Analysis to Impacts of the International Financial Crisis on the Foreign Trade of Medicines in China    

China Chamber of Commerce for Import & Export of Medicines & Health Products has recently published a report, stating that the exports of some medicines in China will maintain a growth.
   There are yet no signs showing that the international financial crisis has already touched the bottom. Its impacts on the global medicine sector are still going on. They are mainly manifested in various aspects such as downsizing of enterprises, degrading of salaries and drastic reduction of jobs. To reduce cost and increase productivity, multinational medicine enterprises have cut down expenditures, reformed internal organizations, readjusted R&D focuses and postponed new projects. At the same time they have increased sales in emerging markets such as Asia to seek new shares in market and offset negative impacts from the financial crisis.
   As a matter of fact, multinational medicine enterprises started to implement large-scale downsizing plans from 2002. In the previous two years they already dismissed several thousand employees worldwide. The outbreak of the financial crisis urged multinational medicine enterprises such as Pfizer, Merck, Schering-Plough and Glaxo to quicken their steps in the action. To multinational medicine enterprises, in addition to the severe situation of the financial crisis, they have also to tackle various difficulties such as lack of new patent medicines, expiry of patents for high-profit medicines and challenges from imitation-geared enterprises. To most medium and small biomedicine enterprises, they have even more difficulties from venture capital organizations and other financial organizations to financing and can hardly carry on clinical tests and new product developments. Such a status will last for a considerable period of time and constrain the development of the entire biomedicine market.
   Given the hard situation, medicine enterprises have to conduct a new round regroup, merge and acquisition among themselves. Multinational enterprises will cut R&D input and find more difficulties in financing. The combination and binding of different value chains will be made and new commercial coordination will be conducted between enterprises so as to get more market shares for products in demand. Commercial modes in the mainstream medicine market will therefore likely have changes. To reduce cost, medicine enterprises in European and American countries will outsource more businesses to enterprises in Asian countries such as China and India and further shift their business focuses. Given the growth slowdown of import/export for the entire medicine sector in 2009, it is expected that China's foreign trade of medicines will likely have the following trend in 2010:
   First of all, in spite of the adverse situation globally, the positive growth of medicines imports and exports in China can hopefully be maintained. Both imports and exports of medicines in China have kept a double-digit growth in recent years. The export has maintained a high growth between 25% and 30%, already in the fast track. By products, it is expected that China will maintain advantages in exporting traditional large-volume chemical APIs and the exports of antibiotics, vitamins, analgesic-antipyretics and amino acids, in particular, will continue to increase. It is because in the production of these APIs China has already acquired remarkable advantages in conditions, technologies and cost and will find no strong competitors in the international market in a short term. Moreover, the market demand for most APIs as basic raw materials for downstream food and drug formulations sectors is also relatively stable. Even if a price drop happens, there is not much doubt for large-volume APIs to maintain the present export level.
   Secondly, the medicine imports for China will hopefully have an increase. New policies for the reform to the medical and healthcare system will help enlarge the domestic demand. The import amount of large quantities of key medical equipment and technologies, as well as high-quality low-price drugs and biochemical medicines, will therefore surely go up. Furthermore, due to the depreciation of U. S. Dollar, Euro and Pound Sterling and the price drop of energies and large-volume raw materials in the international market, many foreign enterprises will likely be eager to export more products and technologies to China at a reduced price so as to quickly recover cash and ensure their basic operations. Chinese medicine enterprises can make use of this opportunity to expand the import of medicines and help to increase their own productivity and R&D level.
   Thirdly, trade conflicts in the medicine sector will be aggravated. RMB is still faced with the pressure of appreciation. A new-round appreciation likely to happen will result in pressure in the export of China-made products. Moreover, quite a few emerging economies have also suffered impacts from the financial crisis. To safeguard their own enterprises, these emerging economies will put restrictions on China-made products. Trade friction cases between China and emerging economies will likely more up. The recent increase of related antidumping cases launched by Brazil, Indonesia, Russia and India to China can serve as evidence.