, given by more than one expert: "Put 60 percent of your money in China and 40 percent in the U.S."

Such confidence in the China market is surprising, given U.S. biotechs have had a stellar year and China has been beset by challenges, including the overall economic slowdown, lengthy delays in drug approvals, anticorruption campaigns and ongoing sector-wide reforms that cause uncertainty and risk.

China also has yet to produce a blockbuster drug and many predict it is at least 10 years from doing so.

But looking too closely at the present, or expecting China to follow a path to success that imitates either the U.S. or other markets would appear to be beside the point. It is the larger trends that evoke confidence: China's significant unmet medical needs, a rapidly aging population, increased government expenditure and investment in innovation all come together to make a bet on the future seem worthwhile.

While it might seem gloomy that the economy is slowing for the first time in decades to 7 percent growth, the health care industry is expected to far outstrip that with projected growth rates of 12 percent to 20 percent by 2025, according to Richard Yeh, head of health care research at Citi Research.

That stunning acceleration is in part because China needs more effective drugs suited to the needs of its population.

"Among 4,500 kinds of diseases, 90 percent lack effective drugs for treatment. China needs more good medicine urgently," said Guowei Sang, former vice chairman of the Standing Committee of the National People's Congress.

In a detailed presentation, Sang pointed to promising cases of me-too, me-better and, in some cases, innovative drug projects developed in China such as butylphthalide for cerebrovascular disease, peramivir tryhydrate injection for influenza A, icotinib for non-small-cell lung cancer, imrecoxib for inflammation, chidamide for tumors and the Japanese encephalitis vaccine.

China has 13 chemical and biological drugs in trials under the innovative category (1.1) classification, he said. He urged for more support for translational medicine and looks to innovation to close China's drug gap.

But according to Citi's Yeh, China is undergoing a paradigm shift with key structural changes; hospital privatization, commercial medical insurance, changes in the pricing and cost control frameworks, shifts in the prescription mix and R&D are all creating seismic tremors.

The biggest investment opportunities, he said, are the rise of mHealth, private hospitals, commercial insurance, biosimilars, genome sequencing/precision medicine, increased M&A and more domestic players gaining MNC market share. Calling it a milestone, "2014 has been an important period, the government allowed private hospitals to be established." Yeh added there is a growing focus on biologics, "starting from a low point but growing very fast."

The capital markets have shifted, too, showing a new appetite for innovation.

While many Chinese companies are stuck in a queue waiting for a chance to IPO, innovative local biotech Luye Pharmaceutical Ltd. got its chance to go public in Hong Kong, raising a whopping $760 million. To the company's advisors at Citi, it showed consumer investors are looking at companies in a new way.

"We are past marketing stories; it is about [product] differentiation," said William Cho, director of APAC Healthcare at Citi Global Markets Asia, in reference to the investor response he saw firsthand on the IPO roadshow for Luye Pharma.

"In China, the [distribution] channel is no longer the king; in future, the product will be the king," said Yeh.

But in the meantime, for most companies the surest path to profits remains generics.

"Now more than 90 percent of the market is dominated by generics and the makers are rich, but it will change," said Hualiang Jiang, of the Shanghai Institute of Materia Medica, or SIMM. "As they have more money and cash to spend on innovation, it will make innovation the trend, in 20 or 30 years."