China

Case Study – Medical Equipment Manufacturing.

Client: Hedge Fund, Arlington, Virginia, USA

Client Opportunity: Fund exploring investment in Chinese medical equipment manufacturer serving the domestic Chinese market.

Questions from Client: How is medical equipment procured in the Chinese healthcare system? What role do hospital administrators play? What is the role of corruption and kickbacks?

Products Provided to Client: Analytical memo, with Q&A follow-up.

Foglamp Contributors Engaged: Lead expert in Guangzhou; peer reviewers in Shanghai.

Local Contacts Consulted: Physicians in major hospitals in China; salesmen for medical instruments company in Shanghai.

Turnaround Time: Three days.

Summary Answers: Sales and distribution are handled by domestic agencies and agents who have personal relationships with hospital administrators. Kickbacks are common in hospital equipment procurement; administrators prefer high-quality equipment but kickbacks are also expected. Recent kickback scandals have been reported in the media but are considered to be just the tip of the iceberg; no broad regulatory action has been taken. Foreign firms that have established their own sales networks independent of local agents have failed.

Outcome: Foglamp information incorporated into fund strategy.