Since the outbreak of COVID-19， medical devices have attracted more attention. Many products show the importance of medical devices in modern medical treatment： from the blossoming of diagnostic products to the Extracorporeal Membrane Oxygenation（ECMO）and high-flow oxygen delivery. Under the multiple catalysis of technology empowerment， favorable policies and market expansion， the medical device industry will usher in a golden investment period.
　　The number of medical device enterprises in China is increasing year by year
　　From 2017 to 2020， the number of medical device enterprises and products in China was increasing year by year. By the end of 2020， there were 25，440 medical device manufacturers in China， an increase of nearly 40% year-on-year. In addition， the number of medical device products registered nationwide exceeded 170，000， an increase of 21.59% compared with the end of 2019 （144，237）. Among them， there are 97，720 Class I products， accounting for 55.72%； 66，701 Class II products， accounting for 38.03%； there are 10，954 Class III products， taking up 6.25%.
　　According to the analysis of Deloitte’s research report on China’s medical device industry， the market size of China’s medical device industry is relatively large and continues to grow. In 2019， the scale of China’s medical device market reached RMB 629 billion， double that of RMB 308 billion in 2015. In 2020， due to COVID-19， the demand for a series of medical de- vices， such as medical masks， nucleic acid detection kits and Extracorporeal Membrane Oxygenation （ECMO） machines， surged rapidly. Therefore， Joinchain Medical Equipment Research Institute predicted that China’s medical device market will reach RMB 1，008 billion in 2020， with an increase of more than 40%. In the post-pandemicera， China’s medical device market will continue to maintain rapid growth.
　　At present， there are more than 26，000 medical device manufacturers in China， and the number of smallscale manufacturers has proliferated. In 2019， medical equipment dominated the medical device market， accounting for nearly 57% of the market share， followed by high-value medical consumables （20%）， low-value medical consumables （12%） and in vitro diagnostic medical devices （IVD） （11%）.
　　In terms of geographical distribution， China’s medical device industry is mainly concentrated in four regions： Beijing-Tianjin Bohai Bay region， the Yangtze River Delta （including Shanghai）， the Pearl River Delta and the Central China region （including Wuhan， Chengdu and Chongqing）. In order to support the development of medical device industrial parks， local governments usually give preferential policies to enterprises settled in the parks， such as rent reductions， settlement bonuses or product registration bonuses， etc. In terms of the number of enterprises， the largest of these industrial parks is the high-tech industrial park of Taizhou in Jiangsu Province， with over 110 medical device enterprises. 　　Due to the effects from COVID-19， 2020 will be an upending year for the industry. However， in the first half of 2020， China’s exports generally increased by 22% compared with the first half of last year. Among them， the category with the highest export growth is medical consumables （such as masks）， with an increase of 43%. It means that compared with the past， all product categories of medical devices in China are net exports. Therefore， China is increasingly becoming a big market in the field of medical devices that foreign enterprises cannot ignore.
　　Introduce policies to promote the development of the medical device industry
　　At present， China’s medical device market takes upnearly 20% of the global medical device market， and it is still growing. Domestic medical equipment enterprises are mainly small and medium-sized enterprises， mainly concentrated in low-value medical consumables and other low-value-added equipment fields. As far as high-end equipment is concerned， the industry is still highly dependent on imports， and this market segment is dominated by a few foreign brands.
　　However， in the past 10 years， the share of domestic brands in the market segment of high-value medical consumables has increased from about 20% to about 30%. China is also becoming an increasingly important participant in the global medical device market. During the period from 2015 to 2019， China’s foreign trade in medical devices grew at an annual rate of nearly 10% （exceeding the global growth rate）， which grew China’s share in the international medical device trade market. In 2019， the total import and export volume of medical devices in China reached USD 29 billion and USD 27 billion respectively. The exported medical devices were mainly disposable medical consumables， medical dressings and low-end medical devices， while nearly 70% of the imported medical devices were diagnosis and treatment devices （most of which are high-end products）.
　　From the perspective of policy， the state has increasingly supported the medical device industry， encouraged innovative research and development of medical devices， continuously increased the market share of domestic medical device and other medical devices in public medical institutions， and encouraged import substitution.
　　The “Healthy China 2030” blueprint clearly states that the innovation capacity of high-end medical devices should be strengthened and the localization of medical devices should be promoted. 　　In May， 2019， the eighth meeting for deepening overall reform of the Communist Party of China（CPC） Central Committee was held， and the Reform Plan on Governing High-value Medical Consumables was reviewed and approved. As part of the program， the government will explore the procurement of high-value medical consumables in a classified and centralized manner.
　　Encouraged by the central government， local governments turned to centralized procurement with quantity. Nationwide， there are 26 provinces that purchase intraocular lenses in quantity. In December， 2020， Jiangsu Province completed the fourth round of procurement of medical consumables in public medical institutions. After stents， artificial hip joints and artificial knee joints， the target varieties were dry film and stapler， for which the price dropped by 50% to 96%. Similarly， Guizhou， Chongqing， Yunnan and Henan provinces have carried out centralized procurement of staplers， patches and films， and the average price dropped by more than 60%. Hubei Province has also carried out similar reforms， and prices have also dropped to the same extent.
　　Under the pressure of cost reduction， hospitals turned to local manufacturers with lower quotations for procurement. Therefore， local manufacturers gradually occupy a larger market share， especially in market segments such as imaging and in vitro diagnosis （IVD）. At present， four out of the top ten in vitro diagnostic enterprises in China are local enterprises.
　　The growth trend of medical market attracts foreign brands
　　According to the analysis of the Deloitte report， for a long time， foreign brands occupied a dominant position in the market of high-value medical devices with low price sensitivity. In the past 10 years， the market share of foreign brands has dropped from about 80% to 70%， and is expected to continue to decline. However， due to the overall growth trend of the industry market， even if the market share of foreign enterprises declines， they are still expected to gain income growth in the future. If foreign enterprises can find their own market position， it should be a favorable situation for them.
　　Many foreign enterprises in China are turning to the strategy of “In China， For China”， that is， making productive investment in China to sell products to the Chinese market， not to export them from China. This strategy reflects the increasing scale and importance of China’s market. By moving production closer to the end market， manufacturers with branches in China can respond to customers’demands more quickly， and usually reduce costs. Localization of supply chains in China not only means reproduction of foreign supply chain models， but also is more economical. 　　According to the reports， manufacturers should regard this as an opportunity to invest and innovate in the Chinese market. Since the mid-2000s， the Chinese government has issued encouraging policies for greater innovation， for example， tax policies that are conducive to R&D investment. This makes China’s economy transform from imitating to innovating with infrastructure and resources to encourage enterprises. For this， China’s economic development has formed a living system focusing on accelerating innovation.
　　For example， in China， the state has always played a leading role in the development and arrangement of 5G technology. By the end of 2020， China will account for nearly 80% of global users of 5G， while at present， more than 10% of mobile users in China are using 5G. This technology will play an important role in the field of medical devices， especially in the development of the above-mentioned medical Internet of Things， intelligent hospitals and wireless body sensor networks. The development of this network will promote the improvement of disease diagnosis， monitoring and postoperative feedback. At the peak of COVID-19， 5G technology assisted Wuhan in remote diagnosis. China has become the third largest global smart medical market after the United States and Japan.
　　Finding suitable partners will help to take root in the Chinese market
　　Analysts believe that the main considerations for foreign enterprises when entering the Chinese market are shifting from traditional labor costs and infrastructure to tax incentives， financial subsidies and industry compliance support provided by local governments. Enterprises should not neglect financial incentives brought by localization， such as reducing the corporate income tax rate by 15% and reducing or exempting value-added tax.


　　In cooperation with local enterprises， foreign investment companies can make use of local technological know-how， which is particularly important in industries that are strictly regulated， such as medical and health care. A suitable partner helps foreign medical device manufacturers connect with the local ecosystem of relationships among suppliers， customers and government， thus helping enterprises to take root in the Chinese market in a more integrated way.
　　On the other hand， many local medical device manufacturers are seeking cooperation with foreign manufacturers to shorten the timeto-market of new products. With the development of Chinese enterprises， companies increasingly regard this kind of Sino-foreign cooperation as a means to expand overseas markets. 　　A Deloitte report points out that a common factor in the successful cases of foreign enterprises in China is empowering local entities to make effective decisions according to local conditions. Although the number of cross-border transactions in China declined in 2020 due to the COVID-19， the M&A transactions in the medical device industry remained relatively stable in 2020， reflecting the importance of the industry during the COVID-19 pandemic. One of the biggest transactions of the year in the industry is Dirui IVD Products Co.， Ltd.， a Chinese medical device enterprise specializing in the production of disease detection device（including nucleic acid detection）.
　　Deloitte thinks that joint venture is a common way for foreign enterprises to enter a broader Chinese capital market through the investment of local partners. When entering the Chinese market， enterprises should consider that industries that meet the national strategic objectives are more likely to receive support from the Chinese government. In addition， if enterprises can settle down in the expected medical device industrial park， the local government will be more willing to provide assistance to the enterprise， such as giving the settlement bonuses and preferential loans. With the increasing trends of China’s aging population， demand for long-term medical services will surge. At the same time， with growth of income and the expansion of medical clinics and hospitals， China will play an increasingly important role in the global medical device market. Manufacturers should consider how to take a share in this trend of growth.