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China’s healthcare boom

China is in economic restructuring. Building affordable healthcare and social security system are on the top of the reform agenda (this helps drive down China's savings rate so to avoid crisis in the future fueled by global imbalance). Foreign companies will have tremendous business opportunities in China.

The world's largest CT-scanner makers, including General Electric Co., Siemens AG and Royal Philips Electronics, are zooming in on China.

That nation plans to spend $125 billion to build tens of thousands of hospitals and clinics, extending health care to nearly all of its citizens. Its ambitious three-year plan, announced last year, has created a rare feeding frenzy in the lucrative field of diagnostic-imaging machines, an area in which Western manufacturers still face little Chinese competition.


Indeed, China's total medical device and equipment market is expected to roughly double between now and 2015 to $53.7 billion, according to market-research firm Frost & Sullivan. That figure includes products ranging from patient-monitoring devices to stents, but much of the growth will likely come from MRI and CT scanners, which are highly profitable and can cost up to $2 million apiece. And the likely sales come amid a protracted slump in the U.S. market for medical equipment and devices triggered by the economic slump.

"The efforts made by the Chinese government are unprecedented" in terms of investing in health-care infrastructure and spending on higher-tech equipment, says Ronald de Jong, chief executive of Philips Healthcare's emerging markets business.

GE and Philips project double-digit increases in their health-care operations in China over the next few years, while Siemens says it aims to increase medical-imaging sales there at a faster pace than the market's projected 10% annual growth. Last year, GE says, it generated $1 billion in Chinese health-care revenue, including equipment sales, parts sales and maintenance fees. It declined to disclose its U.S. sales figures, but the overall U.S. market for medical-imaging equipment and services fell by one third last year to $9.7 billion from $14.4 billion, according to market research firm Frost & Sullivan.

GE remains the top seller of medical-imaging devices globally and in China, but both Siemens and Philips are gunning to expand their Chinese market shares. To cater to smaller and more rural hospitals, all three companies have opened more sales and service offices across China's interior. They are also expanding less costly, lower-end lines of imaging gear.

GE, which plans to increase its 4,000-employee health-care work force in China by as much as 15% this year, has expanded its line of lower-priced Brivo imaging equipment beyond X-ray machines and into CT scanners that are roughly 30% less expensive than the company's costlier models. GE says it has sold 70 Brivo scanners in China since they were introduced in March.

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