Healthy business case

GE sees a big market in selling equipment to China’s smaller hospitals

Healthy business case

Jeff Immelt

You can’t fight City Hall, goes the cliché – and after GE CEO Jeff Immelt famously despaired of making money in China last year, his company seems to have decided there’s some wisdom to that point of view. “I am not sure that in the end they want any of us to win, or any of us to be successful”, he griped back then. Evidently the lure of China’s fast-growing market for things like smart-grids and medical devices makes it worth another try.

One of GE’s bets: rural healthcare. The government has launched a programme of healthcare reform in the latest five-year plan that’s targeting (the often impoverished) countryside. With an estimated 70,000 community hospitals across the country, it’s a market with real potential.

So in October GE brought in a local, Duan Xiaoying, to be its healthcare boss for Greater China (the incumbent was Brazilian) – and commissioned a fresh market survey. “The survey is geared towards understanding the characteristics and needs of Chinese healthcare institutions” (such as local hospitals and community health centres), she told the 21CN Business Herald.

GE now has more than 500 sales staff serving second and third tier cities, and plans to boost investment in customer support, training and financing for its client hospitals. GE’s healthcare division had sales of $1 billion in China last year, and the company plans to invest over $2 billion over three years to broaden its footprint. “Now we have to consider revising our service model,” Duan told the newspaper. She says GE’s traditional model sent service engineers to hospitals, but as the firm targets more small clinics in second and third-tier cities it needs to explore other methods such as online customer service.

The maker of high-tech capital goods is also making all the right noises by employing more than 600 R&D engineers locally to develop products. The most significant progeny to come out of GE’s local labs: the Brivo CT imaging machine. According to anecdotal reports from the Economic Observer, the quality of this body scanner – which combines x-ray technology and computer software so as to reveal tissue as well as bone – gives GE a competitive edge over local rivals.

The real hitch, of course, is pricing. Rural hospitals aren’t likely to have a million dollars to throw at each machine they buy, but Duan insists that GE won’t have to sacrifice profits to serve them. “Our profit margin requirements for primary care machines are no different from that of other high-end products,” she told 21CN.

GE’s ability to provide financing will no doubt help its salespeople make their case for quality over thrift, but the newly planned government funds are what will really open up the market. “Previously, the low-end market for medical devices was dominated by local companies,” explains 21CN, “but now, spurred by the new healthcare reform, market expansion is allowing multinational companies to enter too.”

Of course, GE’s way won’t be completely clear of patriotic opposition. “I prefer domestic products, all things being equal,” one medical device purchaser told Drugstore Weekly. The general manager of a local device maker also insisted that the quality gap with international products was narrow. “I dare say that in terms of quality and level of technology, local products have almost been the same with foreign products, and even have more features, why do we not support the more cost-effective national industry?”

That sort of sentiment may prove the biggest obstacle to GE getting its products into those 70,000 hospitals.

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