May 21, 2014

Deepening healthcare reform, growing demand for higher quality products and challenges abroad have combined to turn the tables on China’s medical device sector. Based upon initial first-quarter statistics from key port areas, China will likely be a net importer of medical devices this year.

In the first three months of 2014, ¥4.62 billion ($740 million) of medical devices entered China through Shanghai, a year-on-year increase of 7.8%. Imports via special customs supervision areas such as bonded zones were up 22% to ¥2.88 billion ($460 million). However imports through general trade dropped 9.2% to ¥1.6 billion ($260 million) while imports via processing trade fell 11.1% to ¥110 million ($17.7 million)

The southern province of Guangdong also reported similar trends in the first quarter, importing ¥1.11 billion of medical devices, up 18.1% year-on-year. Imports passing through special supervision zones grew by 11.3% to ¥933 million ($150 million). Medical devices entering the province via general trade increased by 22% but processing trade imports slid 4.1%.

Medical device imports in the northern port city of Tianjin increased 6.8% year-on-year to reach ¥610 million ($98 million).

Progress in healthcare reform and a large, rapidly aging population were the main factors behind the growth in medical device demand, according to the website of China Customs Statistics, part of the Customs General Administration of China.

But the increased demand for devices has not been as powerful a booster for China’s medical device exports.

Exports of medical devices from Tianjin in the first quarter of this year dropped 2.9% to ¥570 million ($91.5 million). Exports to the U.S. suffered most, dropping 16.3%. Exports to Japan and the EU were up 3% and 1.5%, respectively.

Medical device exports out of Ningbo in the first two months (there were no figures for the quarter) were down 19.1%, totaling ¥280 million. Shipments to top export destinations South Korea, the EU and the U.S. were down 39.1%, 8.2% and 4.7%, respectively.

China’s exports of medical devices tend to be at the low end of the technological spectrum and are facing stiffer competition from products out of Vietnam and Thailand. The China Customs Statistics report also noted that Chinese exports are dealing with higher barriers to entry in overseas markets, such as a 5%-15% electronic waste recycling fee imposed by the EU.

This year’s swing toward stronger imports and weaker exports was not surprising, given how things went in 2013, when China’s medical device trade surplus dropped 14.8% to $4.36 billion ($700 million).

Total medical device imports for all of China in 2013 reached $14.97 billion ($2.4 billion), an increase of 20.07% and 5.5 percentage points higher than growth in 2012. Exports, however, totaled $19.35 billion ($3.11 billion), showing annual growth of 9.92%, a 2-percentage-point slide compared with annual export growth in 2012.

“It is estimated that in 2014 the medical device trade would grow 12% and reach $40 billion,” noted a report by the China Chamber of Commerce for Import and Export of Medicine and Health Products last month. “It is expected that import growth shall surpass export growth. “

“Chinese medical device companies are in a process of transition,” the chamber added. “One of the focuses of this year is the selection of export products. It will change the price competition strategy and focus more on high-tech and higher value-added products.”

“This year, domestic companies will invest more in R&D and improvement in IPR protection. They will also continue to use capital for M&A activities, which is crucial for enhancing the overall competency of the industry.”

Though medical device imports generally increased in the first quarter of 2014, this growth has not been geographically uniform.

Shanghai which hosts the most international-invested companies, leads the country in imports, accounting for 38.25% of total value. In the first quarter of 2014, Shanghai’s international-invested companies accounted for 67.2% of imports, totaling ¥3.1 billion ($500 million), up 6.1%, while state-owned enterprises imported ¥770 million ($112 million), a drop of 19.3%.

In Shanghai during the first quarter, imports were mainly from the U.S., the EU and Japan, which together comprised 81.6% of total medical device imports. American imports were highest, reaching ¥17 billion ($2.73 billion), up 6.1% year-on-year while European imports dropped 6.2% to ¥13.7 billion ($2.2 billion). Imports from Japan increased 6% to ¥700 million ($112 million).

European devices were increasingly welcome in Guangdong in the first quarter, totaling ¥470 million ($75.5 million), a year-on-year jump of 26.6%. The EU was followed by the U.S. at ¥380 million ($61.3 million), up an even larger 46.1% and Japan with ¥95.8 million ($15.35 million), a decrease of 23.1%.

Published: May 16, 2014


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