In order to solve many problems in the current medical system, the Chinese government is implementing large-scale medical system reforms. In April 2009, the State Council issued a new medical system reform plan and promised to invest 850 billion yuan ($123 billion) in the three years from 2009 to 2011 to advance the reform. The plan plans to establish a universal medical insurance system that will cover 90% of the Chinese population by 2010, while focusing on improving the construction of rural areas and community health service centers.

　　The government will build and renovate 3,700 urban community health service centers and 11,000 community health service stations within three years; build 2,400 urban community health service centers in difficult areas. The purpose of these measures is to divert patients from large urban hospitals to more convenient small clinics, alleviate the problems of overcrowding and insufficient beds in large hospitals, and to develop medical infrastructure to meet the needs of China's aging population.

　　The central government will focus on improving medical services for China’s 800 million rural poor, who have difficulty or inaccessibility to many basic medical services and medical insurance. The new "Rural Cooperative Medical Compensation Program" requires that by 2011, all villages and towns in the country must establish clinics, and all counties and districts must establish hospitals. If the program goals are achieved, at least 2,000 new county-level hospitals and 29,000 village and township clinics will be established in rural areas across the country within three years.

　　One of the potential beneficiaries of these reform measures is China's medical device industry. The analysis report of Episcom, a medical equipment research company, pointed out that by 2014, the total value of China's medical equipment market is expected to reach 28 billion U.S. dollars, more than twice the 2006 level. The industry believes that the main reason for the continued growth is the increase in the purchasing power of high-end medical equipment or home medical equipment and the government's emphasis on the development of medical facilities in rural areas.

　　Impact of new regulations

　　In this reform, the central government emphasized that while increasing the level of medical care in small clinics and first- and second-tier hospitals (hospitals with less than 500 beds), the corresponding costs should also be reduced.

　　The Ministry of Health has strengthened its control over the purchase of high-priced "Class A" medical devices, which cost more than 5 million yuan (approximately US$710,000). The Ministry of Health pointed out that such equipment may significantly increase medical expenses. However, the government still encourages medical expenses and will allocate 8.3 billion yuan ($1.2 billion) between 2008 and 2010 to purchase X-ray machines, patient monitoring equipment, and ultrasonic testing equipment for rural areas. The government will also provide subsidies for medical equipment, and stipulate that medical institutions that use financial funds to purchase related equipment must first purchase domestically qualified products.

　　In addition to regulations related to the purchase of medical devices, the central government has also injected funds in research and development. Through the recent stimulus package, the central government plans to invest 62.8 billion yuan ($9.2 billion) in technology research and development in the medical industry. For a long time, Chinese companies have competed in the low-end market, while foreign companies have occupied the high-end market. However, the government's strong support for R&D and the ambition of many Chinese companies to develop into global manufacturers are changing the situation of the industry.

　　Newly built medical facilities need to be equipped with equipment, and existing hospitals need to update medical equipment, because currently 60-70% of hardware equipment is left over from the 1970s and 1980s.

　　Domestic companies are investing

　　The domestic medical device market is still a highly fragmented market. At present, there are about 3,000 medical device manufacturers in China, but most of them are small in scale, have limited market power, and only have a small number of competitive products. A total of 62 companies in the Chinese pharmaceutical industry are listed overseas, of which only four are medical device companies: Golden Meditech Medical Technology Co., Ltd. and Shandong Weigao Group Medical Polymer Co., Ltd., which are listed in Hong Kong, and are listed on NASDAQ Mindray Medical International Co., Ltd. and China Medical Technology Corporation.

　　However, domestic manufacturing companies are investing heavily to gain market share. Beijing Wandong Medical Equipment Co., Ltd. is one of the largest medical equipment manufacturers in China, specializing in the production of diagnostic imaging equipment and even dental treatment equipment. The company’s marketing manager said, “The market still has a lot of room for development, despite the financial crisis. , But we are still very optimistic about the market prospects."

　　At the same time, they are committed to developing high-quality equipment, the cost of which may be 30% lower than that of foreign competitors. Mindray Medical International Co., Ltd. is China's largest medical device manufacturer. The company's revenue in 2008 was nearly US$550 million, an increase of 36% over the previous year. Mr. Xu, the marketing manager of Mindray, firmly believes that there are still many opportunities for expansion: "Our company has established a solid foundation in the domestic market and is currently setting its sights on the international market. Recently, we have done research and development and sales. Invest a lot in order to be able to grasp future business opportunities."

　　The reform measures taken by the government and the rise of domestic companies such as Mindray have all put pressure on foreign companies, prompting them to respond quickly to consolidate their position in the Chinese market, but multinational medical device manufacturers still have huge development opportunities in China , Because they currently have advantages in technology. At the same time, hospitals and consumers are more inclined to use foreign products.

　　High-end demand continues to grow

　　In recent years, the demand for China's healthcare system has been on the rise. The continued economic prosperity and changes in eating habits mean that more and more Chinese people are facing the same health problems as patients in developed countries. In China, the top three fatal diseases are cancer and malignant tumors (28.53%), cerebrovascular diseases (18.04%) and cardiovascular diseases (16.29%).

　　More and more patients are seeking advanced medical technology to treat these diseases, and they are still largely dependent on Western medical technology. “The most demanded foreign products are those medical products that use the most advanced technology. Many tertiary A hospitals specifically require imported medical products to provide services to wealthy patients who are willing to pay for the best equipment for treatment,” Said Yao Hong Quan (transliteration), manager of the medical device department of Mecang Shanghai International Trade Co., Ltd. This company is one of the largest pharmaceutical and medical equipment import and export trading companies in China.

　　For some patients suffering from serious diseases, price is not the most important issue. For example, in complex heart surgery, the demand for high-end cardiovascular medical equipment has always been high. Interventional therapy is a non-surgical method for the treatment of cardiovascular disease, and this method is being accepted by more and more people in China. The cost of this treatment method ranges from 10,000 yuan ($1232) to 90,000 yuan ($11,084). The high cost of treatment makes the popularization of this treatment method slow, but the demand is still increasing. The market demand for vascular repair and arterial stents, especially drug-eluting stents, is growing rapidly, and several domestic companies are striving to seize the market. In China, the number of heart patients increases by 20-30% every year. On the other hand, the market growth rate of arterial stents has reached 40%.

　　Due to the lack of a comprehensive health care system, most patients cannot afford the high cost of arterial stent treatment. In 2003, only 5.8% of patients who came to treat cardiovascular diseases used stent treatment. However, the recent reform of the medical system and the introduction of special regulations for medical devices will provide patients with a better medical reimbursement system, which will greatly increase the demand for advanced treatment methods such as arterial stents.

　　Foreign companies, especially large medical device manufacturers in Japan, Germany and the United States, still enjoy technological comparative advantages and control 90% of the high-end medical device market. Although the government vigorously provides low-cost medical equipment for rural projects, major hospitals in China's large cities still need the best foreign equipment. In addition, Chinese consumers are still cautious about "Made in China" and require the use of foreign brand products when treating diseases.

　　China Market Research Group is a market strategy research company headquartered in Shanghai. The company found in a recent survey that most Chinese consumers trust Western medical device brands rather than domestic brands and would rather pay 20% more Because they think foreign brands are more reliable and less likely to fail.

　　Owen Tang, an analyst at InMedica, a research organization in the medical device industry, summarized this phenomenon. "Demand for low-end X-ray machines will continue to stabilize in the next few years, such as simulating ordinary X-ray imaging equipment, because the Chinese government will continue to invest in rural medical care, which often lack basic medical equipment. However, for high-end X-ray machines, The demand for X-ray equipment is considerable...In fact, China’s imports of digital X-ray imaging systems are expected to triple from 2007 to 2012."

　　Domestic production companies must strive to establish a trustworthy image and eliminate the negative image of "Made in China" in the country. At the same time, foreign medical device manufacturers have the opportunity to use their brand value to build market share.

　　A problem facing foreign companies is that China’s relevant regulations mean that it will be difficult for them to enter the rural market. Domestic companies will receive strong support from the government to win opportunities in these markets. In order to counter this trend and continue to develop in China, many foreign brands have chosen joint ventures or cooperation with domestic companies in order to enter the developing market, improve sales channels, and benefit from government medical funds.

　　Create a joint venture

　　In order to maintain a competitive advantage in both the high-end and mid-range markets, many foreign companies choose to establish joint ventures with Chinese local production companies. In addition to reducing costs, joint ventures can also use a strong network of local dealers and relationships with hospitals or affiliates to eliminate sales barriers.

　　The use of domestic companies to promote products can also enable foreign companies to benefit from the newly issued policy that fiscal funds must first purchase domestic products. This decree may have little impact on the high-end medical device market, because domestic companies still lack the technical capabilities to provide such products. Mr. Yao from Mecang Shanghai stated that “l(fā)arge hospitals with good reputation will continue to purchase high-end equipment from foreign suppliers because most of the domestically produced medical devices still fail to meet the requirements.” The situation in the low-end market is quite different. If foreign production enterprises want to accelerate their development, they must take creative measures. For example, after cooperating with domestic companies, foreign companies can produce and sell cheaper products and use the funds provided by the government to build a rural health care system.

　　Recently, Medtronic Inc., a medical device company headquartered in the United States, established a joint venture with Shandong Weigao Group Co., Ltd. to promote Medtronic’s spinal treatment products and Weigao’s orthopedic devices. Weigao’s distribution network covers 100 cities in China, which will help bring Medtronic’s products to the market. At the same time, because the products of the two companies have complementary characteristics, it will help to establish a more efficient marketing system.

　　Similarly, other multinational giants have also made acquisitions or cooperation in the local market. In April 2008, Philips Healthcare Division acquired Shenzhen Jinkewei Industrial Co., Ltd., China's second largest patient monitoring equipment manufacturer, thereby consolidating Philips' position in the high-end and low-end markets.

　　General Electric Company (GE) recently launched a low-cost product development program, which is specifically supplied to rural hospitals in China. General Electric’s main strategy is to establish a local base in China and use China’s resources and technology to produce low-cost medical devices at 15% lower prices than imported products. To achieve this goal, the company co-founded Xinhua General Electric Medical System Co., Ltd. with Shandong Xinhua Medical Equipment Co., Ltd. According to the cooperation plan, the company will launch 50 low-cost products to the market; mainly X-ray machines and supporting equipment for rural hospitals. At the same time, General Electric continued to invest in its research and development capabilities in the United States.

　　The emergence of bipolar markets requires foreign suppliers to make corresponding strategic adjustments. On the one hand, the application of high-end products such as implantable medical devices and high-end products in the field of cardiovascular devices is expanding. This is because there are more and more wealthy people in large and medium-sized cities, such as Beijing, Shanghai, Shenzhen, Guangzhou, Fast-growing second-tier cities. Once the new medical system is put in place, this market will expand further.

　　At the same time, the rural market, which accounts for 80% of China’s population, will be the focus of the reform of the new medical system. For poor rural areas, manufacturers must develop low- and medium-grade diagnostic and imaging equipment used by local hospitals and simple household diagnostic equipment.

　　One of the challenges faced by multinational companies is how to maintain a good brand image while catering to low-end market demands. Ben Cavender, a senior analyst at the China Market Research Group (CMR), pointed out that the company can "establish different brands to sell low-end and high-end products separately to avoid negative impacts on high-end products and create price sensitivity. Type of sales."

　　China's promotion of the development of the rural medical system has created huge business opportunities for the industry, but the regulations on how hospitals and clinics purchase products, and the rising domestic medical device manufacturers mean that multinational companies must respond quickly to consolidate Their market position.