Development of China’s Medical Device Industry May Discourage Multinational Firms

China is one of the largest medical device manufacturing hubs globally, supplying a range of devices to many countries. But the country’s efforts to strengthen its domestic medical devices industry may create a trust deficit and discourage multinational medical device companies to invest there, claims GlobalData. 
 
Recently, some local ministries and commissions in China have issued a circular prohibiting all public medical institutions from procuring imported medical equipment without approval.
 
GlobalData forecasts the Chinese medical devices market to grow 6% annually through 2030. An increase in the number of hospitals/labs and the country’s aging population are expected to drive the market’s growth.
 
Currently, foreign multinationals dominate the Chinese medical devices market and more than 70% of the high-end medical devices are imported. The new policy will help domestic Chinese medical device manufacturers to gain market share. 
 
“The new policy will encourage domestic companies but may have a negative impact on the foreign companies, which may like to shift their manufacturing facilities to other APAC countries,” said Rohit Anand, a medical devices analyst at GlobalData. “On the other hand, these policies may benefit India and we may see an increased foreign direct investment in the field of medical device manufacturing.”
 
The government wants foreign medical device manufacturers to transfer technologies and their assembly processes to China. It also wants foreign companies to manufacture, design, and procure critical components domestically. However, domestic medical device companies have weak innovation capabilities and low R&D investment and hence they will find it difficult to compete with the established foreign companies. 
 
“Some foreign companies may fear losing high-end technologies, and few may now see China as a less attractive destination to manufacture and sell medical devices, whereas some other will be forced to operate as a separate Chinese entity with squeezed profits,” Anand said. “It may not be possible for medical institutions to completely replace all high-end imported medical devices with domestically manufactured devices over the next few years and China will continue to be an import-dependent country. Also, the new policy may create a trust deficit and discourage medical device companies to invest in China.”