Medical equipment (China market)

Main article: Medical equipment (global market)

2019: China introduced duties on medical equipment

On September 1, 2019, China introduced the first part of additional duties of 10% on US products worth $75 billion. And on December 15, new 5 percent fees will come into force. Duties have affected some types of medical equipment, including dialysis devices, orthopedic products and hospital consumables.

The perimeter of China's new duties included Varian solutions for radiation therapy, including the Halycon platform. The company estimated losses from the actions of the Chinese government at $21-23 million in 2019, but the manufacturer intends to compensate for them by reducing costs in other areas.

China introduced the first part of additional duties

Radiation therapy is mentioned as one of the areas affected by duties, and it will face some influence. Given that Halycon is going to China, it is possible that shifting the assortment towards Halycon could mitigate this impact, said Evercore ISI analyst Vijay Kumar.

The duties that China imposed on the import of products from USA will also suffer, Stryker especially its orthopedic technologies. According to the company's forecasts, due to duties, it missed $28-30 million in revenue in 2019, while losses of $25 million were previously expected. Perhaps the losses will be higher, since that manufacturer's forecast did not take into account some orthopedic products, says Vijay Kumar.

According to him, Chinese duties will have a minor impact on the business of Medtronic and Baxter.

Although it mentions dialysis products, Baxter imports them to China a little, so we expect that the last round of [duties] will not be an event for the company, the expert said.

As for another American manufacturer of medical equipment, Becton Dickinson, the analyst expects the impact of duties on profit of 1%.

2015: Up to $50 billion

In October 2016, the AuntMinnie.com portal published a study of the Chinese medical equipment market. The report, called "China Medical Device Industry Yearbook - 2016," contains data from various medical sources and services, interviews with health experts, information on the spread of diseases and demographic dynamics.

According to analysts, in 2015, sales of medical equipment in China amounted to $48.5 billion. Since 2010, the market has grown by an average of 22.3% annually, and since 2016, the average annual growth rate will be measured by 15%, researchers predict. According to them, further high growth rates and the presence of factors stimulating the development of the market remain in question.

Dynamics of sales of medical equipment in China from 2010 to 2015

Rules and Guidelines

Chinese authorities, including federal and local governments, play a key role in the local medical device market. Over the years, they have issued many rules and guidelines that support the development, registration, production and distribution of devices, as well as hospital purchases of these products. By October 2016, there are a total of about 14 thousand manufacturers of equipment for healthcare needs and about 186 thousand dealers in the country.

Medical technology is among the 10 key sectors developed under the national Made in China 2025 program, which provides for the transformation into China a leading global power in the field of high-tech industry through the construction of 40 innovative centers. The program supports the innovation and industrial development of medical equipment, including diagnostic imaging solutions, medical robotic systems, cardiovascular stents, mobile health care and technology. 3D Printing

In January 2016, the Ministry of Science and Technology of China issued the 12th plan for the five-year development of the medical device industry. Particular emphasis in this regard is placed on products in the field of medical imaging.

In the summer of 2016, Beijing hosted an expert discussion on the implementation of this plan. The event discussed the development of market segments, innovative technologies, key products and policy measures. As a result of this discussion, it became clear that the Chinese medical equipment market received strong support for several years to come.

Population and medical expenses

By the end of 2015, about 1.375 billion people lived in China, the natural population growth was measured by almost 5%. The high age group of people (over 65 years old) accounted for 10.5% of the population. The number of Chinese who turned 65 or more grew by 4% per year.

At the end of 2015, 300 million residents of the Middle Kingdom had chronic diseases. These include cardiovascular diseases, tumors, diabetes and respiratory diseases. Among cancer patients in men, lung cancer is most common, and in women, breast cancer. Against the backdrop of an increase in the number of patients, the PRC authorities have made control of chronic diseases one of the key tasks, AuntMinnie.com notes.

Total health spending in China (including the costs of the state, social services and people themselves) in 2015 reached 4 trillion yuan (about $593 billion), which corresponds to 6% of the country's gross domestic product. The average annual medical expenses per person amounted to 2,952 yuan (about $438).

Dynamics of medical expenditures in China from 2010 to 2015

Medical resources and services

As of October 2016, there are about 1 million healthcare institutions in China: hospitals, medical institutes, specialized clinics, etc. In 2008, 19,712 hospitals worked in the country, in 2015 their number rose to 27,226. Thus, the annual growth in the number of new hospitals was 4.7%, which was largely due to private institutions, the number of which increased by 14.6% annually - from 5403 in 2008 to 14,049 in 2015.

Dynamics of change in the number of beds for patients in China from 2010 to 2015

In the first half of 2016, there were 3.85 billion patients in China, which is 2.3% more than a year earlier. Among them - 1.38 billion visitors to public hospitals and 190 million - private. This is 4.6% and 18.5% respectively more than the values ​ ​ that occurred in the first two quarters of 2015.

The number of beds for patients in Chinese medical institutions grew annually by 7.9% between 2010 and 2015 - from 4.8 to 7 million units. The share of bed patients in the total number of beds increased to 76%. In 2015, more than 90% of new beds for patients appeared in hospitals in the country, and their ratio to 1000 people increased to 5.11 from 4.83 in 2014. By 2020, the indicator will reach 6, predicted in the Chinese government.

China still lacks health professionals, including doctors and nurses, analysts said. It is expected that by 2020, one million people in China will account for 2500 doctors and 3140 orderlies.

Manufacturers and capabilities

China is one of the world's most important medical equipment markets for many international companies, such as GE Healthcare, Philips Healthcare, Medtronic, Boston Scientific and Stryker, which actively develop business in the country through several strategic measures (investments, mergers and acquisitions, partnerships, localization, etc.).

In 2016, the largest segments of the Chinese medical equipment market were medical image scanners, laboratory diagnostics, cardiovascular devices and orthopedic equipment - they occupied more than 60% of sales. The largest costs in the industry come from medical imaging devices, the demand for which is growing largely thanks to district hospitals and medical centers in small towns, said Yong Yi, marketing director at Wisonic, a company that manufactures color ultrasound equipment, medical monitors and telemedicine products.

According to him, China plans to create a hierarchical medical system to improve health services in regional polyclinics and village medical centers, especially in less developed regions. It is assumed that the new initiative will lead to an increase in the patency of these medical institutions and, accordingly, will increase the demand for devices such as biochemical analyzers, computed tomographs, digital radiography and ultrasound devices, Mr. Yee noted.

Medtechnics is an attractive sector for investing in healthcare, says Share Capital Managing Director Howard Zhao. Thanks to government support and growing demand for medical systems, there are more companies founded by former executives of other such firms. Most of them are very ambitious and are well acquainted with medicine and technology, entering the market of such companies adds more investment opportunities, Zhao said. Share Capital itself invested in the following medical companies: Dr. Smile Medical Group, BGI, WeiMai Medical Equipment, JuRong Medical Technology и др.

In the city of Shenzhen, which has long been considered the production center of China, there are more than 600 manufacturers of medical equipment of 2 thousand dealers (data for 2015). In 2015, they delivered products worth 30 billion yuan ($4.45 billion), which is 20% more compared to 2014.

Most manufacturers of medical equipment in Shenzhen belong to private business and are more ready to master new market segments, says Howard Zhao. In particular, we are talking about companies such as Mindray, SonoScape, Edan and Landwind, which produce medical electronics, laboratory diagnostics equipment and other solutions. Shenzhen is among the key Chinese cities in terms of exporting medical equipment, writes AuntMinnie.com.^[1]

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