Developments in China’s Health
China is one of the world’s most attractive healthcare markets, and is by far the fastest growing of all the large emerging markets. The nation’s healthcare spending is projected to grow from USD 374 billion in 2013 to USD 1 trillion in 2020. China will have the largest elderly population in the world by 2016, with almost 10% of the total population over the age of 60. This, coupled with the rapid growth in wealth and disposable income, has resulted in a surge in demand for medical equipment. The Chinese government prides itself in its expanded medical insurance coverage at an official 95% of the country, though this is still widely contested by the public. Nonetheless, it shows that there is increased emphasis on the healthcare sector from not only the government, but also the people of China.
The Current Market
The medical technology market in China is the second largest in the world after the US, totalling over RMB 21 billion in 2013 with an expected 20% annual growth over the next 3 years. While medical devices still take up the smallest share of the entire healthcare market, this segment is growing rapidly and shows high potential for the future.
The local market consists of a large number of small sized manufacturers geographically focused on the eastern and southern coastal areas. 80% market revenue is driven by the provinces of Beijing, Guangdong, Hebei, Jiangsu, and Shanghai. With a total market output of RMB 180 billion, there were just under 15,000 of these low- to mid-volume producers in 2012.
By contrast, imported products dominate the high-end market, supplying high quality and high cost products that are not available locally. In fact, the number of new imported product registrations has increased by a dramatic 49% since 2010. The value of these imports reached RMB 93 billion in 2013, with almost half originating from the US and Germany.
Rise in Domestic Demand
The high-end segment is dominated by foreign products that are either produced abroad or locally but with a foreign design. These products typically have specialised functions as a result of more specific know-how from international experts. Targeted at large domestic premium customers, the main competition in this sector originates from top international and ASEAN companies.
The low-end market, by contrast, is made up of mostly Chinese manufactured products aimed at small-to-medium domestic customers. Concurrently, there is much room for growth in the mid-end market, which occupies 40% of total market share. For this segment, some international companies have developed special ‘eco’ product lines adapted to the mid-range end-customer. These products can have a local design and be locally produced along Chinese standards but originate from specialised foreign known-how.
In China, medical devices are generally categorized into three classes:
- Class I: safety can be ensured through routine administration
- Class II: further control is required to ensure safety of use
- Class III: implanted into the human body, or used for life support, or pose potential risk to the human body and thus require strict safety surveillance
Depending on which class your product falls in, your application procedure will vary. The process is lengthy and very detailed (see box “Registration Procedures”).
We recommend you seek out a specialist to assess for you what your market entry strategy should look like to make the process as smooth as possible.