China’s move to ban overseas-made medical equipment is forcing multinational corporations to choose between leaving the market and handing over their core technologies. Local governments issued notices to local hospitals to limit their use of medical and testing equipment to those produced domestically.
Beijing not only wants companies to transfer their assembly processes into the country but also research and development, design, and procurement of critical components.
A plan was announced to encourage foreign companies to transfer technology, ultimately aiming to raise the level of the domestic medical equipment industry to the world’s highest by 2035.
In addition, the government announced a draft amendment to the government procurement law, giving preferential treatment for the procurement of products that were value-added in China.
This is thought to have been in response to the central government’s internal notice issued that listed 315 items — including equipment for magnetic resonance imaging, computed tomography, X-rays, and endoscopes — that it wanted hospitals to procure only from local producers.
Many local governments have been obeying that order. Major hospitals in Beijing, Shanghai, Guangdong Province, and other areas are also increasingly limiting their procurement to domestically produced products.
Foreign companies dominate the Chinese medical equipment market with a share of 70% to 80% of CT and MRI sales through public bidding, according to local media. These companies make around 80% of high-performance models, according to those reports. The top three manufacturers are General Electric, Siemens, and Philips.
According to Chinese media reports, China’s medical equipment market is vast and only expected to expand in the future due to an aging population. Local media reported that the turnover of China’s medical equipment market is expected to double by 2025 from 2021’s $140 billion, which was already close to that of the U.S. Sales of CTs and MRIs sales reached $3.5 billion and $2 billion per year respectively, from public bidding figures alone.
Sysmex has been assembling blood testing equipment in Jinan in Shandong province since 2018. It recently switched to the local assembly of its urine testing equipment.
According to Chinese media, GE Healthcare of the U.S. exhibited CTs and other equipment developed and manufactured in China at a Beijing exhibition in August. Similarly, in June, Germany’s Siemens Healthineers declared that it would expand its domestic production as a “Chinese company.” Philips of the Netherlands also produces CTs and MRIs locally in China.
The Chinese government has been expanding its clampdown on foreign companies. Since 2010, it has restricted the use of U.S. platforms such as Google and Facebook locally to foster the growth of domestic internet companies.
China is also pressing Japanese companies to transfer their technology in the manufacturing of office equipment such as photocopiers. “If we produce in China, how we protect our technologies will be a challenge,” said an executive at a manufacturer.
At the EU level, leaders have long complained about Chinese subsidies that distort the global economy, as well as restricted market access
Beijing’s ultimate goal is to reduce China’s dependence on foreign technology and promote Chinese high-tech manufacturers in the global marketplace. The policies have been designed to tackle access to healthcare and financial protection. “China is distorting global markets by prioritizing political considerations over economic incentives”, critics say.