Does China's leading place in the global medtech market reflect the reality?

Snedden Campbell
By Ivor Campbell*
Wednesday, 08 May, 2024

Does China's leading place in the global medtech market reflect the reality?

The recent Medlab Middle East convention in Dubai showcased China’s formidable and growing presence in the global medical technology industry.

Delegates from the East Asian country occupied around a quarter of the floor space, appearing to outnumber and outmuscle even major players, like the US and India, with the sheer volume of companies on display. With each trumpeting new and exciting developments across a range of disciplines — including diagnostics, vaccines, epidemic control and in vitro diagnostic instruments — you could be forgiven for thinking the country is both the epicentre and the driving force behind the global industry.

But while it is the world’s second biggest market, behind the US — with a predicted growth rate of 10–15% this year — its activities are principally focused on its own internal market and a handful of others, mainly in Russia, North Africa and the Middle East.

In the West, Chinese medtech remains an unknown quantity

To many healthcare buyers in the US, Europe, South-East Asia and the growing markets of Africa and South America, China remains an enigmatic and largely unexplored entity. Even industry veterans in those territories will tell you that the only time they ever come into proximity with a Chinese medtech, biotech or life sciences company is at international trade conventions.

Medlab Middle East has evolved into a renowned global laboratory exhibition and an internationally acclaimed professional IVD expo, with more than 23,000 professional delegates and 650 companies from 140 countries and regions. This year the Chinese delegation was out in force, both physically and across all of the pre-convention marketing hype.

In the run-up to the three-day event, it was noticeable how quickly inboxes filled with press releases promoting the latest Chinese innovations, including biotechnology company Vazyme’s automatic nucleic acid extraction instrument, its SARS-CoV-2 antigen detection kit, its post-vaccination antibody detection kit and its quantum dot fluorescence immune analysers.

Tianlong, in collaboration with Shanghai Kehua Bioengineering and Focus Diagnostics, highlighted a range of solutions, including its innovative Gentier X3 series real-time PCR system. Meanwhile, among the new technologies showcased by global life sciences company Fapon was its ultrahigh-throughput CLIA system, Shine i8000/9000.

If you have never heard of any of these companies, then you might be forgiven. Not because they are in any way discriminatory about who they trade with, but because the size of the internal Chinese market is so vast that their activities tend to take place primarily within it.

Chinese Government initiatives could influence the global market

Since the COVID pandemic, China’s localisation strategy for medtech has gone into overdrive, significantly impacting international competition. The Chinese Government’s initiatives to reform the country’s medical system and boost its domestic market have led to an accelerated localisation trend, reshaping the competitive landscape and influencing global trade dynamics.

The emphasis on ‘Made in China’ as a common precondition for government procurements creates hurdles for foreign suppliers. International medtech companies face challenges in accessing the Chinese market due to the preference for locally manufactured products.

The Chinese Government continues to invest heavily in its public hospitals, making them a crucial part of the medical system reform. Volume-based procurement extends to medical devices, driving increased shipment volumes but squeezing profits for manufacturers.

Other Chinese Government initiatives, such as ‘In China for China’ or ‘In China for Global’, demonstrate a commitment to both local and global markets. Made-in-China products have advantages in government procurement considerations, quicker approval processes and lower costs.

Naturally, given the potential riches on offer, many western medtech multinationals are now tailoring their R&D and manufacturing strategies to align with the Chinese market’s unique needs and government initiatives. Companies like Siemens Healthineers, Philips and Medtronic are accelerating their localisation strategies, manufacturing products within China to better align with market needs.

Medtronic’s strategic partnership with Changzhou National High-tech Industrial Development Zone demonstrates its commitment to manufacturing, R&D and innovation in China. Boston Scientific’s launch of an intravenous ultrasound imaging product in Shanghai for the global market signifies a strategic move in alignment with its 25th anniversary vision. Siemens Healthineers’ construction of a large production base in China and Philips’ goal to achieve 100% made-in-China products for certain segments further highlight this trend.

In China, commercial ‘reality’ is not always what it seems

Privately, however, some western companies are anxious about operating in and engaging too closely with a country where commercial ‘reality’ is not always what it appears to be.

Just as questions remain about the independence and transparency of state-owned technology companies such as Huawei, there are concerns over how autonomous, or profitable, many of its medtech companies are, particularly those that rely on large amounts of government support. What chance does a small medtech business from the UK have in the vastness of China?

This opacity also raises questions about whether businesses may be fronts for other interests. A country prepared to blatantly spy on sensitive UK interests, even in the UK Parliament, is likely to be a challenge for an IP-rich business to work with on a trusted partner basis.

China’s centralised economy could hinder opportunities for international collaboration

In the competitive landscape of the medtech industry, collaboration and information exchange are crucial for fostering innovation and staying ahead. The centralised nature of China’s economy and controls has the potential to hinder collaboration, creating a barrier to entry into global markets.

Top-down controls may also stifle the organic growth of ideas and entrepreneurial ventures that will be essential for the industry’s evolution. The question arises as to whether China’s medtech companies can truly compete on a global scale when centralised governance hampers innovation and creativity.

Without local collaboration, western companies basing R&D and manufacturing facilities in China will be required to bring their own researchers and scientists. Whether qualified professionals from leading innovation hubs, such as San Francisco or Cambridge, will be inclined to relocate to China, with all of the restrictions on their freedom they will encounter, remains uncertain.

While India appears to be lagging behind China in the size of its medtech, biotech and life science industries, it may be that, lacking the government-funded sweeteners on offer in China, its position is more grounded in commercial reality. China might be able to demonstrate more impressive physical ‘evidence’ of the scale of its industry but, given that we are not privy to the size, or indeed the existence, of any tangible returns on its investments, it may be that India’s more cautious approach will ultimately yield more sustainable long-term growth.

The size of China’s delegation at the Medlab Middle East convention was certainly impressive, and the energetic and personable sales reps appeared to be doing a fantastic job promoting their companies’ products. But whether all the talk of its booming medtech industry in the bars and breakout areas was grounded in reality, or just Chinese whispers, remains to be seen.

*Ivor Campbell is Chief Executive of Callander-based Snedden Campbell, a specialist recruitment consultant for the medical technology industry.

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