China's 12th Five-Year Plan Generates Opportunities for Taiwanese Medical-device Firms

China's 12th Five-Year Plan for National Economic and Social Development (2011 to 2015) is expected to provide lucrative business opportunities for Taiwan's medical device industry, according to a recent analysis by the Industrial Economics & Knowledge Center (IEK), a unit of the island's government-backed Industrial Technology Research Institute.

Among the sectors that are expected to benefit most from the new five-year plan are health care, energy/environment, and technology. In the field of health care, the plan focuses on creating a modern health care industry through continued health care reform, consolidation of the pharmaceutical distribution sector, and encouragement of investment in biotechnology.

In 2009, China released an aggressive health care reform plan that included short-term objectives such as greatly expanding access to basic medical coverage for citizens, modernizing the country's health care infrastructure, and improving grassroots health care delivery. The new plan supports these reforms with specific policies and funding designed to provide broader basic health care coverage, expanded infrastructure for grassroots medical networks, public awareness of disease prevention, improved health care administration, creation of national health care benchmarks and standards, and heavy investment in health care information technology.

In the 12th plan, China hopes to consolidate and commercialize its pharmaceutical distribution industry throughout the plan period. In addition, the Chinese government has announced that biotechnology will be one of the country's new Strategic Emerging Industries, probably because of the sector's potential for large productivity gains and its ability to solve health problems associated with China's rapidly aging society.

Opportunities in an Aging Society
C.C. Chang, deputy director of IEK, points out that the population in China is rapidly aging. The population of 60-year-olds and up was 167 million in 2009, accounting for 12.5% of the overall population, and that ratio is forecast to reach 28% in 2040. Judging from the age structure, Chang continues, China will offer unlimited business opportunities in medical and preventive health care.

Giving a simple example, Chang comments that the number of hypertension sufferers in China has reached some 200 million, and the number is growing by three million or so per year. The sufferers are about equally distributed in urban and rural areas. The number of diabetic patients there was about 92 million in 2009, and some 1.2 million are added per year. The morbidity in urban areas was 11.4% that year, compared to 8.2% in rural areas.

T.Y. Chang, research manager at IEK's medical device and health care services unit, says that the rising morbidity from chronic diseases among elderly Chinese will gradually increase the demand for self-administered health checks and medical treatment, while spending on health care by the general population will climb along with disposable income. Ms. Chang points out that in 2009, personal spending on healthcare by people living in cities in China already averaged 856 renminbi (RMB, or Chinese yuan) each, and the amount is expected to grow rapidly as disposable incomes increase.

Field Investigation
In July and August, IEK sent a team to conduct field investigations in Tianjin and Chongqing so as to gain a better understanding of the type of health care undertaken by Chinese consumers and of the home medical-device market in those two cities. Survey findings show that the major consumer group for family health-care devices is the 50-70 age group, which has a relatively high health consciousness and willingness to purchase health-care products. The findings also reveal that this group often has regular patterns of life and most of them recognize that sickness will affect their families' lives as well as their own.

For this group of people, IEK says, communities and nearby public spaces are the main areas for leisure activities. In Chongqing, silver-haired people can easily chat with peers on health-related topics, and they have relatively easy access to the latest health information as well as new products.

IEK suggests that medical-device vendors set up business points next to these locations to provide a higher chance of exposure to elderly people. In addition, local TV, newspapers, and health magazines are the major sources of daily health information for these people, especially the retired among their number. In fact, IEK says, most consumers purchase products according to information garnered from TV advertisements and programs, or from newspapers and magazines.

According to T.Y. Chang, most Chinese consumers believe that Western medicine is mainly for curing sickness while Chinese medicine can help maintain health; so, to keep themselves in good health, they prefer to use medical devices that have some relation to the principles of traditional treatment methods such as fire cupping and acupuncture.

The survey found that some over-60s buy oxygen generators to address problems of sleeplessness or oxygen-deficit dizziness. Buyers of massage products tend to pay money only for products that really make them feel better, and do not necessarily take the words of sales people at face value, so they generally buy from places where they can try out the products—sometimes repeatedly. In Chongqing, especially, a customer may buy a massage device only after trying it on numerous occasions over a period of one to three months.

Chang goes on to say that IEK's recent field investigation also shows that many Chinese people choose to measure their blood pressure, glucose level, and other health indicators at nearby community hospitals or health centers. Others, with chronic diseases, many resort to buying monitoring devices such as blood-pressure meters or glucose meters so that they can test themselves. They often purchase products recommended by friends and relatives, especially those who have a medical background.

The accuracy of medical monitoring devices is closely related to their acceptance by consumers, the IEK investigation shows; before they buy, most consumers check the results of self-use monitoring devices by comparing them with the results obtained at medical institutions. Ease of use also affects sales of home health-care devices; basically, the easier something is to use, the more senior consumers like it.

IEK concludes that there are very few strong health-care device brands available in Chongqing and Tianjin, meaning that Taiwanese suppliers have a good chance to tap into the high-potential healthcare-device market in China. Their future will be especially bright if they can set up comprehensive service channels to help establish their brand image in China's seemingly limitless market. (QL, Oct. 2011)