Business opportunities in China(原创)

wyflyUID: 90025

这是我3年前写的第一份E文的商业报告 拿出来赚积分啦  呵呵

Business opportunities in China
Wu Yifeng, China Pharmaceutical University


Since the economic reform and open door policy implemented by the Communist Party of China (CPC) in the late 1970s, the Chinese pharmaceutical industry has grown rapidly [figure 2.1].  These reforms changed the Chinese economy from a centrally planned one to an economy more oriented towards the market, and the measures implemented included:

liberalization of the market, ensuring market access for emerging non-state enterprises, including private-owned enterprises, self-employed enterprises and various joint ventures
relaxation of the state’s monopoly over industrial production
an open door policy which gave a fillip to foreign investment enterprises in China
privatization of state-owned enterprises.
The growth of the Chinese pharmaceutical industry
China has established a pharmaceutical industry structure, and has become one of the largest pharmaceutical producers in the world.  The Chinese pharmaceutical industry accounts for 2.14% of the total output of the overall industry in China, and the Chinese output of beta-lactams and vitamins makes up 30% of the total output worldwide.

The Chinese pharmaceuticals market is a very large one – by 2005, it is expected to have increased 1.7 fold over 2001 levels. There are a number of factors supporting this increasing demand for pharmaceuticals. China has the largest population in the world – this is likely to reach 1.33 billion by 2005. Alongside this, the growth of urban populations is accelerating. The urban population, which has a higher demand for pharmaceuticals, is likely to rise to 0.59 billion by 2005. Another group with a high demand for pharmaceuticals is the population over 65. This ageing group is likely to go beyond 0.1 billion by 2005.

Characteristics of the Chinese pharmaceutical industry
The industry in China divides into five sub-sectors:

production of chemicals for pharmaceutical manufacturing
pharmaceutical manufacturing
production of traditional Chinese medicine and medicinal material
production of veterinary medicines
production of biologicals.
The first three of these make up over 90% of the market [figure 2.2].

Despite its rapid growth, the Chinese pharmaceutical industry is dominated by small-scale operations with a scattered geographical layout. In 2001, 24% of the pharmaceutical organizations were described as large- and medium-sized enterprises and the remaining 76% small-sized enterprises [figure 2.5]. These companies are characterized by duplication of production processes and output—for example, several hundred pharmaceutical factories produce generic versions of gentamicin, and more than 30 factories produce generic versions of levofloxacin and clarithromycin.  

Chinese pharmaceutical companies also have a lack of internal R&D programs.  As an example, between 1996 and 2001, the expenditure on research and development in Chinese pharmaceutical companies did not exceed 3% of sales revenue per year, and while the number of companies is increasing overall, the number of companies with in-house R&D departments has remained somewhat static. This is because, historically, Chinese pharmaceutical companies have tended to center on short-term profits rather than long-term programs, focusing on producing low cost copies of patented pharmaceuticals.  For example, in recent years, 97.4% of 873 varieties of raw materials produced by pharmaceutical enterprises were copies of patented drugs. A knock-on effect of this is that many institutes and universities struggle to find industrialized co-operative partners for their patents and research achievements.

Finally, the formulation and manufacturing capabilities of Chinese pharmaceutical companies are poor. In general, the companies can only prepare pharmaceuticals in three dosage forms (tablet, capsule and injection), and the quality of the final product is often variable.

Opportunities for business investment
Historically, it has been difficult for non-Chinese companies to get a foothold in the country, with administrative measures such as reimbursement lists, licensing approval processes and pricing protecting domestic interests.  

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.

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).
In order to support this external investment, and as part of China’s accession to the World Trade Organization (WTO), the Chinese authorities have made certain commitments.  Within three years of China’s accession to the WTO, non-Chinese service suppliers will be allowed to distribute pharmaceuticals, and the applied average tariff rate on imported pharmaceuticals will reduce by 5-6% (in 2003, this rate was 8-10%).

Post-accession to the WTO, the Chinese authorities were allowed to adopt the following administrative measures.

State pricing (Government-set pricing) on imported pharmaceuticals.
Registration of initial imports of pharmaceuticals.
GMP (Good Manufacturing Practice) and GSP (Good Supply Practice – equivalent to Good Distribution Practice outside Japan, China and Korea) certification for ‘foreign-funded pharmaceutical firms’ and business distributors.
Revision of patent laws to fulfill the requirements of the TRIPS (Trade-Related Intellectual Property) Agreement
Chinese authorities must establish strict implementation of the patent law in full compliance with the requirement of the TRIPS Agreement
Chinese pharmaceutical enterprises will no longer be allowed to replicate patented pharmaceuticals while these are still under the protection of non-Chinese patents.
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 and the lack of Chinese pharmaceutical R&D have also left gaps in the market that can be exploited by non-Chinese companies.

Before deciding on how to capture business opportunities or which fields to enter into, companies from outside China must be aware of some significant points:

Many of the administrative measures adopted by the government are still not transparent
Chinese authorities have retained pricing control over imported pharmaceuticals and over many adoptable administrative measures -this incurs risks associated with changes of policy and regulation
The Chinese market is still an emerging market for non-Chinese investors, and its operational mechanisms are very different from those of the Anglo-American markets.
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.

In conclusion, there are many business opportunities for non-Chinese pharmaceutical firms in China. How to capture such business opportunities depends upon their skills of turning a disadvantage into an advantage.

[ 本帖最后由 wyfly 于 2006-7-8 09:35 编辑 ]

claire2006UID: 151478

thank u 4 sharing