Dusseldorf German medical technology companies are facing growing restrictions in the important Chinese market. After Drägerwerk from Lübeck, the B. Braun Group also reports that business in the country is becoming more difficult. The background is the “Buy China” strategy of the government and local authorities.
“China is striving for greater independence in the supply of medical technology. For many medium-sized companies, the market can no longer be served to the usual extent,” said B. Braun boss Anna Maria Braun on Thursday when the balance sheet was presented. The family business specifically selects which products to continue offering there. “But we don’t want to and won’t do without China. The market is too important for that,” explained the CEO.
The medical technology manufacturer Drägerwerk is not planning this either. But CEO Stefan Dräger chooses more drastic words to describe the current situation. It is foreseeable that freedoms in China will continue to be restricted. Many hurdles are not official at all, but the result of “arbitrary behavior” by the authorities, Dräger told the Reuters news agency. “Many medium-sized companies are in the process of withdrawing from China.”
Beijing regards medical technology as a strategic branch of the economy
B. Braun and Drägerwerk have production facilities in China and can therefore act as local suppliers on the market. Providers who export from Germany cannot do that. This applies to most medical technology companies: 93 percent of the industry consists of small and medium-sized companies, the export quota is 66 percent.
For them, China is important as the world’s third largest medical technology market after the USA and Europe, because the demand in the country with its rapidly aging population is great. However, many companies feel slowed down by increasing industrial policy regulation.
“Many medium-sized companies are in the process of withdrawing from China.”
(Photo: Dräger)
Beijing sees medical technology as a strategic branch of the economy, the products of which are to come entirely from domestic production in the future. According to the “Made in China 2025” industrial modernization program, county-level hospitals are expected to procure at least half of their high-end medical equipment from domestic manufacturers by 2025, and 95 percent by 2030, according to GTAI.
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Many provincial governments have drawn up concrete lists of which medical technology products can still be imported from the West. With such “Buy China” guidelines, China wants to raise value creation and technology in its own country to a higher level, explains the Berlin consulting firm Sinolytics. The aim is then to be able to serve the world market.
According to the industry association BVMed, part of this “Buy China” strategy are new tendering procedures that are causing German companies great concern. The healthcare system in China is mainly operated by the state, which has enormous influence on procurement and purchase prices. With the so-called volume-based procurement, the authorities not only want to lower prices, but also benefit domestic producers.
A presence in China is indispensable for B. Braun
The consequence for Western companies: Those who can, position themselves practically as Chinese companies with local production and organization. Major supplier Siemens Healthineers, for example, split its Asian business in 2022 and created a separate unit for China. Others are withdrawing from the country completely or with parts of their portfolio.
The group’s business picked up again in 2022.
(Photo: B. Braun Melsungen AG)
For B. Braun boss Anna Maria Braun, a presence in China is indispensable despite all the restrictions – and not just because of the sheer size of the market. “It’s important to participate in the rapid technological development there, for example in artificial intelligence,” she says.
At the same time, however, other locations in Asia are becoming more attractive. B. Braun has been represented in Malaysia, Japan and India for some time and is currently building a new factory for dialysis concentrates in Vietnam. Drägerwerk, on the other hand, relies primarily on India, Indonesia, Vietnam, Japan and South Korea.
B. Braun generated more sales in all regions in the 2022 fiscal year, with total sales increasing by 3.4 percent to EUR 8.5 billion. After the decline in the corona pandemic, there were more operations that could be planned again worldwide. That drove demand for knee and hip implants, as well as surgical instruments and sutures.
Nevertheless, according to Braun, 2022 was a “difficult year”. The high costs for raw materials, energy and logistics pushed the profit (Ebitda), which fell by 9.5 percent to 998 million euros. Added to this were unscheduled depreciation for discontinued projects in the areas of production and development.
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