Global Insight Perspective | |
Significance | China's NDRC has revealed that the production value of China's pharmaceuticals industry soared by 25.87% y/y to 507.38 billion (US$68.4 billion) in the first 10 months of the year. |
Implications | The main production bases are in the northern province of Shandong and in the eastern provinces of Jiangsu and Zhejiang. Meanwhile, production for domestic use is outpacing production for exports, which rose by 19.16% to 51.18 billion yuan over the 10-month period. |
Outlook | NDRC's latest statistics paint an even rosier picture than other recently released statistics, which have estimated sales growth of a little under 20%. However, doubts over intellectual property protection continue to deter foreign investors. |
According to NDRC statistics, which were reported in Interfax, the most productive region was the northern province of Shandong, with a pharmaceutical production value of 72.67 billion yuan (US$9.8 billion) in the year to October. The eastern provinces of Jiangsu and Zhejiang also featured strongly, generating respective production values of 52.04 billion yuan and 46.02 billion yuan.
In terms of growth, the leading region was the north-eastern province of Liaoning, whose pharmaceutical production value shot up by 39.66% y/y. The other most dynamic regions were the Inner Mongolia Autonomous Region (+39.62%) and the central province of Henan (+37.69%).
The NDRC statistics also broke down pharmaceutical production values for China's various municipalities. The leading municipality was Shanghai, whose production grew by 12.8% y/y to reach 21.68 billion yuan. In second place was Beijing, whose production soared by 28.81% y/y to reach 15.58 billion yuan.
Exports Rose by Over 19%
China's pharmaceutical exports also performed strongly, with their value increasing by 19.16% y/y to reach 51.18 billion yuan. The main production base was Zhejiang, which generated exports worth as much as 14.28 billion yuan. This was followed by Shandong (6.91 billion yuan) and Jiangsu (5.61 billion yuan). Meanwhile, in terms of exports growth, the leading regions were north-western China's Xinjiang Autonomous Region and north-eastern China's Heilongjiang Province, both of which saw their pharmaceuticals export value double in size.
But Investment in Healthcare Industry Falls Short of Targets
According to a separate set of figures published by the National Bureau of Statistics (NBS), investments that were pledged in the pharmaceutical manufacturing industry totalled 173.07 billion yuan in the nine months from January to September, although the actual investment over the period amounted to just 57.65 billion yuan. Looking at the constituent parts of the industry: for the manufacture of chemical drugs, the pledged investment was 70.32 billion yuan, compared with an actual investment of 23.25 billion yuan; for the manufacture of finished traditional Chinese medicines (TCM), pledges of 33.33 billion yuan compared with an investment of 9.77 billion yuan; and, for the manufacture of biological products, pledges of 33.04 billion yuan compared with an actual investment of 10.4 billion yuan.
Outlook and Implications
The NDRC's robust set of manufacturing production figures compare favourably with recent estimates of actual pharmaceutical sales growth in China, which have tended to hover just under the 20% mark. Meanwhile, the State Food and Drug Administration's (SFDA) Southern Medicine Economic Research Institute (SMERI) has forecast full-year growth of approximately 18% (see China: 27 November 2007: SMERI Forecasts Growth of 18% in China During 2008).
However, although investment in the industry has also seen increases well into double digits, a number of issues continue to deter investors. For foreign companies, principal concerns include a lack of confidence in intellectual property protection, while venture capital companies have also expressed concerns over exit strategies.