An overview of the opportunities the Chinese elderly care and rehabilitation sector offers to foreign SMEs. Learn about distributing your products in China, protecting your IPR and how to obtain local product certification. This slideshare is based on our report Selling in the Chinese Elderly Care and Rehabilitation Sector. Download your FREE copy here: http://bit.ly/19yRQbq

1. SELLING IN THE
CHINESE ELDERLY
CARE AND
REHABILITATION
SECTOR

2. Get a free copy of the full report
Sales and distribution in China’s Medical Device and
Rehabilitation Sector

3. 2. Institutional overview
3. Protecting your IPR1. Key developments
4. Distributor and
stakeholder best practices
Outline

4. What you will learn
Key developments in related sectors
Hospitals and institutions
Medical device registration
IPR protection
Distributor management

5. Key developments

6. China has the world’s fastest growing
elderly population
 2010: 140 million people over 65 years
 2050: 350 million people over 65 years
 One child policy causing population imbalance
 Better living standards have raised life expectancy

7. Source: United Nations, 2010
Age structure of China’s population, 2010

8. Source: United Nations, 2010
Projections for 2050

10.  1 child supporting 2 parents and 4 grandparents
 Traditional cross-generational housing model increasingly challenging
 Increasing demand for rehabilitation and long-term elderly care facilities
 Public and private elderly care sectors are experiencing high growth
The 4-2-1 phenomenon

11.  80% of them need assistive devices
 The government is pushing for more rehabilitation clinics to support the
growing amount of people with physical disabilities
 Increasing the demand for mobility aid and assistive devices
China is home to 83 million disabled people

12. Source: Export.gov

13.  China’s annual income has almost doubled in 6 years
 The rise in purchasing power is enabling more Chinese people to
purchase better quality care and equipment
 This is fuelling higher demand for foreign rehab and assistive devices
Rising incomes in China

14. Institutional Overview

15.  The sector is relatively new and still in its infancy
 Lagging behind in specialized facilities and expertise
 Currently China is reliant on foreign equipment and expertise
 Total import value of rehab devices and orthopedics: 2011 $1.4 bn, 2013
$2.2bn
China lacks know-how and experience

16.  The Chinese senior population prefer being cared for by the younger
generations (also known as filial piety or in 孝, xiào in Chinese)
 The 4-2-1 phenomenon means this is no longer an option
 Therefore the demand for long-term care facilities is surging
Traditional methods are no longer sustainable

17.  Increasing demand fuelled by urban residents
 Most facilities are located in rural areas, previously the centre of demand
 Facilities are mostly low-end, demand has shifted to middle and high-end
Regional supply and demand imbalance

18. “74% of total elderly care facilities are
in rural areas, and are mostly low-end
public nursing homes”
Jules Falzado, Engagement manager at SmithStreet

19.  The government is encouraging private investors to set up elderly care
facilities and hospitals
 A growing sector with favourable investment conditions
 The ratio between private and public institutions is projected to change
resulting in a larger private sector
Private sector encouraged to provide solution

20.  2012, China had 42,000 elderly care institutions
 In these there were about 3.81 million aged care beds
 20% of the institutions are privately owned
 Supply of beds in government-owned facilities to increase to six million by
2015 (roughly double the number of 2010)
China’s elderly care institutions

21.  Premium and mid-market private facilities emphasize the quality of care to
their clients
 Public facilities often offer low/basic care and use lower quality equipment
Public and private facilities are very different

22. “Private senior care providers in China generally
provide better quality care than the majority of the
public institutions and mid-market private facilities
offer adequate care services and are acceptable
alternatives to the upscale government nursing
homes with longer waiting lines”
Jules Falzado, Engagement manager at SmithStreet

23.  FDI regulations have been loosened, encouraging foreign companies to set
up elderly care facilities in China
 The development is occurring throughout the country
 Currently it’s mainly driven from richer coastal areas and 1-tier cities and
mostly by European and American investors
 The number of foreign facilities is expected to continue rising
More foreign-owned institutions

24.  Mainly focus on the top segment of the market
 Bear a resemblance to luxury hotels
 Provide a high quality of care to their tenants
 Generally use foreign equipment
Source: China Senior Care Inc.
Most foreign facilities are high-end

25. “Our facility and most of the foreign-
operated facilities are using foreign
brands for all their rehabilitation
equipment.”
Mark Spitalnik, President & CEO of China Senior Care Inc.

26.  Their classification is determined by their size and quality of care
 There are approximately 21,000 hospitals in China
 Some hospitals are ungraded and unclassified
3-tier Chinese hospital system

27. 3-tier Chinese hospital system

28. Small hospitals Large hospitals
 Tier-1 hospitals are usually located in
small townships and cities.
 Provide a basic level of care and
generally do not enjoy a good reputation.
 Their budgets are small, making them
more price-sensitive
 Less likely to purchase foreign
equipment.
 Tier-2 and tier-3 hospitals are usually located in
large or medium-sized cities.
 Provide a high level of care and enjoys a good
reputation
 Have access to large budgets
 More likely to purchase foreign equipment

29. “It is not unusual for large public hospitals
to compete on who is having the most
sophisticated equipment”
Jens Moth, former counselor of the Danish Trade Council in Beijing

30.  Large tier-3 hospitals have large budgets but you are required to enter a
public tendering process
 Entering a tender is often costly and time-consuming
 Public senior care facilities are often low-end and therefore less inclined
to buy high quality equipment
In order to win a the tendering process you
“must”:
A. Have an innovative or high quality product. It is difficult for
hospitals to justify using a foreign brand instead of a domestic
brand if the foreign brand is not significantly better.
B. Be well connected to local decision-makers. The engineering
bureaus that draft the tender offers rely on outside experts to
provide them with knowledge and input.
Public sector is more difficult to target

31. “If your product is not a breakthrough product I
would suggest avoiding the costly tendering
process and instead focus on private hospitals
and senior care facilities”
Jens Moth, former counselor of the Danish Trade Council in Beijing

32.  Government incentives have spurred growth
 Middle and high-end care facilities use quality equipment
 The absence of a tendering process makes them easier to target
 More mid-range facilities are emerging in order to support the growing
middle-class
Private sector shows strong potential

33.  Chinese facilities have limited in-house experience and know-how
 Therefore they are much more reliant on after-sales service and support
compared to the public sector
 Localizing sales and after-sales is crucial
Importance of support and service

34. Localized operations
and manufacturing
Experts say localization is key

35. Localized operations
and manufacturing
Makes you more competitive in the market
Experts say localization is key

36. Localized operations
and manufacturing
Makes you more competitive in the market
Enables you to easier support stakeholders and offer after-sales
service
Experts say localization is key

37. Localized operations
and manufacturing
Makes you more competitive in the market
Enables you to easier support stakeholders and offer after-sales
service
Lowers costs of your products and spare-parts
Experts say localization is key

38. IPR protection and medical device
registration

39. Our advice:
 Adequately protect your IPR before
taking any actions in the Chinese
market.
 Work together with a local law firm
that understands your products and
sector
Protecting your IPR

40. “It is essential to register your patents locally in
China – not from abroad – and to work with an
office that possesses experience in the sector you
are operating in. To safeguard your IPR in China
you require strategic protection and an office that
understands the local legal environment.”
- Michael Qu, Managing Partner at Law View Partners

41.  Work with a network of trusted suppliers for manufacturing allowing you
to divide up production
 Ensure that no single party has access to the final product
 Assemble the final product in a separate secure location
Avoid IPR infringement in manufacturing

42. “We usually assemble our clients’ final products
within our own secured assembly facilities and
consequently decrease the risk of suppliers
attempting to copy the product. If your product
possesses highly advanced technologies, you
can also consider outsourcing basic component
manufacturing to China and importing your
advanced components.”
Gijsbert de Bruin, CEO of CHC Product Development and the CHC Group

43.  In order to sell in the Chinese market your rehabilitation device(s) must
be registered, approved and classified
 Medical device registration is done through China Food and Drug
Administration (CFDA)
 If you do not have a legal entity in China you are required to appoint a
registered legal agent to handle your medical device registration
 You are also required to appoint a local after-sales agent to manage
maintenance and device issues
How to register your devices in China

44. Our recommendation: We recommend not appointing
your distributor as your legal and after-sales agent. It will
require you to give your distributor the rights of
registration, which is risky because it gives the distributor
too much influence over your business in China.

45. Registering your products in China
Medical device classification

46. Distributor best practices

47. China is not one unified market
 China is a collection of individual submarkets and one partner is often not
enough
 We suggest working with multiple distributors instead of one countrywide
exclusive distributor
 By doing so you also avoid giving all control over your sales and brand(s)
to one third-party, thereby lowering risk
 Some distributors focus on the public sector, some on private

48. Trade fairs
Chambers of Commerce
Service Providers
 There are an increasing number of water related trade fairs in China
 Make sure to adequately protect intellectual property before attending
 Distributors are often looking for a final product rather than a single component
 Host industry-related events and trade missions
 May be able to assist in the distributor search
 Organize events and trade missions
 Advice given may not be industry-specific
 Using a service provider to find distributors provides the essential due diligence
 Often have extensive distributor databases and local expertise
 Use a service provider with specialist knowledge of your industry
 Find out more about our solutions here
Finding your distributors

49.  Lack sophisticated inventory and CRM systems resulting in inefficient
operations and high overhead costs
 Many distributors lean towards whichever company provides the highest
commission
 Good results in the short-term does not mean long-term success
 They are accustomed to selling on price and are less equipped to sell your
product’s unique advantages
Characteristics of Chinese distributors

50.  Provide continuous training, support and management on the ground to
avoid common mishaps and reach your sales potential in China
 Essential if you want full control of your brand and direction
 Constant management and supervision offers increased IPR protection
 Benefit from first hand information and communication by having a
presence in China
Distributors need local support

51.  Have a dedicated business development manager on the ground to aid your
distributors
 Tie your distributors to performance-based contracts
 Develop good relationships with your distributors (meet them on a regular
basis)
 Visits key clients together with your distributor
 End relationships with underperformers
Distributor best practices

52. “Be 100% sure that your distributor does not accept
your product only to add it to his portfolio in order to
show how local alternatives are a more cost--
efficient option. You must manage your distributors
with an iron fist and not be afraid of ending
relationships with underperforming partners”
Jens Moth, former counselor of the Danish Trade Council in Beijing

53.  Helps you build relationships with your customers
 Lets you exercise more control over your business in China
 Makes you less dependent on your distributors
 Gives you an understanding of the local market and your clients’ problems
 Enables you to offer better service and customer support
Visiting key clients and stakeholders

54.  Many of the new Chinese Continuing Retirement Communities (CCRC) have
product exhibition areas
 Companies can use these exhibition areas to introduce and market their
products in the market
Displaying your products within facilities

55. “An interesting (and in my experience, unique)
feature of Chinese Continuing Retirement
Communities is that they tend to include an
exhibition area within their developments for the
display and marketing of medical equipment
and mobility aids”
Roger Battersby, managing partner of PRP Architects

56. Get the most out of your distributors with
our distribution support platform
Learn more about how we can make you more
competitive in the Chinese medical device and
rehabilitation market >>> contact us now

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58. About us
Launch Factory 88 supports industrial SMEs in the water technology
sector to increase their sales and become more competitive in the
Chinese market. We do so by offering two core services; a
distribution support platform and localized manufacturing and
assembly.
Launch Factory 88 is part of the CHC Group which was established
in 1998 by two Dutch entrepreneurs and has since then developed
multiple market leading companies in diverse industries in China. We
help your company succeed in China using the same careful
methods we employed to build our own businesses.
Contact us today to find out more