Chinese Pharmaceutical Industry - Access China

Summary

China has established a pharmaceutical industry structure, and has become one of the largest pharmaceutical producers in the world. The Chinese pharmaceutical industry has increased in value with an annual average growth rate of 16.72% over the last few decades.

However, the industry is still small-scale, with a scattered geographical layout, duplicated production processes, and outdated manufacturing technology and management structure.

The Chinese pharmaceutical industry also has a lower market concentration and weak international trading competitiveness, coupled with a lack of patented pharmaceuticals developed in-house.

As China joins the World Trade Organization (WTO) (see section 4.1), it will need to integrate more completely into the global economy. The international competition will place an intense pressure on the Chinese pharmaceutical industry and further open the door to a lucrative market for non-Chinese companies, especially for pharmaceutical producers and manufacturers. Accession to the WTO will bind China by fundamental WTO principles, such as improved transparency and the strengthening of commercial legal procedures. China¡¯s WTO commitments include the tightening of rules on intellectual property, tariff concessions, and market access of non-Chinese service suppliers engaging in the distribution of pharmaceuticals. All such moves will create additional business opportunities for non-Chinese pharmaceutical companies in China, and in turn, place an intense pressure on the Chinese pharmaceutical industry.

This report will discuss the state of the Chinese pharmaceutical industry and the opportunities available to non-Chinese pharmaceutical companies doing business in China, based on Chinese official statistics.

In a move to open up and expand the industry, Chinese authorities have permitted investors from outside China to set up non-Chinese investment enterprises, including:

• Sino-foreign equity joint ventures (joint venture by Chinese and non-Chinese investors)
• Wholly foreign-owned enterprises (solely funded by non-Chinese investors)
• Sino-foreign contractual joint ventures (joint venture by Chinese and non-Chinese investors).

Sales derived from non-Chinese investment enterprises have made up 22.23% of the total Chinese domestic market. So what are the key factors to encourage non-Chinese companies to invest in China? The advantages of business investment in the country include the vast consumer demand for pharmaceuticals, the lower labor costs and the changes resulting from economic reform. Changes to the patenting laws in full compliance with the requirement of the TRIPS Agreement and the lack of Chinese pharmaceutical R&D have also left gaps in the market that can be exploited by non-Chinese companies.
How to capture business opportunities in China? Non-Chinese pharmaceutical manufacturers can capture business opportunities in China by establishing wholly non-Chinese-owned pharmaceutical companies and produce pharmaceuticals with in-house patent rights. Another way is to purchase existing pharmaceutical companies, and produce goods using pharmaceuticals developed in-house, substituting for older agents.

Organizations and companies are being created in China that can help companies from outside the country to create these relationships, and resources and help are available from Governments and trade bodies outside China.

Contents

1. Introduction

2. An overview of the pharmaceutical industry in China

2.1. Economic reform and the open door policy in context
2.2. The growth of the Chinese pharmaceutical industry
2.3. The structure of the Chinese pharmaceutical industry
2.3.1. Industry output
2.3.2. Import and export
2.3.3. The industry layout
2.4. R&D in China
2.5. Marketing approvals and manufacturing
2.6. Non-Chinese investment enterprises in China

3. Competing in the international market

3.1. Introduction
3.2. Measuring trading competitiveness
3.3. Potential trading competitiveness

4. Business opportunities for non-Chinese pharmaceutical firms in China

4.1. Factors affecting business opportunities in China
4.1.1. Chinese Authorities' commitments and administrative measures
4.1.2. Chinese consumer demand for pharmaceutical products
4.2. The factors bringing business opportunities
4.3. How to capture business opportunities
4.4. Which would be the profitable fields for non-Chinese pharmaceutical firms?

5. Conclusion

6. Appendices

6.1. Case studies
6.1.1. Sino-Swed Pharmaceutical Corp.LTD (SSPC)
6.1.2. Pfizer (China) Pharmaceuticals Limited
6.2. References
6.3. Glossary
6.4. Source data
6.5. Author's Biography
6.6 Company's Description