Chinese Pharmaceutical Industry

Review

This is an important report that looks at the World Trade Organization (WTO) implementation and business opportunities for international pharmaceutical companies in China. The comprehensive analysis of the multifaceted pharmaceutical industry and market, based on full and accurate statistics, helps guide the reader through the many changes transforming the Chinese pharmaceutical sector.

Indeed, as shown in this study, China is one of the fastest growing global economies. It has achieved and maintained an average GDP growth rate well above 7% since the 1980s. The domestic pharmaceutical industry has been a key contributor to the country’s impressive economic growth. As one of the world’s major producers of pharmaceuticals, the sector achieved an annual compound growth rate of 16.7% between 1978 and 2003. Sales over the same period increased by 16.5%.  Both far outpaced other economies in the world, making China the world’s fastest growing pharmaceutical market. Although China has enjoyed the benefits of an expansive market for pharmaceutical production and distribution, the industry is suffering from minimal innovation and investment in R&D and new product development. The sector’s economies of scale have yet to be achieved. Most domestic manufacturers in the pharmaceutical industry lack the autonomic intellectual property and financial resources to develop their own brand name products. Most manufacturers rely on the repetitive production of low value added bulk pharmaceuticals and imitation drugs.

China’s entry into the WTO, in December of 2001, opened the door to a lucrative market for foreign companies, and especially for pharmaceutical manufacturers and distributors. 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 also include the tightening of rules on intellectual property, tariff concessions, and permission of foreign distributors’ entry into domestic market. These commitments will help reduce the risk of doing business in China and encourage increased flow of trade and investment, enhancing the business opportunities for international pharmaceutical companies and investors. This study highlights all such implications in detail.

I welcome this report and believe that it will provide a valuable contribution to those looking to establish a presence in China or gain greater market penetration.

Professor Xiaoming Wu
Chancellor
China Pharmaceutical University