Magnetic resonance equipment for interventional therapy is displayed at the world Manufacturing Conference 2021 in Hefei, Anhui Province, China
MERICS China Industries
14 min read

Medical equipment production + Tech-focused SMEs + Robotics

In this issue of the MERICS China Industries we cover the following topics:

1. Localizing medical equipment production a core facet of China’s self-reliance push 
2. MOST overhauls institutional setup to promote tech-focused SMEs 
3. Robotics plan seeks to upgrade indigenous capabilities as production soars 
4. Ministries outline innovation priorities for environmental protection equipment 
5. Industrial commodity sector set to become greener and more secure

You can read a free excerpt of our latest MERICS China Industries below. 

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1. Localizing medical equipment production a core facet of China’s self-reliance push

At a glance: Ten ministries and agencies released their 14th Five-Year Plan (FYP) for the medical equipment industry. The plan’s focus to onshore supply chains signals that supply shortages during the pandemic have rattled policymakers. The policy’s key targets for 2025 include:

  • Establish safe and reliable industrial chains and achieve control of core technologies (including extracorporeal membrane oxygenation [ECMO] and ultrahigh field magnetic resonance imaging) and basic materials and components 
  • Incorporate digital technologies including 5G across the medical equipment sector; encourage companies to enter the telemedicine and smart medical care sectors  
  • Facilitate the rise of six to eight Chinese firms into the top 50 medical equipment companies worldwide
  • Become a global leader of medical equipment R&D, manufacturing and application by 2035 

MERICS comment: China’s medical equipment industry is a large and growing market. China’s aging population, evolving medical needs and increased wealth will fuel further growth and create opportunities for foreign companies in this sector.

However, to expand and retain market share, foreign companies are under pressure to localize R&D and production in China. The plan promotes domestic, safe industrial chains. Already, the central government is favoring domestic producers via centralized volume-based procurement, the ‘Buy China’ policy and medical equipment catalogs. The pressure will not abate. And even if localized foreign producers still experience discrimination, exporting to China remains an option, but primarily for companies that produce low volumes of specialized high-tech products. 

Within this sector, China’s economic upgrading and self-reliance push has been ongoing since at least 2015. The infamous Made in China 2025 plan outlined domestic market share targets for 2025 for medical devices and core medical device components of 70 and 80 percent respectively. Currently, China still depends on imports and foreign brands remain dominant, but their market share in high-value medical devices has fallen from 80 to 70 percent (2010-2020). The shortage of crucial equipment and components during the pandemic has fueled the self-reliance push. To fill gaps in core technologies, China is: (1) acquiring foreign technology, MicroPort became the first Chinese manufacturer of ECMOs after acquiring German company Hemovent; (2) encouraging foreign investment by placing relevant technologies into the encouraged investment catalog; and (3) subsidizing R&D. 

Article: 14th Five-Year Plan for Medical Equipment (十部门关于印发《“十四五”医疗装备产业发展规划》的通知) (Link)
Date: December 28, 2021

2. MOST overhauls institutional setup to promote tech-focused SMEs  

At a glance: The Ministry of Science and Technology released guidelines to create a more favorable environment for tech-based SMEs to conduct R&D. The notice defines a tech-based SME as one that has at least five patents, a high proportion of technical staff and an R&D intensity of over six percent. Targets include: 

  • Support the R&D activities of SMEs and promote the growth of 50,000 new tech-based SMEs
  • Set up a credit system for tech-based SMEs that allows banks and markets to better evaluate R&D capabilities
  • Improve the ‘dual employment’ and ‘revolving door’ mechanisms for researchers so that they can easily work at both enterprises and research institutes or switch between them