Over the past several years, Hong Kong has continuously invested in the development of applied life science industries, including biotechnology, medical technology and healthcare devices. An increasing number of Hong Kong-based companies do business in these sectors. Considering the city’s aging population and new opportunities arising in the Greater Bay Area, the market is full of potential for decades to come.
Growing Demand in Hong Kong
Hong Kong is home to an ever-growing number of bio- and medical technology companies in various fields of business, including pharmaceuticals, traditional Chinese medicine, in vitro diagnostics and reagents, therapeutic products, and medical equipment for both private consumers as well as institutional buyers. In the 2018-19 Budget, the Hong Kong Government highlighted biotechnology as a key area for innovation, and the sector has seen a steady expansion in recent years. This is manifested by the Biomedical Technology Cluster at Hong Kong Science and Technology Park, for instance: As of today, around 130 biomedical enterprises are listed in the company directory. HKTDC estimates the overall number of “biotechnology-related companies” in Hong Kong between 250 and 300.
Hong Kong’s aging population creates long-term growth potential for the pharmaceuticals, medical technology, and healthcare devices industries. The share of elderly persons aged 65 or above is projected to increase from around 18% as of mid-2020 to almost a third of Hong Kong’s total population – then around 8 million – by the mid-2030s; with the changing demographic structure will come a rise in demand for medical equipment, readily available health services and care facilities. In addition, the coronavirus pandemic has arguably consolidated the discernible upward trend in health consciousness among the general population, which is also likely to contribute to an increase in demand for medical supplies and services in the future.
Even before Covid-19, the Hong Kong Government set course for the expansion of the city’s hospital infrastructure. In 2016, a 10-Year Hospital Development Plan with a budget of HK$200 bn (US$26 bn) was announced: By 2026, the Hospital Authority aims to create an additional 5,000 hospital bed spaces and 90 operating theatres, as well as increase the yearly capacity for general and specialist outpatient clinic attendances by an additional 430,000 and 2.8 million, respectively. The plan also includes the construction of New Acute Hospital at the Kai Tak development site and the redevelopment of 11 other hospitals across the city, including Kwai Chung Hospital, Prince of Wales Hospital in Sha Tin and Queen Mary Hospital in Pok Fu Lam.
The comprehensive development plan creates additional demand for hospital equipment. While the city possesses considerable research and development capabilities, medical equipment manufacturing is low in Hong Kong. Therefore, the SAR relies heavily on imported goods to cover its domestic needs. Most medical instruments and consumer goods are imported from Mainland China, while medical technology in the high-end segment is largely bought from the US, followed by Germany and Japan in second and third place, respectively. According to data from the Census and Statistics Department, imports of electro-diagnostic apparatus, medical instruments and appliances from Germany to Hong Kong amounted to well over HK$800 million (US$110 m) in the first seven months of 2020.
At the same time, Hong Kong acts as a re-export centre for medical and healthcare equipment from Mainland China to overseas markets and vice versa. The total value of medical equipment exports from Hong Kong stood at around HK$12.8 bn (US$1.65 bn) last year and HK$7.7 bn (US$1 bn) in the first half of 2020 alone, a year-on-year plus of more than 21%. Exports to the EU in H1/2020 rose by nearly 55%, with the Netherlands (+118%) and Italy (+49%) recording the highest increases. Germany imported 12.5% less medical equipment by value from Hong Kong over the same period.
New Cross-Border Opportunities
Life science-related industries are a recurring theme in last year’s much-discussed Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area. For instance, the plan identifies biotechnology as a new pillar industry in the region and prioritises “nurturing and strengthening strategic emerging industries,” such as biopharmaceuticals, high-end medical diagnostic equipment as well as new healthcare technologies.
Furthermore, the plan envisions increased cross-border co-operation in building up medical and healthcare resources, including encouraging talent exchanges as well as developing a regional healthcare cluster and medical centres. Zhongshan on the western shore of the Pearl River Delta has been designated as a centre for biomedicine and health innovation. Meanwhile, its southern neighbour Zhuhai has made efforts in recent years in the development of medical, healthcare and elderly care services, not only for distribution to its own city population, but also to residents of Macao and other GBA cities. With its high quality of talent and R&D resources, Hong Kong has an important role to play in future inter-city co-operation and industry development.
In late 2019, the Leading Group for the Development of the GBA, headed by the Vice-Premier of China’s State Council, Han Zheng, announced 16 priority measures for the next implementation stage of the GBA initiative. One of the measures was to allow designated Hong Kong-owned healthcare institutions in the Greater Bay Area the use of pharmaceutical products and medical devices registered in Hong Kong, starting with a pilot test at the University of Hong Kong-Shenzhen Hospital. In the future, the Hong Kong Government hopes to attract multinational pharma and medical technology companies that could apply for registration of their products in Hong Kong and subsequently expand their business into the Greater Bay Area and beyond.
Cross-boundary industrial activity in the Greater Bay Area has been a proven practice for quite some time already. Many medical technology companies have their production base in one of the nine mainland cities, while sourcing, quality control, R&D, product design, marketing and sales activities are managed in the service centre Hong Kong. With continued economic integration in the GBA in the coming years, including the creation of new industrial zones with special business incentives, such as Qianhai New District in Shenzhen, Hengqin New Area in Zhuhai and Lok Ma Chau Loop in Hong Kong, biotech and medical companies could capitalise on new growth opportunities in the region with its lucrative consumer market of more than 70 million people.
For pharma companies in particular, the GBA could serve as a launchpad for wider access to the Chinese single market; Guangdong Province is not only one of China’s most important economic regions overall, but also a leading centre for the country’s pharmaceuticals industry, both in sales as well as manufacturing. According to the Guangdong Bureau of Statistics, the pharmaceuticals industry recorded double-digit annual growth in value added on average over the past decade. Hong Kong is well positioned to benefit from continued economic development and integration in the region and offer an attractive entry point for a wide range of life science companies looking to tap into the GBA market.
By Hendrik Hillebrecht
Related Links
- Source: CENSTATD – Hong Kong Population Projections 2017-2066
- Source: CENSTATD – Interactive Data Dissemination Service for Trade Statistics
- Source: GTAI – Hongkongs Bedarf an Medizintechnik wird noch jahrelang steigen (German language)
- Source: HKSARG – Press Release
- Source: HKSTP – Biomedical Technology Cluster
- Source: HKTDC – Biotechnology, Medical & Healthcare Devices Industry in Hong Kong
- Source: Hospital Authority – Ten-Year Hospital Development Plan