The Current Situation and Trends of the International Development of China's Medical Devices under the Normalized Epidemic

In 2020, the COVID-19 pandemic raged across the globe, severely impacting international trade and the world economy, and posing challenges to global public health systems. However, China's medical device industry attracted global attention. Medical and epidemic prevention materials and related medical devices produced in China contributed to the global fight against the pandemic, with rapid export growth becoming a highlight of China's foreign trade and playing an important role in stabilizing foreign trade. 2020 was a momentous year for China's medical device trade, with rapid development in both domestic industries and international trade. According to statistics from the China Medical Insurance Chamber of Commerce, in 2020, China's import and export trade volume of medical devices exceeded US$100 billion (including epidemic prevention materials), with exports reaching approximately US$730 billion. The main reason for China's sustained and significant export growth during the pandemic was that, while the industrial chains and supply chains of many countries were severely damaged or even shut down, China's industrial system was the first to resume normal operation, unleashing the power accumulated through years of industrial development, and further highlighting its international market competitiveness.

In 2021, the COVID-19 pandemic continued to spread overseas, causing international trade and economic growth to slow. Exports of medical devices in the first half of 2021 also decreased compared to the same period last year, mainly due to reduced exports of epidemic prevention materials such as masks, protective clothing, and respirators. However, the export growth rate of testing reagents remained relatively stable, the epidemic in India led to a surge in oxygen generator exports, and exports of traditional medical devices resumed normal levels. The growth rate and product structure of medical device exports gradually returned to reason.

01

Medical Device Exports Dominate

According to the Chamber of Commerce's statistics, the total import and export trade volume of medical devices in the first six months of this year was US$615 billion, down 23.86% year-on-year. Exports totaled US$443.88 billion, down 31.32% year-on-year, while imports reached US$171.16 billion, up 5.96% year-on-year. The sharp decline in exports was mainly due to the significant fluctuations in exports of medical dressings such as masks and protective clothing, totaling US$96.92 billion, down 75.05% year-on-year. This is also attributable to the easing of the pandemic in various countries and the recovery of their domestic manufacturing industries, leading to reduced reliance on Chinese products. Exports of imaging and diagnostic equipment related to the pandemic also declined slightly, but exports of other traditional and advantageous medical devices resumed growth. While the figures show a clear decrease from last year, the overall trend in recent years reflects the healthy development of China's medical device exports (Table 1). It is worth noting that after the pandemic, exports of medical devices surpassed pharmaceutical products in overall export value, accounting for 53.53% of total pharmaceutical exports in the first half of this year.

In terms of export markets, the United States remains China's most important export market. According to statistics, the United States, Germany, the United Kingdom, and Japan were China's main export markets during this period, accounting for 49.09% of total exports, with the United States still ranking first among numerous export markets (see Table 2). In addition to traditional markets, emerging markets along the Belt and Road Initiative, such as India, Russia, and Vietnam, will become important export regions for China. In the first half of this year, exports of medical devices to Belt and Road countries reached US$141.37 billion, accounting for 31.8% of total exports, and this proportion is expected to further increase in the future (Table 3). In terms of exporting provinces and cities, the top ten provinces and cities accounted for 89.92% of exports in the first half of the year, further highlighting the high concentration of China's medical device exports. Major exporting provinces and cities such as Guangdong, Jiangsu, and Zhejiang showed good growth trends, with Guangdong Province continuing to secure the top export position (Table 4).

02

Strong Export Growth of In Vitro Diagnostic Products

In vitro diagnostic products showed the most significant growth. During the pandemic, Chinese in vitro diagnostic companies actively expanded their global business, resulting in explosive export growth. New coronavirus antibody, antigen, and nucleic acid testing reagents were favored globally, leading to overall positive achievements for testing reagent companies. In the first half of this year, despite the sharp decline in exports of other epidemic prevention materials, in vitro diagnostic products withstood the pressure, maintaining significant year-on-year export growth. According to statistics from the Medical Insurance Chamber of Commerce, based on the data of three major HS codes for diagnostic reagents (38220010, 30021500, 38220090), China exported US$79.09 billion in major diagnostic reagents in the first six months of 2021 (see Table 5), a year-on-year increase of 288%. Zhejiang, Fujian, and Guangdong were the main exporting provinces and cities for in vitro diagnostic reagents in China, with exports of self-testing reagents reaching US$68.88 billion, accounting for 87.09% of total diagnostic reagent exports (Table 6). The main export markets were concentrated in European countries that have special authorizations for self-testing reagents, such as Germany, the United Kingdom, and Austria (Table 7). The large international market demand for self-testing products this year is a key factor driving the growth of diagnostic reagent exports. Coronavirus reagents, under the influence of the pandemic, have become the main product driving the growth of China's medical device exports. Many companies' conventional reagent products have resumed exports this year, with many export volumes also increasing. While the international market is expanding, establishing overseas marketing channels and localized promotion have become the top priorities for Chinese companies expanding into international markets. Due to intense homogeneous and low-Price competition and the impact of domestic centralized procurement Prices, the industry is experiencing serious involution. Expanding overseas operations is of great significance in promoting the upgrading of China's industrial structure and enhancing the competitiveness and influence of the IVD industry. According to data from marketsandmarkets, the global in vitro diagnostics market is expected to grow from US$84.5 billion in 2020 to US$96 billion in 2025, with a compound annual growth rate of 2.6%. The global in vitro diagnostics market is unevenly distributed, with developed economies such as the United States, Western Europe, and Japan accounting for the majority of the market share. The United States accounts for 44.00% of the global market, Western Europe for 21.08%, and Japan for 9.00%, totaling 74.08% of the global market. However, as the markets in developed countries have entered a relatively stable and mature stage, growth has slowed. In developing countries, however, in vitro diagnostics, as an emerging industry, is characterized by a small base and high growth rate. It is expected that emerging markets such as India and Latin America will maintain a growth rate of around 15%-20% for the in vitro diagnostics market. Emerging markets will become the main battlefield for Chinese IVD companies.

03

Strong Counter-cyclical Growth in Exports of Household Health and Wellness Products

Affected by the pandemic and stay-at-home measures, the global "home economy" has rapidly developed, and exports of household health and wellness products have seen strong growth. In early 2020, exports were initially severely impacted by the pandemic, but relying on years of continuous innovation, persistent accumulation, and resilience, Chinese companies overcame difficulties, withstood pressure, and achieved the remarkable feat of year-on-year export growth against the odds. In the first half of 2021, massage and health care appliances, a traditional strength in China's medical and health product exports, continued to see rapid growth. The "home economy," coupled with the formation of new habits, further accelerated industry development and market demand. Building on the success of last year's counter-cyclical growth in massage and health care appliance exports, the entire industry achieved record-breaking export performance again. According to statistics from the China Medical Insurance Chamber of Commerce, China's exports of massage and health care appliances in the first half of 2021 reached US$29.60 billion, a year-on-year increase of 86.77%, covering 200 countries and regions globally. Demand is particularly strong from the United States, Germany, South Korea, Japan, and the United Kingdom, with the current market still facing supply shortages. Exports are expected to reach US$50 billion this year.

04

Steady Increase in Medical Device Imports

In the first half of 2021, medical device imports amounted to US$17.116 billion, a year-on-year increase of 5.96%. The main sources of imports remain the United States, Germany, and Japan, accounting for 53.39% of the total import value. The largest imported products include catheter consumables, IVD in-vitro diagnostic reagents, and high-end medical equipment. In addition, the import dependence on some high-end medical devices, core components, and key raw materials remains high. Shanghai, Beijing, and Guangzhou are the main import provinces and cities for medical devices.

05

International Development Trends of Medical Devices

In 2021, medical devices continued to dominate China's medical product exports.

In 2021, international market demand for China's epidemic prevention materials decreased, such as a sharp drop in orders for masks, medical protective clothing, ventilators, and forehead thermometers. Special authorization from European countries for self-testing reagents resulted in relatively stable demand for China's COVID-19 testing reagents in 2021. Demand for products such as pre-filled syringes for vaccines increased, and the outbreak of the epidemic in India led to a surge in demand for China's oxygen generators. Market fluctuations were significant. While slightly lower than in 2020, the total import and export value of medical devices is expected to be around US$100 billion. The European Union and the United States remain the most important export markets. In addition to traditional markets, emerging markets along the Belt and Road Initiative will be important regions.

Risks and Challenges Facing the Internationalization of Medical Devices

1. The general slowdown in global economic growth and competition from epidemic prevention materials will reduce the purchasing power for ordinary medical supplies. Due to the pandemic, demand from public hospitals has increased, while demand from private hospitals has decreased.

2. International travel restrictions have severely limited the ability of engineers and sales personnel to travel to their destination countries, significantly impacting market promotion activities requiring on-site presence and After-sale Service for some large exported equipment, which has had a serious negative impact on business and future sales.

3. The surge in demand for epidemic prevention material transportation, coupled with the decline in efficiency at destination ports, has led to a significant slowdown in container turnover, resulting in increased logistics costs. Furthermore, rising raw material and labor costs, and increased regulatory scrutiny from cross-border e-commerce platforms, will further squeeze corporate export profits.

Impact of Changes in International Market Regulations

Last year, the Medical Insurance Chamber of Commerce deeply felt the shortcomings of Chinese medical device companies in aligning with domestic and international standards and regulations during the management of epidemic prevention material exports. After a year of experience, many companies' overseas regulatory certification work has gradually been put on track. Due to the pandemic, the new EU Medical Device Regulation (MDR) and In Vitro Diagnostic Medical Device Regulation (IVDR), whose implementation was delayed, came into effect in May of this year. Overall, they will focus more on clinical performance, strengthen the traceability of medical devices, and improve transparency for patients. This means that stricter restrictions will be imposed on medical devices entering the European market, placing higher demands on industry practitioners. This regulation will lead to increased costs, longer certification cycles, and increased compliance risks for Chinese exporting companies.

In the short term, global reliance on China's medical device supply chain has increased due to the demand for epidemic prevention and control. In the long term, the COVID-19 pandemic has become a catalyst for reshaping the global industrial landscape. With the introduction of encouraging policies in various countries, international competition will intensify, and Chinese products will face greater challenges in global market competition. While the Chinese pharmaceutical industry cannot remain unaffected by the numerous challenges and pressures facing the global economy, it is encouraging that the Chinese government has put forward a new development strategy for the new era. China is moving towards deeper and higher-level reforms, and public health issues have been raised to an unprecedented strategic level. The medical and health industry is entering its best golden age and period of explosive growth, and China's international status in the medical and health industry will be further enhanced.

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