In recent years, China's medical device industry has ushered in a rare "policy intensive period", fostering a clear trend towards "domestic substitution". Based on enterprise research and expert interviews, it has been found that:

• The "No. 551 Document" jointly issued by the Ministry of Finance and the Ministry of Industry and Information Technology in 2021 has had a significant impact on the market and industry, prompting foreign companies to shift their production to within China. However, the specific criteria for determining "production within China" are still unclear.

For local medical device enterprises, in addition to such domestic encouragement policies, further optimization of the quality management system, regulatory review system, and procurement/price management environment is also necessary for their healthy development.

"In the future, domestic substitution will become the main theme of the market, especially in the field of high-end medical devices, where domestic brands have great potential for development," Lu Zhong, director of the Southern Medical and Pharmaceutical Economic Research Institute of the National Medical Products Administration, pointed out at the 2023 Medical Device Economic Information Conference.

As one of the fundamental sub-sectors of the biomedical industry, the medical device industry is a high-tech sector characterized by interdisciplinary fields, intensive capital investment, long investment cycles, and high technological barriers, especially in the field of high-end medical devices. Slightly different from pharmaceuticals, medical devices are characterized by small batches, multiple varieties, and high technology. Due to the particularity of the medical device industry, coupled with its late start and weak foundation, the Chinese medical device industry has long been plagued by issues such as small and scattered enterprise scales, and homogenization competition. As the performance, precision, and stability of local products are significantly inferior to those of imported products, high-end medical devices are heavily reliant on imports and are considered as a "bottleneck" industry in China.

In recent years, China's medical device industry has ushered in a rare "policy intensive period", fostering a pronounced "domestication" trend and stimulating the development of local medical device enterprises. New domestic medical device products have been launched in a surge. In 2022, the operating revenue of China's medical device industry reached approximately 1.3 trillion yuan, representing a year-on-year increase of 12%, significantly higher than the overall growth rate of the pharmaceutical industry. Its market share accounted for more than one-third of the global market, with a growth rate approximately three times that of the global market. In 2023, a total of 61 innovative medical devices were approved for marketing in China, including multiple domestically pioneering products. "Innovative achievements in pharmaceutical and medical devices have entered an explosive period.".

How should we understand the trend of "domestic substitution" in China's medical device industry in recent years? What impact will the "localization" orientation have on different industrial entities, and what chain reactions will it bring to the market? Recently, researchers from The Paper Institute interviewed Yang Yu, director of the Large Medical Equipment Professional Research Office of the Shanghai Medical Device Inspection and Research Institute, and an anonymous industry insider. They also collated and discussed relevant opinions on Shanghai's business environment put forward by four medical device enterprises surveyed in 2023.

This round of domestic substitution in the medical device industry is primarily policy-driven. While some policy measures have been criticized as "discriminating against foreign companies" and "protectionist," they have indeed prompted foreign medical device companies to invest more heavily in local production in China, and have also fueled the investment and development enthusiasm of private medical device enterprises. In fact, there is still room for improvement in the quality management and innovative development of domestic medical devices. The specific criteria for "domestic" are still being clarified, and it is worth paying close attention to how it will change the market expectations and industrial landscape of China's medical device industry.