China has been an increasingly appealing market for Western pharmaceutical firms in recent years, but the recent decrease in growth may burn those that have invested too heavily.
The Chinese economy looks set to miss the 5% government growth target for this year, and weak consumer spending in the region has been mentioned by a number of healthcare companies as a key factor in their negative outlooks.
Among them are biotechnology company Illumina and healthcare giant Thermo Fisher Scientific. Both reduced their yearly growth outlooks to around 1% down from 7-10% and 4-6% respectively, citing China as one of the major reasons.
Though this volatility has cost them recently, the benefits of the market are obvious: a large and increasingly well-off population, a relatively low cost for clinical trials and plenty of land to build factories and offices. Until recently, China was also seen as an extremely stable market, with high and steady growth over the last 50 years.
However, there were clear challenges even before this downturn. Many companies face a language and culture barrier to entering the market, as well as competing with a large number of established domestic firms. An investigation last year revealed that 75% of clinical trials conducted in China – a requirement to sell in the Chinese market – were by domestic firms without foreign involvement.
The good news is that these deterrents seem likely to be temporary, and Western firms are continuing to invest in the region on this assumption. Californian company ABVC BioPharma has invested $7.4m into land in Chengdu on which it will build a base of operations and a GlobalData report from June reveals that a number of international firms are outsourcing their drug production to the country.
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