Overview

• The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) came into effect on 1 January 2004. All goods made in Hong Kong, including medical and healthcare products, subject to the CEPA's rules of origin, can enjoy duty-free access to the Chinese mainland beginning January 2006.



• Hong Kong's medical and healthcare equipment industry is mainly targeting at the household consumer market. In 2008, Hong Kong's total exports of medical and healthcare equipment grew by 23%. Chinese mainland and the US remained the largest markets of Hong Kong. In 2008, exports to Chinese mainland and the US increased 41% and 17% respectively, while exports to Japan picked up markedly by 103% to become the third largest market.



• According to the United Nations, there are currently more than 610 million people aged 60 or over, accounting for 10% of the world's total population. By 2050, this proportion is projected to increase to 22%. Aging population and increased health consciousness are factors boosting the demand for home healthcare equipment such as massagers, body-mass-index (BMI) calculators, body-fat scales, ionizers and positioning aids, as well as medical equipment for patients suffering from cardiopulmonary disease, diabetes and neurological disorders.



• There is an increasing trend for home-based, individual and long-term care which leads to higher demand for medical and healthcare products and services. According to the World Health Organisation, the total global expenditure for health is around US$4.1 trillion a year.



• Modern technology is also playing a major role in the medical and healthcare equipment industry. Innovations such as microminiature and remote surgery techniques, DNA-based diagnostics, tissue-engineered organs and advanced information technologies provide solutions to some of the most persistent and debilitating healthcare problems and create demand for new medical and healthcare devices.

 

Industry Features*

* Industry statistics refer to production in Hong Kong only. They only include professional, scientific, measuring and controlling equipment.

The medical and healthcare equipment industry has two distinct markets - household consumer market and professional or institutional market (hospitals and clinics). Most medical and healthcare equipment companies in Hong Kong are engaged in OEM business, mainly producing massagers, temperature and blood pressure monitors. Taiwan is traditionally Hong Kong's main competitor. In recent years, with increased competitiveness in price and product development, the Chinese mainland is increasingly putting pressure on local companies, inducing them to strive for product and company re-positioning. Many local companies have undertaken to develop innovative and multi-functional products to enhance their competitive edge.

In order to lower production costs, many Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, and most of them are engaged in the manufacturing of mechano-therapy appliances/massage apparatus. However, quality control, marketing, research and development, design, as well as material and equipment procurement continue to be conducted in Hong Kong.

The industry relies heavily upon imported parts and components, especially for electronic components. Most of them are sourced from Japan and Taiwan.

Products with better growth prospects for Hong Kong manufacturers include home-based equipment, hygiene sterilised supplies, equipment for less-invasive procedures, orthopaedic tools and devices, devices and supplies for high health-risk diseases and injuries and telemedicine etc.

Performance of Hong Kong's Exports of Medical and Healthcare Equipment^

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies.
* Insignificant

In 2008, Hong Kong's total exports of medical and healthcare equipment increased by 23%. Exports to the Chinese mainland, the largest market for Hong Kong's medical and healthcare equipment exports, grew by 41%, while exports to the US and the EU increased by 17% and 6% respectively. Exports to Japan also showed a marked growth of 103%.

Among different product categories, Hong Kong's exports of miscellaneous medical instruments and appliances which include sight testing instruments and veterinary science appliances, increased by 14% in 2008. Exports of electro-diagnostic apparatus rose by 33%, while exports of mechano-therapy appliance and massage apparatus drop slightly by 3%.

Outsourcing is growing in popularity among overseas manufacturers of medical and healthcare equipment in recent years. Hong Kong companies stand a good chance in acting as contract manufacturers or sourcing partner given their edges in quality assurance and IPR protection. Though the cost of regulatory compliances is high for Hong Kong companies, this helps differentiate Hong Kong companies from other low-cost competitors and reinforces the role of Hong Kong companies as a partner providing high-quality products and services.

Sales Channels

Medical equipment is mainly sold directly to hospitals and clinics, while healthcare equipment is mostly distributed to department stores, chain stores and supermarkets via local or overseas trading companies. Well-established suppliers, such as Osim and OTO, have set up their own specialty shops.

Many Hong Kong's medical and healthcare goods are exported under OEM arrangements with supplied product specifications and designs. Recently, Hong Kong manufacturers are increasingly involved in product design and development, engineering, modelling, tooling and quality control. In order to differentiate from low-end products, many Hong Kong manufacturers apply different international certifications for their products.

Apart from producing for OEM customers, some Hong Kong manufacturers also have their own R&D department to develop models produced under their own brand names. For these original brand products, Hong Kong manufacturers would sell to overseas importers and distributors who also act as agents to provide after-sale services. It is advised that manufacturers / distributors take out insurance or make other arrangements to minimize the risk of product liability claims.

To further explore overseas market opportunities, medical and healthcare equipment manufacturers and exporters are encouraged to join the fair missions and exhibitions organised by the Hong Kong Trade Development Council (HKTDC). TDC also organises from time to time study or match-making missions for Hong Kong manufacturers to visit specific markets for establishing new business connections.

Industry Trends

Demographic trends have important impact on the medical and healthcare equipment industry. According to World Health Report released by the World Health Organisation, the world average life expectancy will rise to 73 years by 2025 - a 50% improvement on the 1955 average of only 48 years. Currently, there are more than 610 million people aged 60 or above which accounting for 10% of the world's total population. According to the United Nations, this proportion is projected to increase to 22% by 2050. These trends have resulted in an increasing demand for medical and healthcare products designed for the ageing population.

The total global expenditure for health is now more than US$4.1 trillion a year according to the World Health Organisation and the health expenditure as a percentage of GDP has been increasing among all major economies, including the Chinese mainland. The increasing share of medical services or healthcare in household expenditures in some developing countries can be translated into more opportunities for Hong Kong exporters of medical and healthcare products. Meanwhile, growth of public health expenditures in the more industrialised countries is slowing down which, however, creates opportunities for home medical equipment targeting at patients undergoing recuperation and therapy processes.

CEPA Provisions

Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), all items can enjoy duty-free access to the mainland beginning from 1 January 2006 by meeting the CEPA rules of origin. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. For more information about country of origin criteria, please refer to the Trade and Industry Department's CEPA web page: http://www.tid.gov.hk/english/cepa/index.html

General Trade Measures Affecting Exports of Medical and Healthcare Equipment

Equipment for medical purposes faces stringent regulations in overseas markets. In the US, the Food and Drug Administration (FDA) is responsible for ensuring that medical devices comply with the safety and effectiveness requirements stipulated in the Federal Food, Drug and Cosmetic Act. The US regulations cover various aspects of design, clinical evaluation, manufacturing, packaging, labelling and post market surveillance of medical devices.

In the EU, medical devices are covered by 3 main directives which set out the requirements for performance and safety of medical devices and procedures for checking product compliance. A product is required to have a CE mark to show full compliance with relevant directives. The CE mark enables the product to be marketed in any EU member country.

In the Chinese mainland, the State Food and Drug Administration (SFDA) is in charge of the registration and monitoring of imported medical devices. The scope and functions of the SFDA are very similar to those of FDA in the US. In addition to the SFDA, other Chinese government agencies also have jurisdiction over the regulation of certain medical devices. One of these government agencies, General Administration of Quality Supervision, Inspection and Quarantine, issues safety licenses for imports, which include x-ray equipment, dialysis equipment, blood purification equipment, electrocardiographs, implantable pacemakers, and ultrasound equipment.

In Japan, medical device manufacturers must obtain a license and an approval from the Ministry of Health, Labor and Welfare before marketing its product in Japan. In 2002, the Japanese House of Representatives passed the amended Pharmaceutical Affairs Law (PAL), which is applicable to all medical devices, drugs, quasidrugs, and cosmetics entering the Japanese market. Effective from April 2005, foreign sales of medical devices approval will be subject to the following new requirements:

• A foreign manufacturer must appoint a Marketing Authorisation Holder (MAH) as their representative in Japan;
• Under the amended PAL, foreign manufacturers of medical devices are also required to obtain foreign manufacturing accreditation for their manufacturing facilities. After 2008, foreign manufacturing facilities must be reaccredited under the Ministerial Ordinance (MO 2); and
• A mandatory performance standard called Japanese Industrial Standard (JIS), must be established for a medical device to be eligible.

Product Trends

As a result of the aging population, treatments for cardiopulmonary disease, diabetes, and neurological disorders will see rapid growth, so as orthopaedic devices and pharmaceuticals that can help aging baby boomers stay active. In addition, increased consciousness in personal health and fitness in developed countries is boosting the demand for home-based or self care equipment such as massagers, body-mass-index (BMI) calculators, body-fat scales, ionizers, wheelchairs, geriatric seating, positioning aids, commode chairs, shower chairs, walkers, canes, crutches and patient lifts. These equipments facilitate the prevention, detection and control of diseases.

Modern technology is playing a major role in the medical and healthcare equipment industry. Innovations such as microminiature and remote surgery techniques, DNA-based diagnostics, tissue-engineered organs, and advanced information technologies provide solutions to some of the most persistent and debilitating healthcare problems and create demand for medical equipment utilising these new technologies. In addition, the bluetooth technology also gives rise to new medical devices such as a patient-worn pulse oximetry and a portable patient monitor. Technology has also given rise to telemedical services and less-invasive procedures.

In addition, there is an existing problem of nurse shortage in some developed countries. According to the latest projections from the U.S. Bureau of Labor Statistics published in the November 2007 Monthly Labor Review, more than one million new and replacement nurses will be needed by 2016. Therefore, there is a great demand for new products that can save nurses' time in taking care of the patients. For example, the time spent by nurses on training on the use of the new products and technologies could be saved by standardizing different types of medical devices.