SHENZHEN, CHINA-manufacturing medical products is supposed to act as a vaccine for companies against economic downturns. In China, it may also offer at least partial inoculation against the financial tsunami that's brought the world economy to its steepest slowdown in 60 years.
Plastic firms in the medical sector are pushing ahead with investments, judging from recent interviews at the China International Medical Equipment Fair, the country's largest such show. Exhibitors at CMEF, held April 18-21 in Shenzhen, said they expect China's new 850 billion yuan ($125 billion) health-care reform plan will boost spending.
It's not all sunshine: Some of China's export-oriented medical plastic manufacturers say their overseas business is down, and according to a survey from one global medical contract manufacturer, quality remains the international community's biggest concern with slapping Made in China on a medical device.
But CMEF attendees generally expect solid growth, in marked contrast to the factory shutdowns marring lower-value industries like toys or shoes especially in China's home market.
Local market grows, while overseas sales nose-dive
China is an undeveloped market, but more and more international companies are shifting production here to save costs, said Michael Luo, China sales manager for German tubing and catheter maker Raumedic AG. In the coming few years the medical market in China will be strong.
U.K.-based medical plastics processor Flexicare Medical Ltd. finished a new factory six months ago in Dongguan, China. While economic problems have cut Flexicare's profit margins, a spokesman said export sales for its respiratory care and other products are booming and it sees significant opportunities.
Flexicare built the new, 40,000-square-foot injection molding and extrusion factory to replace a leased facility. About three-fourths of the plant's production is exported to the United States, Europe and the Middle East.
Some Chinese-owned, medical-related plastics companies reported that their foreign sales have dropped, but that domestic sales have picked up.
Zhanjiang Star Enterprise Co. Ltd. said its foreign sales are just 20 percent of what they were a year ago. But the company's domestic business, which makes up about two-thirds of its sales, is strong. The firm is building a new factory, to be completed in 2011, to significantly increase its capacity for the home market, spokeswoman Selina Liang said.
Export-oriented Chengdu Puth Medical Plastics Packaging Co. Ltd. also indicated that its overseas sales have dropped and customers have become much more price sensitive.
The company started operations three years ago in Chengdu as a joint venture between private and government investors, but the financial crisis caused it to shift its focus more heavily to the domestic market. The company believes its injection molding machines from KraussMaffei and Engel, bought for export markets, will give it an advantage against local competitors, spokesman Young Yang said.
China's new medical plan garnering world attention
China's plans to expand its health-care system by some accounts, creating universal access to basic care are attracting attention from global medical-device companies, said David Atkinson, a spokesman for American contract manufacturer Jabil Circuit Inc., of St. Petersburg, Fla. It appears to be a pretty substantial opportunity for medical-device makers, he said.
Jabil has plastics operations at five China plants, including one dedicated medical facility.
A Jabil survey of major medical manufacturers, which identified quality as the key issue in China for foreign firms, found that 90 percent wanted to manufacture products in China.
Atkinson said Jabil's customers see opportunities in the Chinese health-care scheme to redesign their existing devices, making them more cheaply, but retaining the same functions.
Chinese companies seek improvements in quality
Growing price pressures in the medical field will create opportunities for Chinese companies that can meet international standards, said Charlie Yu, chief executive officer of Guangzhou TK Medical Instrument Co. Ltd., which makes plastic surgical items like tissue retrieval bags and abdominal surgery tools.
But many Chinese firms cannot meet those standards because they do not fully understand the detailed safety and quality standards of the medical industry, said Yu, a Chinese-American who has worked in Asia for several global medical-device makers for more than a decade.
Yu said TK has problems: For example, getting raw material documentation information from local suppliers is more difficult than it would be in the United States. There is a lot of work to be done, he said.
Still, many see opportunities to improve the quality of medical devices in China.
American tube extruder Precision Extrusion Inc. is looking seriously at setting up a factory in China because it is getting major orders from Chinese medical-device makers that need better-quality tubing than what they can buy locally, said Mike Badera, president of the Glens Falls, N.Y. firm.
We do a better job and we hold to tighter tolerances, said Badera, whose firm recently developed a 340-millimeter-long balloon for angioplasty that it claims is the longest of its kind.
Badera said his company is a few months away from a final decision on a Chinese location.
We see enough demand to make it in China for China, he said. We are counting on all the growth the government says they are going to do.