Clinical Lab Expo Opens Today
Opportunities in China Abound for U.S. Diagnostic Companies
By Matt Quigley
A few years ago, when Jianyong Shen, Northern China account manager for Beckman Coulter, Inc., (Brea, Calif.) was looking to sell diagnostic products to China, he found success at the AACC Clinical Lab Expo. Since then, Shen has continued to build profitable business relationships with Chinese distributors who attend this largest exhibition of IVD products in the U.S. Part of Beckman Coulter’s successful strategy can be attributed to the help of the U.S. Commercial Service’s International Buyer Program. Since 1996, this program has assisted companies exhibiting at the Clinical Lab Expo to form partnerships with prospective foreign buyers. Participants in the program say that their companies have made major sales of instruments and reagents to Chinese hospitals.
“Shows such as the AACC Clinical Lab Expo have been great for our business,” Shen said. “We’ve developed overseas contacts that otherwise would have been more time-consuming to make. It’s an excellent venue for foreign buyers to get a firsthand impression of U.S. companies, become familiar with technologies, and get personal introductions to American management—and that bodes well for establishing those critical long-term business relationships.”
Shen will be attending the Expo here in Washington, and once again, the International Buyer Program will include a Chinese delegation looking to do business. For U.S. companies, it’s an opportune time to explore the potential for tapping into opportunities in China’s growing, but challenging medical device market.
Trends in China’s Medical Device Market
China offers a vast market for U.S. IVD companies, and as China’s manufacturers become more sophisticated, they are gravitating to more complex markets, such as the biotech industry. Today, China’s medical equipment and device industry is the third largest, behind those of the U.S. and Japan, but it is expected to overtake Japan in just a few years.
The most recent data puts the Chinese medical device market at $13 billion, with growth at more than 13% annually. Driving this growth is China’s increasingly affluent middle class. This increased demand for quality healthcare is creating new opportunities for U.S. medical device manufacturers to supply China’s network of manufacturers, clinics, hospitals, and other healthcare facilities.
U.S. IVD manufacturers find the expanding Chinese market very attractive and are making significant investments there. According to economic data from November 2007, the healthcare industry accounts for 20% of the investments in China, a rate that has never been higher. The Chinese government is also spending and investing heavily in healthcare for rural and community medical institutions, opening a huge potential market for IVD tests and instruments.
Key opportunities are not just limited to China’s biggest cities, Shanghai and Beijing, but include 14 of China’s “second-tier cities,” which account for 53% of the country’s imports. Developing a business strategy for these markets is important for a company’s long term-success in the Chinese market.
Strategies for Doing Business in China
China can be a difficult market, and U.S. diagnostic manufacturers must go in thoroughly prepared. One way to increase the chance of success in China is to visit the U.S. Commercial Service Web site at www.export.gov. The site lists locations of the 108 U.S. Export Assistance Centers. Other helpful sites are www.buyusa.gov/China/en, which lists the U.S. Commercial Service offices in China, and the China Business Information Center.
Doing business in China can present some unique challenges, however. Because fake products are common in middle- and low-end markets, U.S. medical device companies should register their patents in China, without which their intellectual property (IP) rights cannot be enforced in China. According to a 2005 U.S. Patent and Trademark Office study, 85% of small- and medium-sized American businesses that export do not realize their U.S. patents and trademarks do not protect them overseas. Click here for more information on IP protection strategies.
U.S. medical device firms must go in with the understanding that there are very few distributors with nationwide networks and that Chinese companies tend to classify the markets in terms of tiers. For example, tier-one distributors are usually located in the major cities of Shanghai, Beijing, and Guangzhou. These distributors import products that are passed on to local tier-two or tier-three distributors in different cities. U.S. exporters can also directly approach distributors with import-export licenses in some of the dynamic emerging markets. Selecting a good distributor requires due diligence, as solid relationships with distributors are key to providing excellent customer service and after-the-sale follow-up.
Another important step to doing business in China is getting a medical product registered. Fortunately, market access for U.S. exporters has improved considerably with the State Food and Drug Administration (SFDA), the agency responsible for the medical industry’s import, manufacturing, and distribution activities. All medical equipment and materials must be registered with the SFDA, with most classified as Medical Device Category II products. Clearing the registration hurdle can take time, and companies should be prepared to work with a local company to help accomplish this. Once a company has registered its products, it should work with a distributor to target top hospitals with medical facilities. Developing a track record of success with clients is the best way to generate positive word of mouth referrals among medical professionals.
The Competitive Advantages
The Chinese market bodes well for U.S. medical device suppliers possessing a good strategy. U.S. medical technology is well-regarded, and American firms have a good reputation for quality and after-sale service. The top end of the market is completely served by foreign importers or foreign-invested companies in China; the middle market is shared by imported and Chinese products, and China-manufactured products of foreign-invested companies; and the low end is supplied mainly by domestic producers. For a hospital or clinic, being able to advertise that it uses the latest high-tech equipment is a key factor in attracting more affluent patients.
By positioning themselves now to take advantage of opportunities in China, U.S. companies can greatly increase their chances of long-term success in this market. As for Beckman Coulter, Shen says he’s looking forward to doing more business in China, and that his firm is seeing 20% annual growth in the Chinese market, with exports to that country accounting for a small, but growing percentage of Beckman’s global sales.
“U.S. medical technologies have an excellent brand image and reputation for after-the-sales service among the Chinese, and that’s a real plus,” Shen said. “However, selling to China is not easy. U.S. firms must do their homework first, be committed for the long-haul, and take advantage of shows such as the Clinical Lab Expo and export assistance from the U.S. Commercial Service.”
In addition to an official delegation from China, other countries, including Pakistan, Ghana, United Arab Emirates, Morocco, Venezuela, and Iraq, are expected to visit the Expo this week.
Matt Quigley is a Trade Specialist with the China Business Information Center at the U.S. Commercial Service in Washington, D.C. Email: Matthew.Quigley@mail.doc.gov Phone: 800-USA-TRADE (800-872-8723).
For More Information
Stop by the International Visitors Center
First Floor, West Lobby of the Convention Center
The International Visitors Center provides special services through the U.S. Department of Commerce’s International Buyer’s Program and AACC to assist both exhibitors and international visitors. Services include: computerized matching, enabling exhibitors and international delegates to secure real trade leads and act on the leads while at the Expo; on-site Trade Specialists from the U.S. Department of Commerce to provide export assistance; and meeting rooms.
Looking to Export?
U.S. Commercial Service Here to Help
Each year, the AACC Clinical Lab Expo attracts thousands of laboratorians and diagnostics manufacturers from around the globe. Here, CLN is pleased to present this look at another side of the Expo. Eugene Quinn, international trade specialist with the Commerce Department’s U.S. Commercial Service, discusses how the International Buyer Program works to bring together buyers and sellers. Under the program, Quinn coordinated the recruitment of several foreign buyer delegations with the help of U.S. embassies. These buyers will be attending the Clinical Lab Expo and looking to form business relationships.
Ninety-five percent of the world’s consumers live outside the U.S., and thus more U.S. companies are looking to increase their international sales with help from the Commerce Department’s U.S. Commercial Service and other federal agencies. This week, we’re literally in the same room with buyers and sellers, offering outstanding export programs to assist export and partnering efforts.
With the Internet, ease of transportation, and free trade agreements, there’s never been a better time to be selling internationally. Whether a company is new to export or wants to expand into new markets, we have the expertise that can help add to bottom line.
International Buyer Program
Continuing its long-term partnership with the U.S. Commercial Service, AACC is reaching out to support export promotion programs for the benefit of exhibitors. Once again, the Clinical Lab Expo has been selected by the U.S. Department of Commerce to participate in the International Buyer Program (IBP), a service that significantly enhances our ability to make the show a truly global marketplace. Through this program, we offer a number of services to help international attendees make the most of their experience at the show.
Through the IBP program and its globally integrated network, the U.S. Commercial Service provides a three-pronged approach that helps small and medium-sized U.S. businesses export their products and services.
First, Commercial Service overseas staff at U.S. embassies and consulates throughout the world recruit and bring to the show foreign buyer delegations and help organize their plans for doing business at the show. Even if a delegation cannot be formed in a country, Commercial Service specialists advertise the Clinical Lab Expo and encourage buyers to register and attend on their own. Several official DOC delegations from all over the world— Pakistan, China, Ghana, United Arab Emirates, Morocco, Venezuela, and Iraq, to name a few —are expected to come to Washington this week..
Second, trade specialists from the Commercial Service will be managing the International Visitors Center (IVC) located in the West Lobby, Level 1, of the Washington Convention Center. In the IVC, buyers can negotiate with sellers, use the meeting rooms provided free of charge on a first-come, first-served basis, and take advantage of the facility to plan their visits to the exhibit floor. We also encourage exhibitors to visit the IVC for our interpreter services and export counseling from the Commercial Service.
Third, with its network of offices across the U.S. and in more than 80 countries, the Commercial Service uses its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. This assistance includes export counseling, market research, matchmaking, pre-arranged business appointments abroad through its Gold Key Service, advocacy, videoconferencing, international partner searches, trade events, and more. Click here for more information.
Export Program Offers Information
With assistance from AACC, the U. S. Commercial Service Healthcare Technologies Team is coordinating a Showtime program where exhibitors will have opportunities to meet with commercial specialists from our international network. Together, they will explore export opportunities and discuss the latest market information on their respective countries. At past IBP shows, these efforts have led to numerous export successes and a significant number of U.S. export successes.