The growth of the medical device industry in China has been faster than that of the pharmaceutical sector over the past decade. China’s current market size for medical devices is still only 14% of the entire healthcare market (small compared with the medical device take of the global healthcare market). However, statistics recently released by the Chinese Ministry of Health (NYSE:MOH) suggest that there is a large opportunity for business growth and development in this sector of China’s pharmaceutical and healthcare value chain. The report in question indicates that the proportion of medical equipment in health institutions costing in excess of RMB 10,000 has increased nearly 2-fold from 2003 to 2009, and it is likely there is significantly more spending yet to come.
China’s Twelfth Five-Year Plan (2011-2015), designed to improve the nation’s basic healthcare system, has further left the medical device and equipment industry with new expectations for medical reform. The release of the 2011 work arrangement for the five key issues of concern in China’s healthcare reform will enforce and promote the availability of medical devices in rural, county-level localities; per the work arrangement, it was clearly indicated that tier-three health service networks in rural and urban community health centers will be established and be completed by the end of this year. The plan aims to set up 300 county-level hospitals, 1,000 central township health centers and 13,000 village clinics. In addition to demand at new facilities for devices and equipment, consumption will also be driven by the need for current establishments to update their wares. Among healthcare institutions in China, 15% of medical devices and equipment listed on hospital ledgers was manufactured in 1970s, and 60% was manufactured before 1985. Given the current status of China’s healthcare system and where it needs to go in the next 10-15yrs, the medical device and equipment industry seems well positioned for continued growth.