For the most part, up until recently, only foreign medical companies that manufactured medical products in China could set up their own sales office and distribution scheme in China. However, after joining the WTO in December 2001, China agreed to open up the direct sales market for foreign companies and to implement regulatory guidelines. The State Council disclosed two new direct selling regulations on August 23, 2005.
First, foreign companies will now be able to establish operations in China without having to manufacture in China. The new regulations will enable direct sales companies to sell the products of their parent companies and/or receive overseas trade and distribution rights from third party drug and device manufacturers. Although this change will open up medical distribution in China, the requirements to establish direct selling operations are still evolving and can be difficult to meet.
Second, foreign investors who are interested in setting up distribution in China are now required to have strong business credibility, a minimum of three years’ experience in direct selling overseas, and meet all other necessary requirements of the Ministry of Commerce (i.e. establish an information filing and disclosure system, must have at least US$9.9 million of registered capital). If these criteria are met, the Ministry of Commerce will issue a direct selling license three months (at least in theory) after consulting with the State Administration of Industry and Commerce.
The direct selling rules went into effect from December 1, 2005 and the Ministry of Commerce began to accept applications for direct selling licenses from December 10, 2005. There are currently about five to ten new foreign medical distributors who have set up operations in China under this new law.