At the beginning of September 2022, the executive meeting of the State Council of China decided to carry out the periodic financial interest discounts and increase the credit support for the social service industry for the purchase and renovation of equipment in 9 major areas, including universities, vocational colleges, hospitals, and small, medium and micro enterprises. The overall scale of loans is 1.7 trillion RMB (237 billion US dollars).

On September 28, the People's Bank of China announced the establishment of a special re-loan for equipment renovation and transformation, with a quota of more than 200 billion RMB (28 billion USD). The Healthcare industry is one of 10 areas supported by the policy.

Among the healthcare industry, both public and private hospitals are covered, including general hospitals, specialized hospitals, traditional Chinese medicine hospitals, infectious disease hospitals, preferential treatment hospitals, grassroots medical and health institutions, etc.. The medical devices on the lists are mainly used for diagnosis and treatment, clinical testing, severe disease, rehabilitation, and scientific research transformation.

Special support for financial institutions to provide loans for equipment renovation and transformation in the manufacturing industry, social service fields, small and medium-sized enterprises, and individual commercial units at an interest rate of no higher than 3.2%. As a result, the loan interest rate for a single project will be less than 0.7%.

As soon as the policy came out, all hospitals and banks quickly negotiated loan cooperation, and news of loan disbursements were frequently released despite the 7-day National Day holiday. Low-interest loans not only provide medical institutions with a rare opportunity for medical device renewal and transformation but also bring a significant increase to China’s domestic medical equipment manufacturers at the same time.

*The 10 areas supported by the policy of refinancing for equipment renewal and transformation are education, healthcare, culture, tourism and sports, training bases, charging piles, urban underground comprehensive pipe corridors, new infrastructure, industrial digital transformation, energy-saving and carbon-reducing transformation, upgrading and recycling of home appliances.

200 Billion RMB (28 Billion USD) Equipment Renovation Project Loans to Hospitals Stimulates Flash Sales

As soon as the policy was out, enthusiasm for loans was ignited everywhere in China. During the National Day period, the amount of equipment renewal and transformation loan contracts signed exceeded 12 billion yuan (1.7 billion USD) in Beijing alone.

According to incomplete statistics from MedTrend Website, Guangdong Province, Hubei Province, Chongqing, Jiangxi Province, Liaoning Province and other provinces and cities have completed the first round of loans for equipment renovation projects in the medical device, where the amount generally ranges from a few million yuan to tens of millions of yuan.

• On September 29, the Guangdong Branch of the Agricultural Bank of China granted a loan of 5 million yuan to a maternity hospital in Yangjiang City, Guangdong to support the purchase of medical devices such as ultrasound system and maternal and child monitoring medical devices. This project is the first loan for equipment renewal and transformation projects in critical fields issued by Guangdong Province since the list of equipment renewal policy was determined.

• On September 30, the Hubei Branch of the Agricultural Bank of China issued a loan of 15 million yuan to a tertiary hospital in Wuhan to support the purchase of MRI systems, orthopedic surgery navigation systems, and medical angiography X-ray DR systems. This is the first loan for equipment renewal and transformation projects in key fields issued by Hubei Province since the list of equipment renewal policy was determined.

• On October 3, Jiangxi Branch of the Agricultural Bank of China issued a loan of 26.1 million yuan to the First Affiliated Hospital of Nanchang University, marking the "first shot" in the province's equipment renovation loan implementation. The loan took only 3 days from demand docking to investigation, approval, and issuance. The loan was mainly used for the purchase of key equipment such as MRI system, DR system, CT scan, Ultrasound system for diagnosis, treatment and scientific research purposes in the First Affiliated Hospital of Nanchang University.

• On October 6, Liaoning Province's first equipment renewal loan was successfully implemented. Bank of China signed a contract with a hospital in Huludao City to issue a loan of 4.64 million yuan for equipment renovation to support its purchase of CT scan, digital medical X-ray DR and other equipment. The annualized interest rate of this loan is only 3%. After the combined policy of the special re-loan and financial discount interest rate, the actual interest rate paid by the enterprise is further reduced.

Less Than 0.7% Low-Interest Loan Makes the Hospitals Prefer Diagnostic Medical Imaging Devices?

For the special re-loan amount of more than 200 billion yuan (28 Billion USD) for Equipment Renovation Project, the interest rate charged by financial institutions shall not be higher than 3.2%, and the financial discount rate shall be 2.5%. If we assume the hospitals enjoy all the preferential policies, the interest rate of the loan shall not be higher than 0.7%.

In particular, this loan policy can be applied for regardless of whether it is a public or private hospital, or a grade three first-class medical and health institution. It is a perfect opportunity for hospitals which desire to upgrade their medical equipment.

The policy limits the use of this loan to "purchase of medical equipment such as diagnosis and treatment, clinical testing, severe disease, rehabilitation, and scientific research transformation", corresponding to major areas such as diagnostic imaging devices, IVD, monitoring medical devise, and rehabilitation equipment.

But after all, it is still a loan. Considering the hospital’s financing constraints and debt capacity, the hospital must first choose a high-efficiency project with good economic benefits and a short payback period. From the above disclosed deals, ultrasound system, MRI system, and CT scans in medical imaging equipment appear more frequently.

At the same time, the deadline for loan and interest discount applications is the end of this year (December 21, 2022), and the popularity of the National Day that just passed is just the beginning. We predict that the fourth quarter of 2022 and 2024 will be the peak period of equipment procurement, and industrial procurement of the medical device industry will accelerate in volume.

Source: MedTrends Website