Laws and customs

Companies wanting to do business in China also have to be wary of the Red government's webs of red tape. As the recent fracas with Google shows, you play by their rules or get out.

"Foreign companies that do business in China need to take into account a lot of culture differences between what they're used to and the market they're entering," Glorikian says. "The Chinese government has very specific agendas on how things are going to go in the country, and one has to be mindful of these agendas and maintain good relations with officials."

One aspect that may prove troublesome to diagnostic-imaging makers is a government rule requiring health care centers to apply for a license before purchasing a CT or MR scanner, which drastically limits the number of high-end machines the country can import. Millennium's Li says the process is "cumbersome," and for hospitals to qualify for the licenses they have to go through at least three different regulation offices and demonstrate they have enough beds, and properly trained personnel, to warrant the purchase. And according to Li, licensing requirements for nuclear medicine systems are even more formidable.

But the rules have a reason: years ago, some hospitals, hoping to boost income, tried to offer CT scans when they weren't needed and when the staff didn't know how to run the scanners.

"A lot of hospitals that didn't necessarily have the technical expertise or knowledge to properly operate these CT systems purchased these scanners, and in some cases, prescribed unnecessary procedures to generate revenues. To protect patients from the potential danger of advanced imaging scanners, such as over-exposure to radiation, and to prevent rapidly rising medical costs for patients, the Chinese government initiated strict regulations so that only qualified facilities would be able to purchase and operate a CT, MRI or nuclear medicine system," Li says.

Aftermarket woes

Businesses hoping to enter the used parts or machine market face, perhaps, the greatest challenge. From the analysts I spoke with, the refurbished market in China gets short shrift, even if the government were to relax its ban against importing used medical equipment.

Glorikian thinks there's a prejudice against used goods from abroad that would have to be overcome. "It's a perception issue," he says. "The population doesn't want to believe they're not going to get anything anyone in the modern world isn't going to get."

Dan Whalen, an analyst at Millennium, thinks that, at least in interventional cardiology, the flood of new funding could erode much of the desire for refurbished products, although the market won't disappear entirely. And a popular local practice, in-hospital reprocessing and sterilization of goods, will continue.

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