Domestically produced medical devices are expected to increase their share of the domestic market.

The new healthcare reform plan indicates that from 2009 to 2011, governments at all levels are expected to invest 850 billion yuan to support five key reform initiatives. Although the specific allocation of the 850 billion yuan remains unclear, industry insiders generally believe that the increased investment will bring about... Medical devices The segments of generic drugs and pharmaceutical commerce are driving overall growth. Xu Lingni, a pharmaceutical industry analyst at Zhongtou Consultants, believes that the medical device industry will be the first to benefit from the new healthcare reform.

The new healthcare reform plan shows that the subsidy standards for urban resident medical insurance and the New Rural Cooperative Medical Scheme will be raised to 120 yuan per person per year. According to Zhongtu Consultants, just this increase in subsidy standards alone will lead to an additional healthcare expenditure of up to 100 billion yuan. Coupled with the planned investment of 850 billion yuan, this will significantly benefit medical devices, generic drugs, and pharmaceutical distribution businesses.

Regardless of the specific allocation plan, the direction of China’s new healthcare system reform has been largely clarified. The state will steadily increase its investment each year in public health systems as well as in the construction of urban community and rural primary-level medical and health services. It is foreseeable that China’s medical device market will enter a period of rapid growth.

According to Zhongtou Consultants, as the government places greater emphasis on domestic medical device suppliers when procuring medical equipment, leading medical device companies such as Yuwell Medical, Xinhua Medical, and Wandong Medical are expected to benefit significantly. Domestic medical devices are poised to achieve a substantial increase in market share thanks to the new healthcare reform. In the long run, this will help foster and enhance the competitiveness of China's medical device industry.

It is understood that one-quarter of China’s medical device products are destined for export. However, most of the medical devices exported from China are mid- to low-end products with relatively low technological content and limited added value. In terms of high-end products—such as MRI scanners—there remains a certain gap in key technologies and manufacturing processes compared to those of developed countries in Europe, the U.S., and Japan. Moreover, China still relies heavily on imports for core technologies and critical components.

Although the world’s largest medical-device markets today are the United States, the European Union, and Japan, China’s market holds the greatest potential. In developed countries, the ratio of output value between the medical-device and pharmaceutical industries is 1:1.9, whereas in China, this ratio stands at only 1:5. Although China’s overall national strength has grown since the start of its reform and opening-up policy, when it comes to the hardware equipment of medical institutions as a whole, China still lags far behind foreign countries. Currently, many medical institutions are upgrading their equipment, and coupled with the new healthcare reform plan, the enormous potential of China’s medical-device market becomes abundantly clear.

According to statistics, there are 563 hospitals rated as Grade III or above at the national level, and 5,000 hospitals at or above Grade II at the county level. The total number of medical service institutions covered by the "11th Five-Year Plan" (including community hospitals) amounts to 310,000. Among these institutions, more than 80% are individual clinics and primary-level medical facilities below the county level. Of the medical instruments and equipment owned by these institutions, roughly 15% date back to around the 1970s, while about 60% were manufactured before the mid-1980s. It is expected that, as the national economy continues to develop, medical institutions will gradually phase out outdated and substandard medical devices, thereby driving rapid growth in the medical device industry.