With nearly 1.4 billion people, China is the most populous nation on earth. And the number of middle class Chinese now stands at 474 million—more than the entire population of the United States. Naturally, this makes China one of the world’s fastest growing markets for medtech devices.
Healthcare expenditures in China have been growing at double-digits for years and are expected to reach $11.4 billion by 2015. While this number is small compared to the $160 billion spent in the United States, medtech market growth is forecast to be 20% through 2018. Much of the demand is driven by a $120 billion healthcare stimulus begun in 2009, which spurred expenditures in China’s healthcare infrastructure.
Chinese medtech companies such as Mindray and Time Medical Systems have profited from the healthcare push. And there are challenges for U.S. companies hoping to compete. China’s version of the FDA, the State Food and Drug Administration (SFDA) regulates the medical device industry. All imported devices must be regulated with this agency. Ostensibly companies with FDA approval should not have regulatory troubles in China, but in reality, the SFDA is unnecessarily complicated and opaque according to industry analysts. As Lin Xianyong, director of SFDA’s medical device safety supervision division in Shanghai, comments, “There is no clearly defined evaluation and approval responsibility or well-established supervisory mechanism.” In addition, fierce competition among Chinese manufacturers has driven down prices and profits.
Despite the obstacles, China remains an underserved market. For example, while China has 7,100 county hospitals, only 800 have MRI equipment. As a result of this shortage, diagnostic imaging equipment is expected to account for 40% of the Chinese medical device sold in 2013.
China is also experiencing a host of new medical problems associated with its growing affluence. As millions enter the middle class and adopt Western-style diets, there is an increase in coronary artery bypass procedures and a corresponding demand for cardiac surgery devices. In addition, by 2025 China will have 300 million senior citizens who will require healthcare services and quality medical technology. Today 70 percent of all high-end medtech in China is imported, which means significant opportunities exist for companies who can maneuver through the bureaucratic maze of the Middle Kingdom.