#What impact does the new EU measure have on Chinese medical device suppliers?
The European Union has taken its first significant action in the ongoing trade tension with China by adopting a groundbreaking regulation through the International Procurement Instrument. This measure restricts Chinese medical device suppliers from competing for substantial public contracts within the EU, marking a pivotal moment in international trade relations.
This regulation, which will be effective starting June 30, 2025, targets public procurement contracts for medical devices that exceed a value of 5 million euros excluding VAT. Importantly, these contracts make up about 59% of the EU’s entire market for medical devices, reflecting the measure's substantial potential impact.
#What is the purpose of the International Procurement Instrument?
The International Procurement Instrument was established to address scenarios where non-EU countries impose restrictions on access to their own public procurement markets while actively seeking contracts in Europe. The European Commission has observed that an astonishing 87% of tenders in China’s medical device sector are plagued by discriminatory practices that hinder foreign suppliers from gaining market access.
While companies can still submit offers that incorporate Chinese-made medical devices, there is a strict requirement. The total value of these devices cannot exceed 50% of the overall contract value. For instance, if a hospital supply contract is valued at 10 million euros, only 5 million euros can be attributed to devices manufactured in China.
This restriction will remain in place for an initial period of five years, with an option to extend it for another five years if deemed necessary.
#Why focus on the medical device sector now?
The International Procurement Instrument was enshrined in law back in 2022 but had not been implemented until now. Initiating this measure against China showcases a transition from theoretical deterrence to tangible enforcement against discriminatory practices. European firms consistently face challenges when entering China’s public procurement market, while their Chinese counterparts compete for contracts within Europe. The critical data point exposing the 87% discrimination serves as the impetus for the EU’s decisive action.
#What are the implications for investors and the market landscape?
For businesses involved in the European medical device arena, this new measure presents an invaluable opportunity for both European and non-Chinese international manufacturers. They now have a more favorable position when it comes to bidding on approximately 59% of governmental medical device contracts within the EU. Moreover, the established 50% threshold allows for some inclusion of Chinese products while compelling procurement practices to diversify away from an exclusive reliance on Chinese manufacturing.
The International Procurement Instrument is a versatile approach that can be extended to any industry where the European Commission identifies discriminatory procurement practices in third countries. This setting establishes a significant precedent, amplifying the EU's ability to use this tool across various sectors in the future.