The Flanders-China Chamber of Commerce and Medvia organized a webinar focusing on the “Opportunities and Challenges in China’s MedTech Industry” on 8 June 2023. This event was organized with the support of Flanders Investment & Trade.
Ms Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce welcomed the speakers and the participants to the webinar. Ms Sonck attended the opening ceremony of the Barco plant in the Suzhou Industrial Park in March, where other members of the FCCC also have investments. China remains an attractive market for Flemish medtech companies. China is still the second largest market in healthcare spending in the world and will continue to need foreign technology. China's medtech market has been growing rapidly and this growth is expected to continue in the coming years. The Covid pandemic has accelerated the demand for medtech products and services. China has an aging population and needs innovative healthcare solutions. There is demand for imaging technology, telemedicine, MDI and healthcare. China remains a market which cannot be ignored. There are risks doing business in China, but not doing business in China is an even bigger risk. Our Chamber published studies on the opportunities in the healthcare market and in the biotech sector in China, which can be obtained by sending an email to the Chamber. The studies were published with the support of structural partner Flanders Investment & Trade.
Mr Johan Lecocq, International Business Development Manager, Medvia, explained that Medvia has over 120 members active in medtech, health and biotech. Medvia supports its members on their innovation journey. Looking beyond the European borders is essential to be successful. Medvia is collaborating with its partners – including the Flanders-China Chamber of Commerce – to provide the necessary support,
Ms Ines Liu, Senior Manager, Dezan Shira & Associates, talked about “Opportunities and Challenges in the MedTech industry”. China is a promising market for the global medtech industry in terms of size, diversity and growth potential. China has the largest population in the world and an aging demographic with increased incidences of non-communicable diseases (NCDs). The “Healthcare 2030” initiative is driving efficiency and cost effectiveness in the delivery of healthcare services.
The key trends to shape China's healthcare industry are:
• Effective epidemic surveillance and management: the Covid-19 pandemic has left an indelible impact on healthcare all over the world.
• Aging-oriented healthcare, which is one of the key drivers shaping healthcare systems. In 2019, 254 million people in China were 60 years or older and by 2040 this number is expected to increase to 402 million, making up around 28% of the population.
• Health awareness in young people: increasing consciousness of a healthy lifestyle, such as a willingness to pay more for healthy food and healthcare services.
The Covid-19 pandemic has served as a catalyst for the digital healthcare market, including internet hospitals and online drug orders. AI healthcare includes medical imaging and AI drug discovery.
A growing number of people seek medical assistance for long-term illnesses, such as hypertension and cardio-vascular diseases. Therefore there is a rising demand for medical devices to monitor health conditions. The demand for reproductive technology is also on the rise. China's in-vitro fertilization market is expected to be worth more than USD2.8 billion by 2025. The rehabilitation market is also growing in China, driven by government support, an aging population, and an increase in the number of people with chronic diseases and disabilities. The number of rehabilitation hospitals in China is rising, and private hospitals account for 77.53% of the total in this category. In 2021 there were 810 rehabilitation hospitals in China. This market is expected to grow from CNY45.03 billion in 2021 to CNY61.57 billion in 2023.
Regionally, the key growth areas are:
• The Hainan Medical Zone and Bo'ao Lecheng International Tourism Pilot Zone, designated as a medical tourism zone since 2018. The zone has attracted private healthcare providers from several countries. The Hainan provincial government has also issued the Integration and Innovation Reform Plan (IIR Plan).
• The Yangtze River Delta (YRD): one of the most dynamic and economically prosperous regions with a population of over 220 million people, developing a world-class biomedical cluster.
• The Greater Bay Area (GBA): a major hub for the pharmaceutical and medical device industry.
Key considerations for market entry:
• When considering to invest, check whether your specific sector is on the negative list or the catalogue of encouraged industries. The 2022 catalogue added several new items to the encouraged category.
• Foreign investment in medical institutions is still limited to a joint venture structure.
• Human stem cells, gene diagnosis and treatment technologies are restricted, but foreign investment in manufacturing of high-throughput sequencing (HTS) systems is allowed. Foreign investors are also not restricted in the sector of genetic testing equipment.
Ms Liu also gave a short introduction of an intellectual property rights strategy.
Medical devices in China are subject to classified management with three classes. For Class II and III devices, a clinical evaluation report (CER) is needed and in some cases also a clinical trial. Real-world Data (RWD) is still in an early stage in China. The Hainan Bo'ao-Lecheng Pilot Zone offers a unique opportunity for innovative medical devices to gain accelerated approval in China.
Takeaways on market entry strategies: stay focused on the core mission of improving and saving lives of patients in China and around the world. Healthcare industry development is a top priority. Most healthcare sectors are open to foreign investment. A well thought-out and customized strategy is needed and innovation is a key advantage. However, the Chinese healthcare market is also heavily regulated.
Email: ines.liu@dezshira.com
Mr Johan Fornier, Executive Vice President, Surgical & Modality, Barco, shared the experiences of his company. About 10% of Barco's yearly revenue of €1 billion comes from China. Barco has six business units and its medical business in China is growing quite fast now. Barco is focused on visualization and collaboration technology in three sectors: enterprises, entertainment and healthcare. Barco is an engineering company that likes to call itself an innovator, with 13% of sales invested in R&D and its expertise reflected in 504 patents. Much is done in co-creation with partners and customers. Barco is present in more than 30 countries and the largest part of the business is located in America (39%), but 25% is done in the Asia-Pacific, with China making up the biggest part. The company is offering video walls for plants to improve critical control; sharing applications for meeting rooms; video equipment for life events such as pop concerts; projection mapping on buildings; storytelling in museums; and finally the medtech sector, including radiology, mammography, pathology, and screens for operating rooms. Barco has a high market share globally in radiology screens.
Why is it interesting to go to China? Three are three reasons:
• The huge market: Barco CEO Charles Beauduin says that in the business of professional equipment, China more or less represents 50% of the global market, which is also true for the medtech sector. China is investing heavily in developing its own medtech companies. Like Comac challenging Boeing and Airbus, you have United Imaging based in Shanghai that wants to become a Chinese version of Siemens, Philips or GE. They are entering all global markets. Mindray is another Chinese medtech company. In the aging Chinese population there is an issue with diseases such as cancer – especially lung cancer – cardiovascular diseases and diabetes.
• The speed of innovation: China is very quick in introducing new innovative things. In de medtech sector, AI is aiding radiologists in making their diagnoses. X-ray images are now analyzed by artificial intelligence, giving suggestions to the radiologists and helping them to examine more cases per day. Because of the aging population and increasing number of disease cases, there are not enough radiologists. Another example is electric vehicles (EVs). The speed of innovation and of introducing new technologies is very fast, also in manufacturing. Much of manufacturing is automated.
• Supply chain: In the world of medical displays there is one key component, LCD panels. Twenty years ago they were made by Japanese companies, followed by Taiwanese and Korean companies, but today there is no other way but to buy them in China. China has invested billions of dollars in manufacturing plants for the core technology of LCDs. In the display business, nowadays you need to buy your key components in China. Other components like glass can be bought about 20% cheaper in China because of the local supply chains. If you make medical screens you need to be in China or you won't be competitive. We are in China for the market but also to be competitive globally.
Barco is in China already since 1985. Today there is a sales office, a factory and a joint venture in Beijing; a new plant for healthcare in Suzhou; sales offices in Shanghai, Guangzhou and Hong Kong; and the company is building a new factory in Wuxi. The company does R&D locally in Suzhou and Beijing. Medtech is Barco's fastest growing business in China.
Barco healthcare in Suzhou: Barco started with R&D and manufacturing in Kortrijk and sales in China in 2012, which is the traditional approach. Next, Barco tried to set up a joint venture with a Chinese company, but it failed, because the company was also a player in the same market and could be considered a competitor. The third approach was trying to acquire a Chinese competitor, but this also failed due to valuation. Barco started investing in Suzhou in 2018 in a fully-owned local subsidiary. Today there are 50 people active in R&D. A manufacturing facility was added in October 2021 in the Suzhou Industrial Park. Many different products are manufactured there, including radiology screens. The customers are global and Chinese companies. The first step was in China for China, now we are also in China for the world.
The most important message is in the growth of revenue after investing in Barco's own plant in 2021. In the beginning we tried to manage everything from Belgium, we tried a joint venture and acquisition. We became successful when we started being very active ourselves in China in manufacturing and R&D. Belgian personnel is only visiting; in China everything is controlled by the China team. The business revenue of the surgical and modality business unit stayed flat between 2019 and 2021, it doubled last year, we are adding 50% this year, and we are expecting 30% growth next year.
Mr Herman Raats, Founder & CEO, Shanghai Yumou Industrial Development Company, started the company only in 2019, just before the outbreak of the Covid pandemic. The company is active in medical imaging consumables, importing semi-finished products from Europe and finishing the products locally in Shanghai. The company is still small with 11 people. Many things mentioned by the previous two speakers come back in our story. The company is locally funded working with local people. To set up a medical device company the most important is to know which products you want to deal with and which class they are in. Registration of Class I products will take between two and five months. I recommend to do it by yourself, together with your Chinese assistant, because it allows you to build up local relationships. Without local relationships you are nowhere. In our case, the creation of the company took two months. Registration of the products took an additional six to seven months. Registration to commence production requires an additional two months.
The main reasons for failure are too limited control over the business. Don't let any other company take control of the business. If you establish a partnership, keep control over it. The second one is neglecting the key importance of the interest of the local relations.
