China's Medical Aesthetics Industry at a Crossroads: Regulatory Crackdown by Eight Ministries Sparks Sector-Wide Transformation

The medical aesthetics industry is experiencing a “storm.”

Recently, eight ministries and commissions, including the National Health Commission, the Cyberspace Administration of China, the Ministry of Public Security, the General Administration of Customs, the State Administration for Market Regulation, the State Post Bureau, the National Medical Products Administration, and the National Administration of Traditional Chinese Medicine, jointly issued a document to launch a special campaign against illegal medical aesthetic services from June to December 2021, and released the "Work Plan for the Special Campaign Against Illegal Medical Aesthetic Services."

Specifically, this special campaign to rectify the medical aesthetics industry includes tasks such as severely cracking down on illegal activities related to medical aesthetic services, strictly regulating medical aesthetic service practices, rigorously combating the illegal manufacturing and sale of pharmaceuticals and medical devices, and seriously investigating and punishing illegal advertising and online information, thereby covering multiple aspects of the medical aesthetics sector.For a time, the entire medical aesthetics industry found itself at the center of controversy.

Where Is the Medical Aesthetics Industry Headed Amidst a Regulatory Crackdown?

In recent years, the rise of the "beauty economy" has made medical aesthetics one of the newly emerging hot sectors.

In terms of market size, according to Frost & Sullivan statistics, China’s medical aesthetics market registered a compound annual growth rate (CAGR) of 22.5% from 2014 to 2019, making it one of the fastest-growing markets globally. The market size in China is projected to exceed RMB 360 billion by 2023.

The vast market potential is attracting numerous institutions to enter the field.A search for “medical aesthetics clinics” on Tianyancha reveals more than 20,000 entities established within the past year, excluding medical aesthetics hospitals that expand their scale annually.

Behind the fierce competition lies the high gross profit margin of the medical aesthetics industry.According to a research report by Guoyuan Securities, the gross profit margin in the medical aesthetics industry remains at 60%. This clearly demonstrates that medical aesthetics is indeed a lucrative business.

On the other hand, the medical aesthetics industry has also been plagued by skepticism. Due to the large number of market participants,Intense competition has become a hallmark of the medical aesthetics industry, resulting in high customer acquisition costs and low net profit margins for medical aesthetics institutions.Relevant data indicate that medical aesthetic institutions typically have a gross profit margin of 50% to 60%, which drops to a net profit margin of only 0–10% after deducting sales expenses.

What is worse, the influx of a large number of companies and the harsh competitive environment have given rise to numerous “illegal medical aesthetics” institutions in the medical aesthetics sector.: The "White Paper on Insights into China's Medical Aesthetics Industry (2020)" shows that an average of approximately 100,000 people suffer injuries or disabilities annually due to illegal medical aesthetic practices.

For example, the recent death of a female internet influencer in Hangzhou due to an infection following liposuction and fat grafting surgery has sparked widespread public and media attention. According to the preliminary investigation released by the Hangzhou Municipal Health Commission, this medical malpractice incident resulted from improper practices at the involved medical aesthetics clinic, including inadequate preoperative assessment, improper intraoperative techniques, and delayed postoperative observation and management. This incident has further eroded trust in the medical aesthetics industry among many individuals seeking cosmetic procedures.

It is precisely because of the rampant chaos in the industry that the medical aesthetics sector, which had been growing recklessly, has sounded the alarm under regulatory crackdowns.

However, it is important to note that regulatory oversight alone is far from sufficient to standardize the industry; greater emphasis must be placed on self-regulation and internal capacity building. Although top-down regulation and self-discipline may cause short-term fluctuations in industry development, they represent the path toward sustainable and healthy long-term growth.

In this process, the scarcity of specialized talent and the weak systematic academic infrastructure in medical aesthetics are critical pain points that the industry urgently needs to address.

Under stringent regulatory oversight, the medical aesthetics industry has long since taken action.

The Initiation of Industry Self-Regulatory Actions.For instance, the year before last, 112 licensed medical aesthetic institutions in Changsha joined forces to issue a public challenge and released three codes of conduct to combat illegal medical aesthetics and jointly crack down on disturbances at medical facilities. Similarly, in May last year, So-Young took the lead in launching a self-discipline initiative within China’s medical aesthetics industry, promoting the “Three Standardizations”—namely, service standardization, inspection standardization, and product standardization—to establish the “So-Young Model” of platform governance and make every effort to curb industry irregularities at their source.

According to SoYoung’s disclosure, from July 18 to August 31, the platform cumulatively blocked 174,102 instances of suspected non-compliant or illegal medical aesthetic products, 1,054 instances involving institutions, 1,717 instances of practitioners engaging in unlicensed or out-of-scope practice, and 12,370 instances of fake orders and reviews, resulting in a total of 189,234 interventions and dispositions against non-compliant or illegal medical aesthetic information. In addition, SoYoung has established a professional review team to strengthen scrutiny of institutional and practitioner qualifications, published content, and products; built a risk control model library for identifying non-compliant content; and enhanced platform governance.

Furthermore, the standardized development of medical aesthetic physicians.It is well known that medical professionals are the core resource of the medical aesthetics industry. To achieve sustainable development, the industry must promptly establish talent cultivation mechanisms and effectively train and reserve high-quality professionals.

Consequently, at the policy level, the Ministry of Education proposed this year that degree-granting institutions with the necessary conditions may independently establish secondary disciplines related to aesthetic medicine under primary disciplines such as Clinical Medicine, based on their own development and social needs. This is undoubtedly a positive start, opening up new channels for the training of professionals in the medical aesthetics industry. In particular, for young physicians, the introduction of aesthetic medicine as a specialized field into universities provides them with high-quality learning opportunities.

On the industry front, So-Young, the leading internet-based medical aesthetics platform, is also actively supporting the professional growth of physicians.On the one hand, So-Young helps doctors enhance their aesthetic sensibilities in line with current consumer trends and improve their professional capabilities. It has also launched the So-Young Cloud Academy to focus on continuing education and academic exchange for the physician community.

On the other hand, by leveraging technologies such as big data, AI, and 5G, So-Young is able to connect doctors and consumers more conveniently through features like video consultations and VR-based clinic visits. This enables consumers to easily access truly competent and skilled physicians, thereby narrowing the gap between the general public and medical aesthetics. It is evident that, with its continued focus on physician development, So-Young has evolved into a more comprehensive and professional platform that provides greater safeguards for the training and cultivation of medical talent.

According to So-Young’s Q2 financial report released on September 10, the company’s total revenue in the second quarter of 2021 reached RMB 451.8 million, a year-on-year increase of 37.7%, hitting a record high. Notably, its net profit attributable to shareholders under non-GAAP standards amounted to RMB 73.7 million, representing a year-on-year surge of 145.2%. This demonstrates that the value of So-Young’s long-term investments is beginning to materialize, underscoring its role as a long-termist committed to promoting the healthy development of the industry.

Finally, medical aesthetic institutions are shifting their marketing strategies.As aesthetic medicine institutions urgently need to address customer acquisition and cost control, many are shifting their operational strategy from traditional broad and scattered marketing campaigns to more refined operations. Examples of such initiatives in recent years include building private-domain traffic pools and selecting targeted aesthetic medicine communities.

It is not difficult to observe that, with the implementation of industry self-regulation initiatives, a more robust system for physicians’ continuing medical education, and aesthetic medicine institutions reducing marketing expenditures while improving customer acquisition efficiency, a healthier ecosystem for the aesthetic medicine industry is gradually taking shape.

Under the stringent crackdown initiated by a joint directive from eight national ministries and commissions, “black market medical aesthetics” and illegal marketing practices will be further eradicated, facilitating the clearance of disreputable companies that exploit the medical aesthetics concept.

On the other hand, this is positive news for legitimate medical aesthetics institutions, as it helps the industry eliminate unethical competitors, reduce competitive costs, and improve profitability.

More importantly, as the improvement of medical service quality serves as the core for the long-term development of all enterprises in the medical aesthetics industry, physician training has been prioritized above all else.: Whether driven by policy guidance or supported by companies represented by So-Young, continuing medical education and innovation for physicians have received greater support, which will serve as a driving force for the continuous advancement of the medical aesthetics industry.

Looking back on the industry’s development, medical aesthetics originated from the humanitarian efforts of surgeons who performed reconstructive procedures for wounded soldiers with severe deformities and tissue defects during the two World Wars, embodying a spirit of saving lives and healing the injured. As the “beauty economy” has gained prominence, medical aesthetics has also taken on the role of enhancing individuals’ confidence in their appearance.

Therefore, returning to its original mission will become the main theme of the industry’s development in the coming period. It is believed that with the joint efforts of all stakeholders, the medical aesthetics industry will also become more beautiful.