Asia in general accounts for about 34% of the world's population, but only 20% of global pharmaceutical drug consumption. The ultimate size and forecast exponential growth in future demand for pharmaceuticals, coupled with the inherent low-cost structure of Chinese manufacturing offer huge opportunities for pharmaceutical enterprises.
APIs make up a significant part of China's international medical trade, accounting for over 50% of total medical exports. There are more than a thousand API producers in China, most producing for both the domestic and export markets. China also makes up one of the largest areas for API demand. There is an increasing demand from China for imported APIs with high added value, rather than home-produced low added-value products.
The EU, US, India and Japan are the biggest trade partners and together make up 60% of China's export markets. China exports bulk items such as vitamins, amino acids and sweeteners to the US; vitamins and antibiotics to Europe; enzymes and primary amino acids to Japan; and antibiotics and hormone intermediates to India.
China represents an enormous opportunity, not just as a source of competitively priced and high quality APIs, but also as a largely untapped and growing marketplace. So how should companies exploit the enormous potential of this marketplace?
It is only when you actually visit China that you begin to see the wood for the trees. The West's perception of China is either as a region run by a repressive centralised political system, with an industrious if somewhat brow-beaten workforce; or as a threatening economic force that is about to decimate the established economies of the world, and become the undisputed number one economic and political superpower.
In reality, the Chinese pharmaceutical industry is staffed by highly Westernised, responsive, outgoing and motivated people, aware of their strengths, but also of their weaknesses, and willing to address them quickly and efficiently.
Much of the global pharmaceutical industry has now incorporated sourcing from China into its manufacturing plans as a key cost-reduction strategy. The fact that China represents a low cost r&d environment is a major driver in this trend. China has a plethora of scientific and technical manpower, and the wage rates of chemists and researchers are 60-70% lower than the costs of similarly experienced staff in the West.
But while short-term cost reduction is a key driver, quality issues are perceived as a major barrier. The State is legislating heavily in the area of compliance, and has instigated rigorous GMP regulations to ensure that Chinese pharmaceutical companies can compete with as well as ally themselves to established Western manufacturers.
In the area of IP rights and protection, large-scale and sweeping actions have been taken to reassure the international marketplace of the ro-bustness of Chinese IP regulations. WTO membership has forced China to tackle compliance and IP issues head-on, and transparency and the strengthening of commercial legal procedures have continued apace.
Perhaps the greatest barrier to trade with China at the moment is language. Despite the fact that the central Chinese government is aware of this and is endeavouring to simplify the language to make it easier for business communication to take place, this will be a long-term undertaking. In the short term, initial sorties into the marketplace through events and at venues that are geared to international visitors will save a lot of wasted time and energy.
Trade shows provide a window on the health and vibrancy of a marketplace. The API China exhibition in Chengdu earlier this year, while predominantly made up of Chinese exhibitors and attendees, also provided an important forum for international visitors. More than 35,000 attendees came to API China from 38 different countries to make contact with some 1,200 exhibitors.
The latest API China is taking place in Qingdao in Shandong Province from 15-17 November 2006.
The shows are organised and managed by Reed Sinopharm Exhibitions, a joint venture company forged between Reed Exhibitions and the China National Pharmaceutical Group Corporation (Sinopharm). The organisers have recently ramped up efforts to increase the number of international visitors, particularly from India, US, EU, Japan, Korea and the ASEAN economies such as Indonesia.
The future for the West in relation to China is one of alliances, says Reed Sinopharm. The dynamics of the Chinese pharmaceutical industry and its hunger for overseas business and alliances, mean that attendance at API China has rewards potentially beyond all expectations, the organiser says.