Medical device companies may need to review their BRIC strategies, as China’s economy slows to a new 3-year low.
China, cited by several med-tech leaders as one of the most important regions to capture, reported a 7.6% growth rate for the 2nd quarter, but the actual figures may be even lower.
"We continue to believe that China’s economy is not doing as well as the already downbeat official figures suggest," Capital Economics’ chief Asia economist Mark Williams said told Bloomberg. Our view is that growth may actually have been weaker still – our China Activity Proxy points to growth of around 7.0%."
The pessimistic figures reinforce previous concerns that the BRIC markets may not maintain the growth that drew so many med-tech giants there.
Goldman Sachs researchers cautioned last year that BRIC nations were no longer the powerhouse markets they once were.
"The policy driven boom of the past couple of years will not be repeated any time soon," HSBC Holdings chief economist Stephen King said at the time. "It’s difficult to see how emerging nations can ride to the rescue once more."
At the time Sachs predicted that China would report 9.4% growth rate for 2011, and a 9.2% for 2012.
Boston Scientific (NYSE:BSX) president & incoming CEO Mike Mahoney told an audience at the MassDevice.com Big 100 Roundtable East in Waltham, Mass., earlier this week that China was one of the most important areas for the company, citing the Asia-Pacific region as one of the fastest-growing markets in the world.
Last year the company announced that a $150 million five-year plan to expand Chinese commercial operations, including establishing a wholly owned manufacturing site and developing training centers for Chinese health care providers.
Medtronic (NYSE:MDT) CEO Omar Ishrak, who celebrated his 1st year on the job last month, put his stamp on the company by last year announcing a big push toward global markets, calling them "potentially less risky than creating new products for the flat U.S. market."
In May healthcare giant Johnson & Johnson (NYSE:JNJ) acquired its 1st Chinese medical device maker, and last year the company launched a medical device and diagnostics center there.
Those investments may not pay off as well as hoped if the economic burst that lured the titans there continues to dwindle, but some economists optimistically pointed to signs of a coming uptick based on continued efforts by the Chinese government to spur growth.
"If you look at the measures that the government is taking, normally it takes about 3 to 4 months before we start seeing signs of pick up," Standard Chartered chief China economist Stephen Green. "In this case, we can see that loan growth has started picking up, projects have started picking up, so yes, I think we can expect a turnaround in September."
