In December 2021, the Ministry of Industry and Information Technology (MIIT) along with nine other ministries jointly released the 14th Five-Year Plan (FYP) on medical devices – the first-ever national-level plan focusing specifically on this sector.
The issuance of this first-ever plan makes clear that strengthening the industrial foundation of the medical devices sector is a strategic priority for Beijing – echoing the need for self-sufficiency in manufacturing, an overarching objective of the 14th FYP, and positioning medical devices as a critical support mechanism for the achievement of objectives outlined in the Healthy China 2030 agenda.
The medical devices industry market size has been consistently growing at above-GDP rate over the 13th Five-Year planning period (>10% CAGR in value), giving rise to many new players. Between 2016-2021, the number of domestic medical device manufacturers increased by 72%. Last year, largely driven by the pandemic, the number of newly registered medical devices jumped by nearly 50% y-o-y.
The new FYP is also a response to medical devices supply chain localization drives globally by many governments in the wake of the pandemic, rendering them more vulnerable to shocks. With an accelerated industrial upgrade of the medical devices industry, the Chinese government reacts to the recognized weaknesses in the domestic manufacturing and supply chains of critical products as well as the reliance on imports of such advanced goods.
The national plan provides specific guidance on technologies and solutions that are considered critical to address existing health demand gaps. Solutions such as precision radiology, robotics and artificial intelligence in a range of application areas, new biomaterials and 5G-enabled health information networks shall be prioritized. On the local level, more financial resources will be channeled towards these focus areas.
Like other five-year-plans for industrial upgrading related to health (e.g. the FYP on the pharmaceutical industry), the plan shall boost collaboration across the entire production ecosystem and it supports partnerships among hospitals, academic institutions, and industry for research and experimentation to strengthen medtech clusters and facilitate the diffusion of ideas across the research value chain in the quest for technology breakthroughs.
Improved and codified domestic standards for an increasingly complicated portfolio of medical devices shall support these plans. While China wants to increasingly participate in the formulation of international standards, the continuous development of domestic standards means that differences in standards will persist.
More government resources will in the coming years be channeled towards key technology bottlenecks and demand gaps, and industrial policies and import substitution tools will be further refined, continuing to drive Beijing’s overall self-sufficiency goals.
With technology gaps persisting into the medium-term, a sizable and growing market for import solutions in advanced medical products will continue to be an opportunity, however, in parallel the pressure from domestic innovations designed to meet domestic product and quality standards that differ from international ones will increase.
In the long-run, companies might want to consider a value chain partnership approach to strengthen their market development effectiveness, e.g. with the import of core technologies and domestic manufacturing and/or the assembly and distribution of some components