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Market Study China

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Market Study China

    企业改造管理流程手册供应商管理规定内部管理报告流程理赔管理流程手册内部控制体系建设培训包销定制商品管理规定

     EASTMAN KODAK COMPANY RESTRICTED INFORMATION

    China

    Medistat Country Profiles

    July 2002

    Author: Brian McLean

     Date: December 20, 2002 商品引进管理规定售后服务系统企业运营报告分行业综合评分城市带发展的研究报告国有企业基本状况企业综合实力行业研究报告管理流程手册组织架构与岗位职责采购系统管理流企业调研问卷生产行业计划实施进展行业监测访谈记录

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    Table of Contents

    Executive Summary 4

    Introduction 6

    Background 6

    Geography 7

    Population. 7

    Economic Status 9

    Health Care Expenditure 9

    Organization and Administration 10

    Ministry of Health Regulations 11

    Medical Regulations 11

    Hospitals 12

    Hospital Beds 14

    Military Hospitals 15

    Medical Personnel 15

    Traditional Chinese Medicine 15

    Health Care Development 16

    Health Insurance 16

    Rural Healthcare 17

    Community Based Healthcare System 17

    Commercial Medical Insurance 18

    Market Access 18

    Importing 18

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

     2 Date: December 20, 2002

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    Market for Medical Equipment and Supplies 19

    Second Hand Equipment 19

    Domestic Production 20

    Multinational Producers 20

    Exports 21

    Imports 21

    Tobacco Usage 23

    Trade Fairs 23

    Chinese Holidays 24

    Appendix A (Map of China) 25

    Appendix B (Hospitals and Hospitals Beds by Region) 26

    Appendix C (Export Statistics) 29

    Appendix D (Import Statistics) 30

    Appendix E (Balance of Trade Statistics) 31

    Appendix F (Tariffs and Duties) 32

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

     3 Date: December 20, 2002

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    EXECUTIVE SUMMARY

    China: Medistat Country Profiles

BACKGROUND

    The Chinese Communist Party founded the People’s Republic of China in 1949. After many years of isolation, the doors to the Chinese market were opened. Today, China is one of the largest, yet most difficult, markets to manage. With a population around 1.3 billion people, China makes up almost 20% of the world’s population. This figure alone displays the magnitude of this market in terms of customer base.

OBJECTIVE

    By using Medistat, the intent is to determine the current and future state of the Chinese medical equipment market. This included a general review of China’s population base, healthcare spending, medical regulations, medical facilities, and foreign influences on the medical market.

     KEY FINDINGS

Population

    o 1.3 billion people;20% of the world’s population

    o Important to differentiate between urban and rural population

    o 2/3 rural residents

    o 1/3 urban residents

Healthcare Expenditure

    o China spends 6% of GDP on health care;estimated US $70 billion

    o 1993;spent 3.8% of GDP

    o 2010;predicted to spend 10% of GDP

    o By comparison, the United States spends about 13% of GDP

Government Control

    o Principal authority within the Chinese health care system is the Ministry of Health

    (MoH)

    o Recently implemented policies in an attempt to control hospital spending

    o The State Drug Administration (SDA) is responsible for regulating medical

    devices

Hospitals

    o Currently, there are approximately 66,500 hospitals;23% of which are at the

    county level and above

    o Focus on these hospitals because they are willing to spend money on

    medical equipment

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

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    o 300 to 400 military hospitals

    o Very little data about these hospitals, but known to be major purchasers of

    advanced medical equipment

    Current Market Status

    o Best to describe the market as a collection of small markets;each major city

    represents a market

    o Each city can establish its own regulatory policies aside from the central

    government

     Three options for best market access: o

    o Sell through a distributor

    o Establish a joint venture;Most popular option

    o Establish a wholly owned venture

    o Forced to import most of its high-tech equipment because very few domestic

    manufacturers have those capabilities

Market Barriers

     Size of the country o

    o Overlapping political makeup;central government versus city regulations

    o Language

CONCLUSIONS/RECOMMENDATIONS

    China is one of the most difficult markets to penetrate. At this point in time, it is only important to focus on the larger cities along the eastern seaboard, where the urban residents live. They are the people that, with an increasing disposable income, are demanding better and more advanced healthcare and healthcare products. Current roadblocks should not deter any company from entering the Chinese market. It is important to gain a piece of the market now, because the future offers endless benefits.

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

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    Introduction:

    China is by far the most populated country in the world, with an estimated population of 1.3 billion. By itself, China makes up around 20% of the world’s population. This alone makes China an enviable marketplace with countless opportunities. By the year 2050, experts expect the total economy of China to be one of the largest in the world. Despite the poor healthcare provisions offered to most of the population, the potential medical device market is vast. Due to economic growth in the larger Chinese cities, there is a demand for better healthcare and the money to spend on western equipment. The future looks bright as long as the new health insurance scheme helps to promote growth.

    Chinese hospitals may charge patients what they wish for services provided based on the hospital facilities and overall quality of the hospital. To attract patients, hospitals must offer the highest quality services, meaning that hospitals compete over patients. The best services usually correspond with the best equipment, and Chinese hospitals are willing to invest in new equipment.

    On the downside, the government and public organization of China remains a jigsaw puzzle, with all the overlapping authorities and officials. In recent years, more harmonized device regulations have been introduced with regard to international products. To succeed in China, it is imperative that personal contacts are established to ensure a smooth business process. Overall, it looks as if the Chinese market place is not one for the very near future, but a prospective market with medium and long-term benefits waiting.

Background:

    The Chinese Communist Party founded the People’s Republic of China in 1949. From 1949 to 1978, China isolated itself from its neighbors and other foreign markets. However, in 1978, the Open Door policy was implemented to encourage foreign investment and market liberalization. Since that point in time, the economy of China has grown at a rate between 9% and 10%. The numbers can be quite misleading though, especially with regards to the disparity between urban and rural areas. Major cities throughout China are starting to rival those of other developed cities in Asia, but rural areas resemble a very small fraction of the nations GDP.

    The economic growth has slowed down slightly, dating back to the mid 1990’s. It is apparent that without government funding and a looser financial sector, the days of huge economic growth may be just a thing of the past. To combat the slow growth, the Chinese government has vowed to lift barriers to private enterprise as well as invest more into the western part of the country. A number of Special Economic Zones, Economic and Technical Development Zones, and Key Economic Hubs have been established throughout the country in hopes of attracting foreign investment.

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

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    Geography:

The People’s Republic of China covers 9,571,300 km 2 in the far east of Asia. It has

    borders with Mongolia, Russia, Tajikistan, Kyrgyzstan, Kazakhstan, Afghanistan, Pakistan, India, Nepal, Bhutan, Burma, Laos, Vietnam and North Korea. The east coast of China borders the Yellow Sea, the East China Sea and the South China Sea. The vast area of the country means that it encompasses a wide range of climates and terrain.

    Area about 9.6 million square kilometers; east to west distance about 5,000 kilometers, from the Heilong Jiang (Amur River) to Pamir Mountains in Central Asia; north to south distance approximately 4,050 kilometers, from Heilongjiang Province to Hainan Island in south, and another 1,450 kilometers further south to Zengmu Shoal, territorial claim off north coast of Malaysia.

    China is divided into 22 Provinces, four Municipalities and five Autonomous Regions. The country is further divided into 335 prefectures and 2,142 counties. Refer to Appendix A for a map of the country.

Population:

    The shear number of people that reside in China make it a marketplace with huge potential. As stated earlier, around 20% of the world’s population lives in China. It goes without saying that the population of China can only get larger, despite a slowing growth rate. Despite the slowing growth rate, the health of Chinese children has improved considerably. This in turn, should have an effect on the population in the future. With more children growing up healthy, it is safe to assume that they will live longer and most likely start families, which will push the population figures up even more.

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

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    As you can see, an enormous percentage of the population is between the ages of 15 and 64. Surprisingly, there is a very small percentage of people above the age of 65. Over time, this trend should change, with a more balanced percentage of those under the age of 14 and those over the age of 65. Compared to the United States, there is a slight difference between the percentage of population between the ages of 15 and 64, as well as above the age of 65.

    U.S. Population by Age Group, 2000

    65+0-1413%21%

    15-64

    66%

    In 2000, the province of Henan, in South-central China, had the largest population, with 92.6 million, equal to 7.3% of the total. By contrast, the least populated province was Tibet, in southwestern China, with a population of 2.62 million. Eastern China was the most populated region of the country, inhabited by 364.7 million people in 2000. The area includes Shanghai, China’s largest city, with a population of 16.7 million.

    The population of China remains predominantly rural. In 2000, 63.8% of the population, around 807 million, resided in rural areas, with the remaining 36.2% living in urban areas. The urban population is expanding, however, having stood at 30.9% in 1999 and 26.4%

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

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    in 1990. The urban population, although small in proportion to the rural population, is vast compared with any other country.

    The following two maps give an indication as to the aging population in the world right now as well as a prediction as to where that population will be in 50 years (Source: Customer First Presentation, Global Marketing 2001).

Economic Status:

    Overall, China can be considered a poor country. With two-thirds of the population living in rural areas, the amount of money each individual earns is quite small. In 1999, an individual working in a Chinese city had an average annual income of US$1,084. By comparison, a farmer had an average annual income of US$342. If you take these figures into account when looking at the cost of living, it doesn’t bode well for the Chinese ** population. As of January 2002, the cost of living index for China is equal to 127(Source: http://www.expatforum.com/Resources/icol.htm).

Health Care Expenditure:

    It is estimated that China currently spends around 6% of GDP on health expenditure, or an estimated US $70 billion. It works out to be around US $55 per capita. By comparison, the United States spent around 13.1% of GDP on health expenditures in the year 1999. In 1993, China spent only 3.8% of GDP on health expenditure, so it seems like the market is growing and the people of China are willing to spend more money to ensure their health.

    Funding for healthcare comes from a variety of sources, with the central and local government only accounting for around 10% of the total expenditure. This number has

    continually decreased since the 1980’s. Around 40% of funding comes from insurance

    schemes; the newly developed government scheme and the remnants of the older rural co-operative scheme. Overall, the largest amount of spending comes from private

     ** A basket of goods and services that costs US$100 in the United States would cost US$127 in China. BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

     9 Date: December 20, 2002

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    sources, accounting for around 45% of the total (Data sources for this appear to have

    approximated figures, accounting for less than complete total).

    The monthly and disposable income of residents in China’s large and medium cities has increased in recent years. The increased spending can be linked to a higher household income, the reform of the healthcare system, and the improvement of healthcare awareness. Among the urban population, the new government insurance scheme has promoted an increase in private insurance. The urban population spends more personal money per capita on healthcare than the rural population; however, the rural population spends a total amount far greater than the urban population does. This is due to a lack of government funding and insurance schemes in rural areas.

    In 1998, it was predicted by a World Bank study that healthcare spending could jump to 10% of GDP by the year 2010, compared to 6% currently, because of current problems. This figure could grow to as much as 25% by the year 2030 if current problems are not addressed properly. Currently, healthcare expenditure is increasing at a slow rate. It is unknown as to whether or not future healthcare expenditure will be affected by current healthcare reforms. According to the study, China could offset the growth of healthcare expenditure by implementing reforms, such as combating the lack of disease prevention. Hopefully this would limit healthcare spending to 6%-7% by 2010, instead of 10%. However, this does not mean that many of the problems China faces are being looked at properly. This is apparent when looking at the meager spending of only 6% of GDP on health care currently.

Organization and Administration:

    The principal authority within the Chinese health care system is the Ministry of Health (MoH). However, public health ministries of provincial and city governments exercise most of the control. This is the level at which most public hospitals are operated. In the year 2000, there were approximately 66,509 hospitals within China that were run at the county level and above.

    On the opposite end of the spectrum are the Chinese armed forces, which operate over 300 hospitals within the country. Only military personnel and their families are allowed access to these hospitals. Although there is very little data about these hospitals, it is a known fact that they are major purchasers of advanced medical equipment.

    In 1998, the State Drug Administration (SDA) took over the responsibility of regulating medical devices and drugs from the Ministry of Health. The Ministry of Labor and Social Security is responsible for medical insurance. At this point, the Ministry of Health is responsible for drafting health care laws, regulations and procedures, the implementation of regional healthcare plans and policy, the development of health education programs, and the monitoring of infectious diseases.

     BUSINESS RESEARCH Report Title: China: Medistat Country Profiles Author: Brian McLean

     10 Date: December 20, 2002

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