06.08.09
After more than 20 years of rapid growth in the high-end healthcare market, Chinese medical suppliers are finding growth opportunities in the medium and lower tier markets where adequate care and basic medical equipment are lacking. Recent government initiatives to establish a universal healthcare insurance system have stimulated the basic healthcare service market. Continuing financial infusion into the rural healthcare system by the central government also has created increased demands in the medium- and lower-tier markets.
In July 2008, the Ministry of Health announced that the central government allocated approximately $397 million to improve county and village healthcare facilities in 2009. In order to combat the worldwide economic recession, the Chinese government announced its stimulus plan in November, injecting roughly $586 billion into the economy by the end of 2010 to stimulate domestic consumption. Healthcare development and the establishment of a fundamental healthcare system are among the 10 designated areas for this stimulus plan. Of the $14.7 billion immediately invested into the domestic market in the fourth quarter of 2008, $1.91 billion is earmarked to expedite healthcare, education and other social infrastructures. The Ministry of Health also announced in November that $706 million would be used to support establishing rural healthcare service systems—$221 million of which is allocated for equipment purchases. This is in addition to the $995 million already budgeted for medical equipment in the government’s five-year plan, which will inject a total of $1.22 billion into the rural healthcare system by the end of 2010.
Such an infusion of funding and demand undoubtedly presents enormous business opportunities for medical technology manufacturers. Leading Chinese manufacturers, such as Wandong Medical Equipment Company and Mindray Medical International Ltd., have the upper hand with long-established brand recognition and sustained market shares.
Foreign producers are quickly catching up to fight for their share of the potential market. GE Medical partnered with Shandong Xinhua Medical Instrument Co. Ltd. in December to form a joint venture to manufacture X-ray systems for the rural market. The initial investment of $10 million was part of a total $25 million investment for the new company. Xinhua Medical holds 51 percent of the shares, while GE owns the balance. Philips Medical Systems acquired Shenzhen Goldway Industries Inc. in April 2008 to tap into the conventional medical electronic market in China and to supply the needs from other emerging markets. Goldway is the second-largest domestic producer of patient monitors behind Mindray. The company also manufactures ultrasounds and other electronic devices.