On January 1, 2003, China’s retail pharmaceutical market will be open to foreign competition for the first time since the establishment of the People’s Republic of China. Previously, foreign medical retail companies were only able to do business in China through joint ventures. As a result of WTO entry, these restrictions will be lifted and foreign companies will be able to compete in the Chinese market beginning early next year.
Presently, domestic pharmaceutical companies are gearing up to prepare themselves for the increased and formidable competition from abroad. Recent statistics show that China has 196 pharmaceutical enterprises with retail chain stores with annuals sales of approximately RMB 8 billion (US$967 million). Domestic drugstores are far from being able to compete with their foreign counterparts on equal footing. Unlike foreign drugstore chains, local companies do not have adequate IT or management skills. These inadequacies will serve as a huge disadvantage once restrictions are lifted next year. Experts predict that in the not too distant future, foreign and joint venture companies will grab a significant portion of the market share while domestic companies will hold on to approximately 15% of retail pharmaceutical sales.
However, a number of domestic companies are increasing their investments in chain stores and are planning to open stores prior to January 2003 in order to prepare themselves for greater competition. Sanjiu Enterprise Group, one of China’s largest pharmaceutical companies, is planning to open between 8,000-10,000 stores, spending about RMB 1.3 billion (US$157 million).