The gross output value of China's medical instrument industry maintained a rapid growth since 1990s with an average annual growth rate of 12-15 per cent. China's domestic medical device manufacturing is largely dominated by small and medium-sized producers numbering around 10,000. The number of such manufacturers has been expanding at an annual rate of 13 per cent, according to the National Bureau of Statistics of China.

China's exports of medical devices and equipment, which generally have a significant pricing edge over foreign competition, have been expanding at breakneck speed growing by 33.7 per cent in the first half of 2005 to reach USD 1.632 billion. Mirroring the direction of its medical imports, the majority of Chinese exports, almost 70 per cent, were shipped to the US, Japan and Germany.

"The concentration of most of the medical devices manufacturers is primarily focused on the medium and low-technology segments of the market, however the focus is changing as the domestic industry is slowly consolidating and foreign producers are bringing in heavy investments," said Raymond Y Cui, vice president, international business, Starway Medical Technology, China.

The recent announcement of some of the MNCs to invest in setting up and expanding their facilities has further fuelled the interest of investors in this nascent industry, where seven of the top ten Chinese medical equipment exporters were foreign-invested or joint-venture enterprises. It is only a matter of time before more advanced production follows.

Such factors have driven China's expansion of Class 3 medical device manufacturing in recent years, evidenced by the number of new State Food and Drug Administration (SFDA) registrations for Class 3 medical devices, which jumped 62 per cent to reach 2137 during 2004. This climb up in the production chain has allowed some Chinese manufacturers to aggressively solicit orders from more established companies outside China, or to arrange partnerships that will allow them to piggy-back on existing marketing networks of such firms in other developing countries.