Chinese manufacturers will face stiff competition
When China opens its tightly controlled drugs market to foreign companies in 2003 as required by its WTO commitments, many domestic competitors will face strong competition. According to local newspaper, very efficient overseas firms will be allowed into wholesale and retail pharmaceutical markets without capital or geographical restrictions after two years of joint venture trials in key cities including Beijing, Shanghai and Guangzhou. A source in the State Economic and Trade Commission (SETC) said negotiations for foreign retailers to set up joint ventures in Beijing and Shanghai have been under way for several years.
Current regulations require non-wholesale foreign medicine retailers to have annual sales of at least US$2bn (€2.26bn) for three consecutive years and total assets exceeding US$200m (€226bn) to set up local joint ventures. The regulations, drafted by the SETC and the Ministry of Foreign Trade and Economic Cooperation, require domestic partners to have sales of yuan 50m (US$6m) for three consecutive years and assets of yuan 300m (US$36m).
If the domestic partner is a foreign trade enterprise, its annual trade volume must exceed US$50m (€56.5m) for three consecutive years, including a minimum of US$30m (€34m) of goods exported. China has kept a tight grip on the sector with chain pharmacies appearing only in the past five years.
Yu Mingde, deputy director of the Economic Operation Department of the SETC, said: 'Opening up the market will inspire domestic pharmaceutical distributors to speed up business expansion efforts and strengthen foreign counterparts' confidence.'
However, Zhang Zhengrong, general manager of Jinxiang Pharmaceutics Shop, a chain pharmacy with more than 60 branches, believed that the challenges posed by market liberalisation outweighed the opportunities. Domestic drug vendors' main weaknesses were their small scale, amateur management and poor service, he said. Jinxiang's sales volume this year was estimated at yuan 200m (US$24m), equivalent to that of a small US drug retailer.