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China’s healthcare market featured continuous, robust growth and dynamic regulatory change in 2016.
2016 saw China’s medical device market reach USD 56 billion (<> RMB 370 billion), an increase of 20.1 percent in local currency when compared with that of 2015. Total sales of pharmaceutical and health products reached USD 277billion (<>RMB 1,839 billion) in 2016, growing by 10.4 year on year; retail sales numbered CNY 368billion (USD 55.5billion), a growth of 9.5 percent.
The medical device market is one of the fastest growing market sectors in China with the industry maintaining double-digit growth for over a decade. In 2016, the medical device market reached $53.62 billion, an increase of 20.1 percent compared to 2015. 72.7% of this growth is fueled by hospital procurements
In 2016, China’s total health expenditure was USD 663 billion, and accounted for 6 percent of China’s GDP, which is a far lower percentage than countries like the U.S. (17 percent), Germany (11 percent), Canada (10 percent), and Japan (10 percent). Health expenditure is expected to increase to between 6.5-7 percent by 2020. Globally, the medical device market is approximately 42 percent the size of the pharmaceuticals market. In China, however, the percentage is much lower at approximately 14 percent. This demonstrates the significant growth potential of the sector. In 2016, the medical device market in China reached 53.62 billion USDs, an increase of 20.1 percent compared to 2015. 72.7% of this growth is fueled by hospital procurement.
Market size of the Chinese medical device sector (unit: USD100 million)
Source: 2016 China Medical Device Blue Book
In 2016, China renewed efforts to deepen its healthcare system reform and set the ambitious goal of ensuring that all citizens have access to basic healthcare services by 2020.
The State Council released an outline for its “Healthy China 2030” initiative - placing health at the center of China’s policy formulation mechanism, aiming to address health in all relevant government policy areas. China also published the “13th Five-Year Plan for Medical and Healthcare System Reform”, which emphasize breakthroughs in the hierarchical medical treatment system, modern hospital management, universal healthcare, drug supply assurance, all covered by comprehensive supervision during the 13th Five-Year Plan.
Currently China’s medical device market has two distinct categories. The first of these are the domestic manufacturers who supply low to mid-range products. Over 80 percent of the domestic manufacturers belong to this category. The second category includes foreign-sourced, high-end products supplied by large companies like GE, J&J, Philips, and Siemens. According to the Annual Report of China’s healthcare Industry issued by China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMHPIE), China had approximately 16,000 domestic medical device and equipment manufacturing companies in 2017. The United States ranks as the #1 foreign supplier of medical devices in China, followed by Germany and Japan. These three countries represent the majority share of China’s imports.
In 2016, China had approximately 27,360 hospitals, of which 23,900 were public and 3460 were private. Foreign-invested medical institutions are facing challenges of high corporate tax rates, a cap on foreign ownership and eligibility requirements for Social Health Insurance. All hospitals are classed into three levels (Tier one, two and three) based on hospital size and capability. Tier three is the most comprehensive of general hospitals with a bed capacity exceeding 500. They are responsible for providing specialist health services perform a bigger role with regard to medical education and scientific research and they serve as medical hubs providing care to multiple regions.
Chinese hospitals consider U.S. products to be of superior quality and the most technologically advanced; and welcome medical equipment and products with high-technology content. U.S. firms garner nearly three-quarters of their local revenues from tier three hospitals and the remainder from tier two hospitals. In an effort to capitalize on China’s burgeoning medical device market, U.S. firms have expanded their local presence in China while also targeting the country’s rural population. At the same time, Chinese domestic medical device companies are consolidating, upgrading quality, and beginning to compete in medium-level technology niches. With the government policy of supporting and encouraging domestic medical device innovation, some local manufacturers are growing stronger and competing with foreign suppliers. In addition, the government’s “Made in China 2025” initiative to improve industry efficiency, product quality, and brand reputation will further spur the development of domestic medical device manufactures and will increase the competiveness of Chinese medical device brands in the long term.
Significant potential exists for U.S. companies interested in entry or expansion in the Chinese market. China continues to deepen public hospital reform at all levels. However, Medical device companies will still face the pressure to cut prices from the public hospitals. The procurement process, price limits, and secondary bargaining are remaining issues relating to the centralized procurement and bidding process in China.
China’s medical information and technology (ICT) market is projected to be worth USD $6.5 billion by 2020 as China continues to push innovation, big data, and efficiency.
Best Prospects Include:
· Chronic disease drugs
· In vitro diagnostic equipment and reagents: clinical and diagnostic analysis equipment, diagnostic reagents, medical test and basic equipment instruments, and point of care testing (POCT).
· Implantable and intervention materials and artificial organs: Interventional materials, implantable artificial organs, contact artificial organs, stent, implantable materials, and artificial organ assisting equipment.
· Therapeutic products: Tri-dimensional ultrasonic-focused therapeutic systems, body rotary gamma knife, simulator, linear accelerator, laser diagnostic and surgical equipment, nuclide treatment equipment, physical and rehabilitation equipment.
· Medical diagnostic and imaging equipment: black & white and colored supersonic diagnostic units, sleeping monitor, digital X-ray system, MRI, CT, DR, and ultrasound equipment.
· Surgical and emergency appliances: anesthesia ventilation systems and components: high frequency surgical equipment, high frequency and voltage generators.
· Medical equipment parts and accessories.
· Biotechnology : new drug research and development
· Hospital management and consultation; professional training to medical staffs.
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