Chinese authorities want to increase the use of medical devices manufactured by local companies — potentially making it more difficult for foreign device makers to do business in the country’s medtech sector in which they have traditionally dominated.

“We want to strongly advocate health ministry organizations to use domestically-made medical devices, especially pushing top level class III hospitals to use domestically-made products,” Li Bin, the head of China’s National Health and Family Planning Commission, said in a statement cited by Reuters.

According to the Reuters report, Chinese officials want to speed the development of their domestic medtech sector in order to lower escalating healthcare costs and ease the burden on patients.

Reuters also cited Miao Wei, the head of China's Ministry of Industry and Information Technology (MIIT) as saying in the same statement that “China needed to raise the level and quality of its homegrown medical devices and create incentives for medical institutions to use locally-made products.”

China is also tightening regulations and imposing stiffer fines to improve the quality of medtech products and to curb the illegal activities and corrupt practices that have plagued the sector. In early August, Chinese medical device regulators also released new guidelines for medical devices and in vitro diagnostic (IVD) devices to be enforced starting October 2014, keeping with the changing healthcare environment, according to the Regulatory Affairs Professional Society (RAPS).

Foreign medical device industry titans such as Medtronic, Johnson & Johnson, and Stryker Corp. have long dominated the medical devices sector in China, but the changing regulatory environment could see them compete head-on with homegrown companies, especially now with the explicit backing of the government.

Shanghai-based Kinetic Medical — which sells percutaneous kyphoplasty (PKP) devices to treat spinal compression fractures — is one of the upstarts trying to compete with foreign companies. Co-founder and chairman Jay Qin, who formerly worked with Medtronic, recently told Forbes that they can offer their devices at much lower prices to local distributors.

“Some multinationals are still trying direct sales in China, which is an impossible approach,” Qin said in the interview with Forbes. “Kinetic hires distributors to establish connections with hospitals long before the product is launched.” The company sells to 600 Chinese hospitals in all mainland provinces aside from Tibet through a network of 200 distributors.

However, he insisted that price is not the only differentiator, as their homegrown products’ technology is now at least on par with what their foreign counterparts have been selling the Chinese market.

“Unlike many of our Chinese competitors’ overseas strategy, we’ve been focusing on developed markets from the start,” Qin added in the interview. “Our products have the same quality as Medtronic’s. Lower price alone wouldn’t get you too far.”

The competition is set to become fiercer since the stakes are higher. The Reuters report said that the Chinese medical device sector is expected to grow 20 percent annually according to estimates from McKinsey & Co. The Chinese medical device industry was worth $34.51 billion last year, according to the Hong Kong Trade and Development Council (HKTDC). Currently, three-quarters of the market is dominated by companies from the United States, Europe, and Japan.