Devices & Diagnostics

Medical industry opportunities in China

It’s been a few days since I returned from my first trip to China and, while I’ve had a chance to digest some of the things I witnessed at the China International Medical Equipment Fair in Shenzhen, I’m still looking for some perspective. Namely, how big an opportunity is the Chinese market for medical device […]

It’s been a few days since I returned from my first trip to China and, while I’ve had a chance to digest some of the things I witnessed at the China International Medical Equipment Fair in Shenzhen, I’m still looking for some perspective.

Namely, how big an opportunity is the Chinese market for medical device companies in the U.S.?

From the outside looking in, it certainly seems to be an enormous one due to the sheer size and density of the country. There are something like 170 cities in China with populations of more than one million people. In the U.S. there are nine. Getting the proverbial 1 percent of that market just might make your head explode.

But there are many factors that make doing business in China more than an exercise in number-crunching: Strict government regulations, the language barrier, the time difference, the culture shock, etc.

But if there’s one thing I learned during my brief trip, it’s that the opportunities in China for the American medical device industry are extraordinary.

The People’s Republic is in the midst of an unprecedented healthcare overhaul, the likes of which we’ve never witnessed in this country (though we might be about to get a taste). By some estimates, more than 2,400 hospitals will be built in this country by 2011. To put that into perspective, there are approximately 5,815 registered hospitals in the U.S., according to the American Hospital Assn.

Part of the boom was fueled by the global economic recession. In 2009, as the crisis escalated, the Chinese government opened up its purse strings with two massive initiatives.

First, it pumped more than $586 billion into an economic stimulus package, earmarked for infrastructure and social welfare improvements all over the country. That money has been put to re-building roads, railways and in some cases entire cities. A portion of it went into responding to the massive Sichuan earthquake in 2008.

Second, the government put another $124 billion into a healthcare reform package designed to usher China’s antiquated medical system into the 21st century. According to InMedica, the medical research division of IMS Research, about 50 percent of those funds will go toward expanding insurance coverage, while 30 percent is earmarked for construction of rural healthcare systems and the remaining 20 percent for building public hospitals. The goal is to provide basic medical services for the entire population by 2011.

“The poor people’s kids are dying,” said Nathaniel Whitney, the president of Whitney Research, a market information and management consulting service based in the U.S. and China. “And it isn’t just in the countryside, it was the poor people in the city too.”

Whitney, who lives and works in China, told me that the changes are long overdue and stem from public demand for better healthcare. In China, unlike in the American medical system, most healthcare bills are footed completely by the consumer — often in cash.

The government recognizes that the situation is untenable, he said, and believes that investing in healthcare will be good for the economy as people use the new health services.

Whitney said the massive hospitals and health clinic build-out has already begun; companies are doing a brisk business in China. Some of the likely winners include big capital equipment makers of things like MRI and X-ray machines. Even more impressive, according to Whitney, will be the demand for in vitro diagnostics.

“On the really local level, rapid test manufacturers will benefit,” he said.

But by how much?

According to Whitney, the numbers are all over the place. Conservative estimates put the growth potential at anywhere from 18 percent to 20 percent year-over-year.

That growth potential has already begun fueling intense domestic competition in China, said Walter Zhang, president and CEO of Landwind Medical, a Shenzhen-based ultrasound device maker.

“Healthcare reform is a very good advantage for all health companies,” Zhang said. “There is very furious competition in China.”

Landwind has an advantage over its competitors, Zhang said, because it’s been distributing Western equipment in China for companies like Siemens for more than a decade. That helped create a strong sales infrastructure throughout the entire country.

Even so, Zhang has his eye on the global market, saying the company’s goal is to do 50 percent of its business overseas. Perhaps that’s merely a hedge against the fierce competitio in-country. Or maybe it’s because, as many believe in his native land, Zhang feels like his time — and China’s — has come.

As I wandered through the nine vast exhibition halls at CMEF, witnessing an aggressiveness and sense of purpose I’ve rarely seen in the States, I began to feel the same way. Perhaps it is China’s time.

If that’s the case, how do we in the West make sure we share in the opportunity, rather than be left behind?

Those thoughts followed me through another 21-hour journey home to Boston and continue to dog me today. I don’t think there’s an immediate answer, except to start paying more attention. Perhaps I got my perspective after all.

In closing, I would like to thank the people at Reed Expositions, especially my hosts at Reed Sinopharm Exhibitions, for giving me a chance to witness this phenomenon first-hand and for taking great care of me while I visited their fascinating country.

I would also like to thank the people of Shenzhen, who went out of their way to make me feel very comfortable (despite my knowledge of only two words in Chinese). I’m grateful for your hospitality. You can only get so far on “Hello” and “Thank you.”

Disclosure: This trip to Shenzhen was sponsored by Reed Exhibitions.

The Massachusetts Medical Devices Journal is the online journal of the medical devices industry in the Commonwealth and New England, providing day-to-day coverage of the devices that save lives, the people behind them, and the burgeoning trends and developments within the industry.

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