GE joint venture will build scanners in China

GE Medical Systems has signed a letter of intent to form a manufacturingjoint venture in the People's Republic of China. The joint venturecompany will be called GE Hangwei Medical Systems of Beijing,said David Wang, vice president for China projects at GE (USA)China, also of Beijing.

Assembly of computed tomography and ultrasound equipment shouldbegin late in the third quarter of this year, following finalapproval by the Chinese government, Wang said.

Yokogawa Medical Systems, GE Medical Systems' Japanese jointventure, will transfer technology to GE Hangwei. Localized manufacturingin Beijing will be phased in over a three-year period, Wang said.

GE will initially import CT Max scanners and RT 2800 ultrasoundsystems for assembly and sale into the domestic market. The Americancompany will own 65% of GE Hangwei, according to a spokespersonfor GE Medical Systems in Milwaukee.

Local production of CT scanners will position GE for long-termgrowth in the Chinese market. Imports of CT scanners into Chinaare restricted by quota. Until GE Hangwei converts to local production,the quota system will limit CT sales, Wang said.

"The total quota for the nation is 40 units a year. Wewill get part of that," Wang told SCAN.

The only existing CT manufacturing facility in China is runby a Chinese company that licenses and assembles Siemens scanners,he said.

Imports of ultrasound systems are not controlled by quota becauseof that modality's lower cost. However, Chinese customers musthave access to foreign exchange in order to purchase importedequipment. The Chinese ultrasound market is also more competitivethan CT, with a greater number of suppliers vying for sales, Wangsaid.

Purchasing decisions for ultrasound scanners tend to be madeat the local hospital level, while the import quota regulationsrequire central government approval for purchases of CT scanners,he said.

Ultrasound systems are used in a wide variety of clinical applicationsin China, due in part to their lower cost.

GE will have two Chinese partners in the joint venture:

• Beijing Changfeng Industrial, a unit of the Ministryof Aeronautics and Space Industry; and

• China National Medical Equipment and Supplies Importand Export, which is part of the Ministry of Public Health.

GE Hangwei only manufactures imaging systems. Sales and servicewill be provided by GE's wholly owned representative offices inBeijing, Shanghai and Hong Kong, Wang said.

The joint venture will be limited to ultrasound and CT manufacturing,at least initially. GE has not decided whether to repeat the processwith magnetic resonance imaging equipment, he said.

"MRI is still in the very early stages here. There islittle knowledge about its use, and it is much more expensive(than other modalities)," Wang said.

There are only 10 to 15 MRI systems installed in all of China,he estimated. The Chinese CT installed base, on the other hand,is approaching 1000 units, he said.