China Promoting Wider Use of Domestic Medical Devices

China may use incentives to encourage domestic hospitals to use Chinese-made medical devices as it looks to stimulate the local market and reduce soaring healthcare costs, a potential threat to the global firms who currently dominate the sector.

China will speed up the development of its medical device industry and promote wider use of local products to “effectively control unreasonable increases in the cost of medical care and reduce the burden on patients,” the country’s health ministry said in a statement.

The overt backing by Beijing for homegrown medical devices will raise protectionism concerns and is a headache for the global companies attracted to China by annual growth rates McKinsey & Co expect at around 20 percent over the next few years, Reuters reports.

Global medical device makers, especially from the United States, Europe and Japan, now dominate around three-quarters of China’s medical device market, which was worth 212 billion yuan ($34.51 billion) last year, according to figures from the Hong Kong Trade and Development Council (HKTDC).

“We want to strongly advocate health ministry organisations to use domestically-made medical devices, especially pushing top level class III hospitals to use domestically-made products,” the statement said, citing Li Bin, the head of China’s National Health and Family Planning Commission.

A number of recent investigations by Chinese authorities into foreign firms like Microsoft Corp. and car companies including Audi AG and Chrysler have sparked concerns that Beijing may be using legal muscle to support domestic firms at the expense of foreign companies.

China’s foreign direct investment inflows in January-July fell for the first time in 17 months compared with the same period a year earlier, although Chinese officials stressed it was not linked to a spate of recent probes into foreign firms for alleged monopolistic behaviour.

Miao Wei, the head of China’s Ministry of Industry and Information Technology (MIIT), said in the same statement that China needed to raise the level and quality of its homegrown medical devices and create incentives for medical institutions to use locally-made products.

The fast growth of China’s medical devices market has drawn in firms including Siemens AG, General Electric Co., Koninklijke Philips NV, Johnson & Johnson and Medtronic Inc. Those companies compete with local firms like Mindray Medical International Ltd. and China Resources Wandong Medical Equipment Co. Ltd.

Hospitals are the biggest distribution channel for medical devices, accounting for almost 80 percent of the market, according to HKTDC figures. There were roughly 13,400 public hospitals in China last year, and a further 11,300 private hospitals, according to a report from Deutsche Bank.