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China’s healthcare sector is swelling by the day due to an ageing population, economic growth and rising income and government initiatives. The world’s second-largest healthcare market, China is now focusing inwards on the procurement of key medical equipment. China medical device manufacturers are now like to get a boost as the country recently moved to ban procurement from foreign firms.
China’s medical device market is dominated by foreign players, mostly from US and Europe, with domestic manufacturers centred around lower value-added devices. High-end medical equipment is largely imported by China. A 2021 Deloitte report said that in the high-value segment, domestic manufacturers had a 30% market share while the rest was dominated by a handful of foreign companies.
Changing landscape for China medical device makers
Back in 2016, the country issued the ‘Healthy China 2030’ plan, which advocated boosting domestic manufacturing of high-end medical equipment, accelerating transformation and upgradation of medical devices, and improving the quality of medical diagnosis.
Additionally, the one year earlier announced ‘Made in China 2025’ policy reflects the focus on domestic firms, with a goal of increasing domestic medical device usage in hospitals to 70% by 2025 and 95% by 2030. In early 2021, Beijing issued guidance on entirely procuring 137 medical device categories from domestic manufacturers.
China’s biggest imports in the sector are diagnostic and therapeutic equipment, for example, devices such as CT and MRI. Incidentally, General Electric, Philips and Siemens are the top players in China for these medical devices. Chinese estimates say that foreign firms have a market share of 70% and 80% in sales of CT and MRI equipment. The three foreign companies mentioned above make around 80% of high-value equipment in China, as per a report from local media. GE Healthcare, Siemens Healthineers and Philips, all manufacture CTs and MRIs locally in China.
A recent amendment to the government procurement law gives preferential treatment to domestic firms manufacturing these high-value medical devices. Separately, Beijing is urging foreign firms to transfer technology to domestic firms to boost its local medical equipment industry.
The Chinese government’s 14th Medical Equipment 5-Year Plan (2021–25) has a goal of having more than six Chinese manufacturers among the top 50 global medical device companies.
More recently, the provincial governments of Hubei, Shanxi, Anhui, and Ningxia Hui effectively banned local hospitals from procuring medical devices from foreign companies and only buying equipment from domestic companies. The local authorities have also issued directives for hospitals to seek permission from the government if they want to import medical equipment.
Boon for China medical device makers?
The ban on foreign medical equipment manufacturers opens a huge opportunity for domestic firms in a market valued at over $140 bn in 2021. But are Chinese medical equipment manufacturers ready to replace foreign firms?
Shenzhen Mindray Bio-Medical Electronics (SZSE:30760) was founded in 1991 and is a leader in in vitro diagnostics and medical imaging. The company has a global presence and has subsidiaries and offices in the Americas, Africa, Asia-Pacific and Europe.
Founded in 1995, Edan Instruments (SZSE:300206) develops, manufactures and sells products for patient monitoring, ECG diagnosis, ultrasound imaging, in vitro diagnosis and smart health management. The company has sales channels in some 170 countries around the globe and has R&D centres in Silicon Balley and San Diego in the United States.
United Imaging Healthcare (SHSE:688271) went public in August and is a leader in medical imaging systems. The company’s PET/CT technology is its flagship product and among the best available in China. The company is largely focused on innovation and more than 40% of its employees work in the R&D vertical of the company.
Some other notable domestic companies operating in high-value medical equipment manufacturing are Anjian Technology, Shanghai Microport Medical Devices, Shandong Weigao Group and Lepu Medical Equipment, among several others.
