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INTERVIEW WITH “CHINACONTACT” ABOUT MARKET ENTRY FOR OPHTHALMIC OPTICS AND HEALTHCARE COMPANIES INTO THE CHINESE MARKET

The Melchers Group founded its first Asian branch in Hong Kong in 1866 and is now active in China in the areas of machinery and industrial products, luxury goods, and healthcare. ChinaContact spoke to Mike Hofmann, Managing Director of Melchers China in Beijing.

Mike Hofmann has lived and worked in China for close to 17 years. He is the Managing Director of Melchers China in Beijing and Chairman of the Board of Directors of the joint venture Koehler Pharmaceuticals Beijing Ltd. Since 2021, Hofmann has been a member of the board of the German Chamber of Commerce in North China and has also been mentoring German start-ups at German Entrepreneurship Asia, part of the BMWK-funded German Accelerator Program.

 

Is market entry in China (still) worthwhile?

Hofmann: Even though the complexity has increased and will continue to increase, China remains a lucrative sales market for many industries. In the healthcare industry, in particular, the market is growing faster than the country’s GDP, driven by general indicators such as rising healthcare system costs, reform and development programs, and the population’s longer life expectancy. Especially in ophthalmic optics, the market volume is expected to boost to almost 19.5 billion euros by 2027. One reason is the short-sightedness rate, which is rising sharply in China. Young people are encouraged to study hard from an early age, and more and more work is done on screens. The Chinese Air Force has already warned that problems arise in pilot training because candidates cannot pass the mandatory eye test.

Therefore, we are seeing strong market interest in the healthcare sector in China and other sectors, whereby we are even observing an adjustment of the traditional export model towards local investments.

Do you recommend specific provinces or cities for establishing branches?

That depends very much on the sector and products. In general, the top hospitals are located in larger cities with higher incomes, representing the most interesting sales markets for medical technology. However, hospitals are also specializing – we are also active in cardiology, for example, for which Beijing has established itself as a center. There are also cardiac surgery centers in Guangzhou, Wuhan and Shanghai. Depending on the product, it is therefore advisable to first identify the location of the relevant specialist hospitals.

What does your export model look like?

Melchers is mainly active in sales from Europe to China and has traditionally also been active in sourcing in China. As a market expansion partner, we work in the healthcare sector primarily with medium-sized companies and family businesses that want to set up a Chinese subsidiary or expand their existing business. These partners generally deliver directly to China and primarily serve the local market.

Can you describe your partner model in more detail?

We offer companies tailor-made and brand-oriented operational solutions ranging from sales and corporate services to corporate governance and shareholdings. In the past, the classic joint venture was required by law in many sectors, particularly concerning technology and also in the healthcare industry. With the transformation of the Chinese economy, the joint venture obligation has been removed in many areas. However, we have observed a trend in recent years toward voluntary mergers and participation. Here, we support companies as a third partner in a so-called “three-party joint venture.”

Such a form of market development and partnership is not only a derisking issue but also addresses the resource requirements of doing business in China, which many family businesses cannot easily afford. This is where Melchers comes in, with over 150 years of experience in doing business in China. We support companies with back office, corporate governance, accounting, and human resources issues. We also offer management representation on the board of directors, for which there are special requirements in China. This allows our partners to concentrate on sales and leave the more complex management issues to us.

Melchers China also offers these services on a stand-alone basis; however, they are increasingly in demand from medium-sized companies in the 3-JV model.

Where do you see the biggest challenges currently?

Many companies, including our customers, have rethought their China strategy during the pandemic. Apart from this is the increasing complexity of supply chains and geopolitical tensions. However, this also means that companies that have not yet had a local presence are now taking a closer look at China after the opening regarding localization pressure in the healthcare industry and are approaching us in this way.

At the same time, Beijing is using programs to promote local players in particular, which leads to increasingly fierce competition. Chinese competitors are very innovative in many areas, especially when it comes to digitalization. There is also an increasing trend towards buy-local, particularly in the healthcare sector. In some cases, there is quite aggressive intervention in the market with certain purchase quotas for local products. In the future, more and more foreign companies will have to ask themselves how they will deal with these requirements and whether a local production chain may need to be established. Due to this trend, we assume that the pressure in the healthcare and MedTech sectors will increase significantly over the next five to ten years.

Last, the pandemic has made many companies and countries rethink their dependencies on foreign countries and reduce them where possible. The same discussions we are familiar with from Germany also occur in China. A prominent example is Chinese chip imports from the USA or China’s dependence on European export markets.

Another point is the tougher framework conditions in China, especially in the healthcare sector. In the past, corruption led to highly inflated prices, which the government countered with artificial price pressure. Central volume-based procurement programs are intended to reduce the costs of the healthcare system, forcing middlemen out of the distribution chain due to price pressure and other requirements. However, the programs also create increasing price pressure for all market participants.

Since the coronavirus pandemic at the latest, it has become clear that the Chinese market is very complex and changing rapidly and that a company’s own China strategy must be constantly reconsidered and adapted. This changeability is often underestimated in Germany. That is why feedback from local representatives or partners and knowledge of local events and trends is essential for successful business in China.

Can providers still score points with “Made in Germany”?

Ten or even five years ago, products “Made in Germany” sold themselves very well, but those days are now over. Chinese companies are catching up more and more technologically, so the unique selling point of German products is no longer necessary in many areas. Although in both B2C and B2B areas, products can still benefit from the association with German engineering and premium quality, however, in general, we see a stronger buying preference for Chinese products, which score points thanks to their proximity to the consumer.

German companies have to work harder these days. The product itself must be more innovative and competitive than the competition. There are also accepted intermediate paths. Just think of “Designed by Apple in California. Assembled in China”. Following this model, SMEs can produce locally but with German standards, quality, and expertise.

Does this also apply to the healthcare sector and ophthalmic optics?

In principle, the healthcare sector is not a mass market. Fewer medical technology manufacturers also specialize in certain areas, such as suppliers of ophthalmic optics. However, here, too, it is important not to rest on “Made in Germany” as a USP. In addition, many manufacturers already have a global supply chain and source preliminary products from other countries.

 

This interview was conducted by Lisa Wick and published in German in the business magazine “ChinaContact” 07-2023 under the original title “Durchblick im Reich der Mitte.” This is a translated reprint.

How Melchers supports you in China

With 155 years of business experience in various sectors in China, we know that every company needs its unique approach to the Chinese market. China’s business world is continually changing and varies significantly from region to region in terms of prosperity, regulation, openness to business, and other factors influencing the business environment. Due to its size and diversity, China can hardly be compared to any other country in the world. This is also true for the health care sector. Our longstanding experience and knowledge along the value chain of the Chinese healthcare industry through sales, management, and compliance activities, as well as corporate services, enables us to offer tailored and brand-oriented market approaches for all our partners. We help our selected brand partner to understand the Chinese healthcare market, quantify the scale and the competitor landscape, and identify short, mid, and long-term opportunities for market growth.

We take equity shares in our partners’ China operation with a focus on long-term partnerships, if desired.

Contact Melchers today via info@melchers.com.cn about establishing a presence or doing business in China or go to Healthcare • Melchers China (melchers-china.com) for more information.

MELCHERS PARTNERS WITH MAXWELL TO FURTHER EXPAND OFFERINGS FOR INTERNATIONAL MEDTECH COMPANIES IN CHINA

December 14, 2023, Shanghai & Hong Kong – Altride Healthcare, a newly formed subsidiary of the Melchers Group, has signed an agreement with the Chinese company Maxwell Medical Technology to form a joint venture to expand distribution activities of MedTech products in China. Combining strong local expertise and execution excellence with corporate governance by international standards, the Sino-German joint venture Meddax Medical is set to reinforce support for multinational medical device manufacturers in the Chinese market.

“The establishment of an independent healthcare unit and our strategic investment in the joint venture demonstrate our commitment to being a credible partner of international MedTech companies in China,” commented Anton Melchers, Global Managing Director of Melchers Group. “By bundling together our competencies in healthcare fields and teaming up with Maxwell, we further enhance our ability to navigate challenges in a changing market and capitalize on opportunities for accelerated growth of our healthcare clients.”

Liu Hongquan, Chairman of Meddax Medical, said: “The leadership team of Maxwell has a proven track record in scaling healthcare business. We are excited about our partnership with Melchers in which we will utilize our local relationships, commercial experience and regulatory and operational know-how to bring in and deliver innovative medical device products from abroad to millions of patients in China.”

On December 7, 2023, a signing ceremony between Altride Healthcare and Maxwell Medical Technology was held in Shanghai, followed by the first meeting of the new Board of Directors of Meddax Medical: Liu Hongquan, Chairman of the Board, John Shen, Managing Director, met with Non-Executive Directors Xu Sanping and Levin von Gehren to deliberate and agree on the business plan, operational and administrative topics. The management team of the joint venture brings extensive knowledge and over 25 years of experience across a range of Pharma and MedTech areas, strengthened by 30 dedicated medical device sales force and clinical application professionals. Based in Shanghai, with a warehouse in Shanghai and a sales office in Guangzhou, Meddax Medical has a well-established network of more than 1000 hospitals in almost all the provinces in China and maintains over 150 active sub-distributors.

 

About Altride Healthcare

Altride Healthcare is a company by the Melchers Group which was established in 1806 in Bremen, Germany, and has been active in China since 1866. With over 800 employees in Asia in 25 offices, Melchers has been a trusted pioneer in bringing global brands to market in Asia for over 155 years. Altride Healthcare offers a set of tailored and brand-oriented solutions with localized expertise for a seamless expansion of healthcare companies to Asia. Building on decades-worth of market and business management, Altride Healthcare’s value-adding solutions and services enable its clients to attain their goals and optimize each market opportunity with success. www.altridehc.com

About Maxwell Medical Technology

Maxwell is a newly established Chinese medical device company active in R&D, selling and marketing of medical devices. Backed by a local healthcare company, Maxwell covers more than 1,000 hospitals in over 28 provinces and maintains more than 150 active distributors. The company is active in a variety of hospital departments with a focus on ICU and General Surgery.

Contact

Mr. John Shen
Meddax Medical
+86 21 6352 8848
info@meddax-medical.com
www.meddax-medical.com

Mr. Levin von Gehren
Altride Healthcare
+852 2546 9069
lgehren@altridehc.com
www.altridehc.com

REGISTER FOR OUR WEBINAR: CAPTURING THE MEDICAL DEVICES MARKET POTENTIAL IN CHINA

Capturing the Medical Devices market potential in China is often discussed amongst overseas MedTech companies. On September 12, 2023, Cisema and Melchers will be presenting in a webinar on this hot topic, and our panel speakers will share insights on medical device registration, distribution and localization in China.

The webinar will answer some of the most frequently asked questions about efficient pathways to obtain medical device registration approval in the Chinese market, and key considerations for already registered products. Our speakers will also share views on the complications of the current regulatory framework, and best strategies to sell into the market.

Details

Date: September 12, 2023 (Tuesday)

Time: 9:00am-10:00am CET

Language: German

Target Audience

  • DACH medical device manufacturers looking at how to enter the China market
  • Companies not satisfied with the existing situation or looking for localization or registration renewal in China

Agenda

  1. Melchers: China medtech market overview
  2. Cisema: China medtech regulatory framework, registration pathways for medical devices, certificate maintenance (change and renewal)
  3. Cisema: local China agent (NMPA Legal Agent) requirements and change, alternative entry pathways, localization
  4. Melchers: recommendations and insights: go-to-market, distribution and localization strategy

Speakers:

  • Levin Gehren, Managing Director, Melchers China Hong Kong Branch
  • Mike Hofmann, Managing Director, Melchers China Beijing Branch
  • Anna King, Business Development Manager, Cisema Group
  • Stefan Fischer, Managing Director, Cisema Group
  • Nick Guo, General Manager, Cisema Beijing

Registration

Click here to register for FREE.