The annual J.P. Morgan Healthcare extravaganza, held last week in San Francisco, was buzzing with excitement about China. Optimism was running high and, best of all, participants were discussing real deals.

It was the second year the conference included a China-specific track. The room was often filled to its 200-seat capacity, forcing some attendees to stand at the back and even more to peer in through the glass doors at the back of the room.

A total of 15 companies, ranging from highly innovative to branded generics drug companies, as well as CROs and distributors, presented their plans for continued growth in China’s expanding market. Each one was strongly positive about their prospects in China as well as the market overall.

The strong sense of positive energy felt throughout J.P. Morgan this year, was even more evident in the China Reception following the company presentations. The reception area was filled with Chinese as well as Westerners, buzzing with excitement regarding the opportunities for the life science industry in China and its 17% to 20% annual growth rate.

During the company presentations, the theme of innovation was strong. For example, John Oyler, CEO of BeiGene Co., declared that BeiGene’s highly experienced team will build the company into the Amgen or Genentech of China. They have brought on nearly 145 staff, many with significant big pharma experience, in only 12 months. While they still have to deliver on their very ambitious business plan, they appear to be one of the best positioned and most aggressive of several new companies focused on novel drug discovery in China that received significant funding in 2010.

The government can be an important source of support for Western companies in China, Oyler said, though having a strong China connection is important. “You are never as purely Chinese as you could be,” he added, saying that companies need to be in constant discussions with officials.

One company, Zuellig Group, a distributor of Western drugs in China, sold its China operations just over a year ago. William Meaney, CEO of the company, said it sees better opportunities elsewhere in Southeast Asia. Because China wants to foster just a few national “champions” in drug distributors, Zuellig felt like it was fighting an uphill battle. In addition, Zuellig found China to be a capital intensive business that they felt did not provide sufficient return on equity.

But Zuellig admitted it is a special case. “Analysts expect every company to have a China story,” he said, and Zuellig, as a private company, could choose to ignore this pressure.

For Chindex International, which operates private hospitals in China, 2010 actually represented a regulatory breakthrough – actually became less onerous. When the Ministry of Commerce formulated new rules on foreign direct investment, private hospitals was upgraded from “Discouraged” to “Allowed” as an investment target.

That is big victory for companies like Chindex. In 1993, when Roberta Lipson, CEO of the company, first proposed the idea of establishing a foreign-owned private hospital, officials laughed at her. They said it would never happen. Now, the time required to get approvals for projects is shortened from the five years it took to establish the first hospital to closer to 18 months, said Lipton.

The optimism is certainly there, as the conference participants expect a very positive year ahead. Stay tuned for the 31st J.P. Morgan Healthcare Conference – ChinaBio will be back to see whether the high expectations for 2012 were justified.

Disclosure: none.