The

aging process of the Chinese population is accelerating, the huge base of the elderly group and the increase of the new generation of elderly population have brought new consumption space to the silver economy. Among them, in the field of medical and health care, especially medical devices, smart medical care, health food and other fields deserve long-term attention.

Xue Yu/text

With the gradual aging of the population, the silver economy has received more attention, and further accelerating the development of the silver economy is of great significance to continuously meet the growing material and cultural needs of the elderly and promote the high-quality development of China's pension industry, and will also give birth to new fields and new tracks.

According to the World Bank, 10% of the world's population aged 65 and over will account for 10% in 2022, including 19% in high-income economies and 12% in upper-middle-income economies. China ranks 74th in terms of ageing, with 13.72% of the population aged 65 and over in 2022, higher than the global average of 10%. According to the data of the newborn population, China has experienced three baby booms since the founding of the People's Republic of China, of which 1962-1975 is the period with the largest number of newborns in the three baby booms, and this part of the population corresponds to 47-60 years old by 2022, which is the largest number of people in China's population distribution of all ages, and will gradually enter the stage of 65 years old from 2027.

Under the dual effect of the decrease in the number of births and the deepening of the aging of the population, the population has shown negative growth, and with the transformation of the population structure, the degree of aging will continue to deepen, and the market space of the silver economy is huge. The silver economy involves the clothing, food, housing, transportation, and medical care of the elderly, among which the medical-related fields have great potential. In 2022, the per capita health care expenditure of Chinese residents will be 2,460 yuan, accounting for 9.18% of consumer expenditure, an increase of 1,548 yuan compared with 2013, an increase of 2.28 percentage points, and an average annual growth rate of 10.43% from 2013 to 2023, which is the fastest growing category among all consumer expenditure subtypes.

On January 11, 2024, the General Office of the State Council issued the "Opinions on Developing the Silver Economy and Improving the Well-being of the Elderly", which clearly put forward 26 measures in 4 aspects, including optimizing health services for the elderly, improving elderly care services, creating a new business format of smart and healthy elderly care, vigorously developing the rehabilitation assistive devices industry, and developing the anti-aging industry. Among them, medical devices, smart medical care, health food and other fields contain new opportunities for the silver economy.

Medical devices are in high demand

The global aging population, the increase in chronic diseases, and the growth in medical spending are driving the expansion of the global medical device market, and the global public health emergency has accelerated the market expansion. According to CIC Consulting, the global medical device market has reached US$480 billion in 2021 and is expected to increase to US$848 billion in 2030, with a compound annual growth rate of 6.4% from 2021 to 2030. Although China's medical device industry as a whole started late, based on factors such as rising national income level, policy support, aging population, and rapid technological development, the market has developed more rapidly, and has become the world's second largest medical device market, with a CAGR of 19.5% from 2015 to 2021, and is expected to increase to nearly 2.5 trillion yuan in 2030, with a CAGR of 11.9% from 2021 to 2030.

The aging trend has brought about a growing demand for medical devices. The incidence of some geriatric diseases, such as osteoporosis, diabetes, hypertension, cardiovascular and cerebrovascular diseases, is significantly higher in the elderly than in the middle and lower age groups. With the gradual aging of the domestic population structure, the demand for surgery and related medical devices for the clinical treatment of related diseases will also continue to grow.

Guojin Securities pointed out that there are a wide range of opportunities in the fields of orthopedics, cardiovascular, blood purification, and ophthalmology in high-value consumables. Many companies are actively deploying innovative products, such as 3D printed joint implant products, hip and knee surgery robots, etc., to meet the needs of personalized treatment for elderly patients. In the cardiovascular field, minimally invasive interventional treatment products for diseases such as aortic dissection and aortic aneurysm related to hypertension have also become the focus of enterprise research and development.

The potential of rehabilitation equipment is huge

Rehabilitation medicine is also a direct beneficiary. Rehabilitation medical devices can be divided into rehabilitation assessment equipment, rehabilitation training equipment and rehabilitation physiotherapy equipment according to different uses. With the rapid growth of China's elderly population and the continuous expansion of the disabled elderly group who lack the ability to take care of themselves, the demand for daily professional rehabilitation is large and the functional requirements are getting higher and higher. The number of disabled people who are disabled due to traffic and work-related accidents also increases by more than 1 million every year, and most of them have rehabilitation needs. As of 2018, at least 70 million people with disabilities in the country still have not access to basic rehabilitation services.

At present, the intervention rate of rehabilitation medicine is low, and the market potential is huge. Due to the late start of rehabilitation medicine in China, the concept of rehabilitation medicine in China has not yet been fully popularized, and the national awareness of rehabilitation and acceptance of rehabilitation are relatively low. In 2021, the early rehabilitation intervention rates of orthopedics, neurology, and intensive care medicine in China were 13.2%, 18.9%, and 29.25%, respectively, according to KPMG statistics, the total income of rehabilitation medicine in the United States in 2017 was 2.35 times that of China, and the per capita rehabilitation medical expenditure was 9.82 times that of China.

According to the statistics of the China Health Statistical Yearbook, from 2011 to 2021, the number of rehabilitation hospitals in China increased from 301 to 810, with a compound annual growth rate of 10.41%, of which private rehabilitation hospitals accounted for 87.62%, with a compound annual growth rate of 15.02%, exceeding the overall growth rate of rehabilitation hospitals. During the same period, the number of rehabilitation medicine beds in China increased from 83,700 to 327,700, with a compound annual growth rate of 14.61%. According to Huaan Securities, in 2021, the number of rehabilitation beds per 1,000 people will rise to 0.23, and it is estimated that there will still be a gap of 378,600 rehabilitation beds per 1,000 people in 2030 with the goal of 0.5 rehabilitation beds per 1,000 people in the "Beijing Medical and Health Service System Plan (2016-2020)".

Compared with general hospitals, due to the lower single-bed investment, lower dependence on doctors, less medical risk, and easier to achieve the expected return on investment when social capital enters, the relatively high gross profit margin drives the increase in the number and total price of equipment above 10,000 yuan in rehabilitation hospitals. From 2011 to 2021, the total value of equipment above 10,000 yuan in China Rehabilitation Hospital increased from 732 million yuan to 8.825 billion yuan, with a compound annual growth rate of 28.28%.

The size of China's rehabilitation medical device market has increased from 22.5 billion yuan in 2017 to 45.03 billion yuan in 2021, with an average annual growth rate of 19%, and according to Northeast Securities, it is expected that the size of China's rehabilitation medical device market will reach 94.15 billion yuan in 2026, with an average annual growth rate of 15.9%.

At present, the national and local governments have issued a number of policies to promote the development of rehabilitation medical services in an all-round way, in addition, the "14th Five-Year Plan" health plans of various provinces and cities have put forward requirements to support the development of rehabilitation medicine from different aspects. With the acceleration of population aging, the increase in the number of patients with chronic diseases, the assessment of the early clinical intervention rate of rehabilitation medicine and the downstream rehabilitation planning policies to open up the demand for rehabilitation equipment allocation, the rehabilitation medical market will maintain rapid growth.

Huaan Securities pointed out that China's rehabilitation medical industry is in the stage of "horse racing". From the perspective of the competitive landscape, there are a large number of enterprises in the domestic rehabilitation medical device industry, and the technical barriers of ordinary rehabilitation medical devices are low, the degree of product homogeneity is high, but there are many subdivided needs and product types, and the industry is relatively scattered. In 2018, the total revenue of the rehabilitation medical device segment of Siangyu Medical (688626.SH), Pumen Technology (688389.SH), Weiss Medical (688580.SH) and Chengyitong (300430.SZ) accounted for only 3.77% of the total scale of China's rehabilitation medical device market. In the future, rehabilitation medical devices will be upgraded in the direction of the Internet of Things, medical alliances, modernization of traditional Chinese medicine, modularization and integration, and the improvement of the treatment level of rehabilitation medical devices. At the same time, the service cycle of rehabilitation medical equipment is long, and it is easier to form channel barriers when entering the enterprise first, forming a trend of continuous improvement of market concentration and strength.

At present, Siangyu Medical has developed and produced a variety of intelligent equipment, such as balance function training and evaluation system, intelligent three-dimensional comprehensive training platform, hand function comprehensive rehabilitation training platform, intelligent lower limb feedback rehabilitation training system, intelligent infrared light moxibustion therapy instrument, etc., including equipment that can be used for multiple people to carry out rehabilitation training at the same time and situational interaction, which can improve the user's sensory experience while improving the treatment effect. Weiss Medical's second-generation transcranial magnetic stimulator (for rehabilitation) can provide non-invasive neuromodulation treatment methods for neurological rehabilitation, and has launched an overall solution of "rehabilitation ring" for the rehabilitation department of tertiary hospitals; The first-generation products of sports rehabilitation robots have all completed the certification process, and a product matrix of sports rehabilitation robots covering the full-cycle rehabilitation evaluation and training of the upper and lower limbs of the human body has been preliminarily formed. Samsung Healthcare (601567.SH) has accelerated the nationwide layout of rehabilitation hospitals through self-construction and mergers and acquisitions, and signed a strategic cooperation agreement with the Chinese Association of Rehabilitation Medicine in 2023 to enhance its influence in discipline construction, medical quality, talent training, and digital construction around the platform of rehabilitation medical schools.

As a platform-based household device leader, Yuyue Medical (002223.SZ) has products in blood pressure monitoring, body temperature monitoring, traditional Chinese medicine equipment, surgical instruments and other business fields, focusing on the three core tracks of respiratory and oxygen generation, blood glucose and POCT, disinfection and infection control, in addition to rehabilitation and clinical equipment products. Taking the company's main product ventilator as an example, the company's ventilator is mainly divided into positive pressure ventilator and bilevel positive pressure ventilator, which is suitable for people who snore and hold their breath, obstructive apnea, etc. Due to the large number of COPD and OSA patients in China, the diagnosis rate is low, and there is a lot of room for improvement in treatment penetration. In 2020, there were about 200 million patients with OSA (obstructive sleep apnea-hypopnea) and 100 million patients with COPD (chronic obstructive pulmonary disease) in China, which is a large number, but the diagnosis rate is significantly lower than that of developed countries, of which the diagnosis rate of OSA patients is less than 1%, so the future penetration potential of the treatment market is broad. Home non-invasive ventilators are one of the main means of treating patients with OSA and COPD, with the global and Chinese market sizes of US$3.34 billion and RMB1.53 billion respectively in 2019. From the perspective of the competitive landscape, it is still dominated by foreign investment, but after the outbreak of the epidemic in 2020, Yuyue Medical, Jardine Jiaye (301367. SZ), among which Yuyue Medical's share in terms of sales increased from 4.6% in 2019 to 7.3% in 2020, and Yuyue Medical's latest product, the third-generation ventilator, has been approved in 2023.

Smart healthcare is an emerging field

With the advent of an aging society, new opportunities have also arisen in the medical field.

Guojin Securities believes that in terms of R&D trends, intelligence, portability and multi-functional integration have become an important development direction for household medical devices. Intelligence enables families and doctors to monitor the physical condition and treatment effectiveness of elderly patients in real time, supporting more targeted treatment plans. Portability adapts to the needs of lightweight medical devices in home scenarios, making it more convenient for grassroots doctors to visit and treat patients. The multi-functional integration improves the detection efficiency, so that elderly patients can rely on a single device to achieve the collection of multiple detection indicators.

In March 2022, the Device Review Center of the State Food and Drug Administration issued the "Guiding Principles for the Registration and Review of Artificial Intelligence Medical Devices", and a total of 32 Class III certificates for artificial intelligence medical devices were issued that year, an increase of 50% to 48 in 2023, and a total of 122 models. According to the "14th Five-Year Plan" and the Outline of the Long-Range Objectives for 2035, the digital construction of the medical field and the construction of smart medical care have become important tasks during the "14th Five-Year Plan" period, focusing on promoting the inclusive application of digital services in the medical field, building application scenarios and industrial ecology based on 5G, carrying out pilot demonstrations in key areas such as smart healthcare, and solidly promoting the standardization and informatization of medical insurance.

Take, for example, surgical robots. In 2021, the number of minimally invasive surgeries in China has reached 18.6 million, and the penetration rate of minimally invasive surgeries has also shown a rapid growth trend, but there is still a huge gap compared with the United States: 38.1% in China and 80.1% in the United States in 2019. However, minimally invasive surgery still has some disadvantages: less freedom in the use of instruments, distortion and difficulty in correcting 2D images, heavy workload, and the need for surgical assistants and other surgical team members to provide support, which cannot avoid problems such as hand tremors during surgery. Robot-assisted surgery can effectively overcome the above shortcomings and further promote the development of minimally invasive surgery, which can provide high-precision high-resolution 3D images of the surgical area and magnifying glass functions, remove tremors through software and algorithms, reduce surgeon fatigue through ergonomic design, and make small incisions caused by precision surgical tools, which is recognized by surgeons and patients.

In addition, an intelligent network of medical equipment began to be established. According to Galaxy Securities, with the continuous support of policies and the empowerment of cutting-edge technology, local governments continue to increase investment in local smart medical construction, and China's smart medical construction has ushered in a period of rapid development. The medical Internet of Things has a wide range of application scenarios, such as clinical reagent and drug management, operating room cleanliness management, medical equipment management, mobile ward rounds, patient positioning, etc., and continues to expand, and the interconnection and data sharing of medical devices and equipment are necessary prerequisites for the realization of medical Internet of Things and smart healthcare.

For example, Mindray Medical (300760. SZ) has built Ruizhilian, Ruizhijian, and Ruiying cloud systems, and formed a hospital-wide solution for smart hospitals, among which Ruizhilian has launched multi-scenario solutions such as critical care, perioperative, emergency, cardiology, and general care, effectively improving the operational efficiency of the department through information technology. Ruizhi inspection is deeply integrated with the inspection process, and interconnected with third-party systems such as SPD and LIS; By connecting imaging equipment and the user's cloud ecological application platform, Rayshadow Cloud provides a cloud community and a variety of cloud applications that can be independently created and operated by users, creating a three-dimensional interactive communication medium.

In addition, remote diagnosis and treatment can expand the radius of medical services, or will quickly become popular. Galaxy Securities believes that the remote diagnosis and treatment model plays a prominent role in optimizing the allocation of medical resources, which can not only solve the medical service needs of remote or medical resources in poor areas to a large extent, but also reduce the pressure on urban medical resources. In the context of the continuous expansion of the elderly group with inconvenient travel, the diversification of patient needs, and the introduction of policy encouragement funds, remote diagnosis and treatment is an efficient service model that meets the future medical needs. At present, MGI has deployed remote and portable ultrasound systems. The remote ultrasound robot developed by it is the world's first ultrasound equipment that realizes the direct remote control of ultrasound probes by professional doctors, which can implement remote diagnosis of patients, the ultrasound display system and control system on the doctor's end, the ultrasound imaging system and the six-degree-of-freedom robotic arm on the patient's end, and realizes real-time video and voice communication through network communication signals, which can overcome the limitations of traditional ultrasound diagnosis and treatment, overcome time and space barriers, and improve the uneven distribution of medical resources.

Steady growth of health food

With the increase of age, the physical function gradually declines, and the problem of unbalanced diet is common among middle-aged and elderly people, which means that most middle-aged and elderly people cannot get enough essential nutrients from their daily diet. Supplemental health food is one of the effective ways to improve the above problems, and the market has a broad space for development.

According to Euromonitor International, the market size of VDS (dietary supplements) in China was 63.642 billion yuan in 2009, and it will increase to 225.341 billion yuan in 2023, an increase of 3.5 times in 14 years. From the perspective of growth rate, the compound annual growth rate of China's VDS market from 2013 to 2023 is 8.47%, which is much higher than the growth level of other developed countries.

The development time of China's VDS industry is relatively short, and the relevant consumption awareness and habits of residents have not yet been formed. From the perspective of per capita consumption level, China's per capita consumption of vitamins and dietary supplements in 2023 will be 23.3 US dollars, slightly higher than the global average and only 22% of that of the United States, which has a high growth space compared with developed countries. According to Euromonitor International, the compound annual growth rate in the next five years is 5.4%, reaching 293.153 billion yuan in 2028.

The market concentration of VDS in China is low, and the market share of the top five companies will be 30% in 2023, a decrease of 4.8 percentage points from 2014, and the overall trend is slightly declining. According to Tianfeng Securities, the reason behind this is, on the one hand, the low threshold and high profits: the high proportion of OEM processing in China's health care products industry, the asset-light model of most cutting-edge brands, the low technical and capital thresholds, coupled with high gross profits, attract newcomers to join the cake; On the other hand, product homogenization is serious, and it is difficult to form core competitiveness: after China's standardized management of the health care product market, the functions that can be claimed by health care products have been regulated, which has reduced product diversification to a certain extent and intensified product homogenization.

However, with the tightening of policies and the strengthening of supervision, the entry threshold is expected to be further raised; In addition, industry mergers and acquisitions are intensifying, and domestic and foreign collaborations promote industry integration, which is expected to further enhance the concentration of heads in the future. Since 2019, Tomson By-Health (300146.SZ) has maintained the largest market share in the industry and has continued to increase its market share, from 9.1% in 2019 to 10.4% in 2023, and its medium and long-term target set at the 2023 general meeting of shareholders is 15% of the market share.

Traditional Chinese medicine tonics, represented by ejiao health foods, have good growth prospects. Ejiao is used relatively frequently in the field of traditional Chinese medicine, and the collagen, vitamins and trace elements in the main components can be absorbed by the human body through the boiling of donkey skin, which is mild in nature and has a good warming effect. From the perspective of the functional composition of Chinese Ejiao health foods, 52.35% of them enhanced immunity and 34.48% improved anemia. Specifically, Ejiao occupies the largest share of immunity, reflecting consumers' increasing attention to improving immunity through health care. Ejiao contains a variety of active ingredients such as polysaccharides, amino acids and trace elements, which are believed to regulate the immune system. On the other hand, improving anemia as the second major functional demand also reflects the traditional application of Ejiao in the treatment of blood diseases. Ejiao is rich in iron and other essential nutrients for hematopoiesis, which helps to promote red blood cell production, thereby effectively improving the symptoms of anemia, and this function is especially concerned by women and the elderly.

After a rapid decline in donkey breeding in the early stage, it has shown a steady upward trend in recent years, and according to the Leopard Research Institute, the donkey herd in Shandong Province is maintained at 50,000 at this stage. In recent years, with the growth of market demand for donkey products such as Ejiao and the increase in demand for high-quality raw materials by related enterprises, the donkey breeding industry has begun to recover. Through policy support, technological improvement and large-scale breeding, Shandong Province has not only stabilized the number of donkey herds, but also improved the breeding efficiency and product quality, providing reliable raw materials for the midstream Ejiao health food industry.

In addition, on the basis of Ejiao blocks, manufacturers have developed Ejiao health foods with various functions such as enhancing immunity and improving anemia, and pay more attention to the diversification and personalization of products. At present, the dosage forms of Ejiao health foods mainly include oral liquid, capsules and granules. Oral liquid is a ready-to-eat product that is not only convenient to carry and take, but also can be quickly absorbed by the body, and is more acceptable to consumers in terms of taste. The proportion of capsule dosage forms is also relatively high, mainly due to their stability and ease of storage, while granules are usually easy to dissolve. At the same time, the variety of dosage forms has further broadened the market audience of Ejiao health food.

Ejiao has a history of 3,000 years as a nourishing precious Chinese medicinal material, and is listed as a nourishing product by the "Shennong Materia Medica", and the "Compendium of Materia Medica" calls it a blood-tonic medicine. At present, Dong'e Ejiao is the No. 1 OTC product and the No. 1 brand of nourishing and health preservation.

Overall, there are many manufacturers in the Ejiao industry, and Dong'e Ejiao (000423.SZ) is currently the leader in the industry, and its market share is on the rise. According to Huafu Securities, in 2021, Dong'e Ejiao accounted for more than 60% of the market share, followed by Fupai Ejiao, with a market share of more than 15%. Dong'e Ejiao and Fupai Ejiao are facing different market groups, Fupai Ejiao is sinking in the market due to its lower price, while Dong'e Ejiao focuses on the high-end Ejiao market. Manufacturers such as Tong Ren Tang (600085.SH) have entered the Ejiao market and have differentiated competition by virtue of cost performance, with Taiji Ejiao and Tong Ren Tang Ejiao accounting for about 10% of the total share.

This article appeared in the December 14 issue of Securities Market Weekly