Forecast that the domestic pharmaceutical industry will continue to grow in 2009
The global economic environment, marked by the subprime mortgage crisis and international financial turbulence, has created uncertainty for the medical economy. Despite a significant improvement in the first half of the year, the outlook for the second half of 2008 and into 2009 remains unclear. Factors such as the global economic slowdown and shifts in domestic macroeconomic policies have made it increasingly difficult to predict the momentum of the pharmaceutical sector. In his report, Lin Jianning noted that if GDP growth in 2009 stays above 8%, pharmaceutical exports grow by at least 25%, and medical reforms are fully implemented, the industry could maintain its rapid growth. It is projected that the total industrial output of the seven key sub-sectors will surpass 10 trillion yuan in 2009.
This year has seen strong performance. According to data from the China Food and Drug Administration (SFDA) Southern Data Monitoring, from January to August 2008, the total output value of the pharmaceutical industry reached 529.664 billion yuan, representing a 28.48% increase compared to the same period in 2007. This growth rate was 4.28 percentage points higher than in 2007, though it slowed slightly from the 28.98% recorded in January to May.
Among the key sub-sectors, chemical raw materials (31.30%), biologics (30.34%), medical devices (31.99%), sanitary materials (38.37%), and traditional Chinese herbal medicines (34.16%) all outperformed the national average. However, the growth of chemical preparations and proprietary Chinese medicine remained below the overall average.
Profitability also improved. The national pharmaceutical industry’s sales profit margin reached 10%, up 0.74 percentage points from 2007 and 0.28 percentage points from January to May 2008. Only the proprietary Chinese medicine sector saw a decline in profit margins, while the other six sub-sectors experienced increases.
From a cost perspective, the national average cost ratio remained stable at 69.45% of total industrial product costs, similar to the same period in 2007. The proportion of sales costs dropped from 12.07% in 2007 to 11.77% in 2008, while the share of total profits increased by 0.92 percentage points. This suggests better cost control and room for profit expansion. Additionally, the accounts receivable turnover rate rose to 4.7 from 4.29, indicating improved liquidity across the industry.
Commercial sales remained robust in the first half of 2008. Total sales of the seven major categories of pharmaceutical products reached 183.9 billion yuan, up 14% year-on-year. Pharmaceutical sales alone hit 138.6 billion yuan, an increase of 13.86%. Sales of proprietary Chinese medicines grew by 13.55% to 30.6 billion yuan, while medical equipment sales rose by 3.06% to 2.5 billion yuan.
The three main market segments showed different trends. The hospital market continued to dominate, with greater concentration of products. The retail market expanded steadily, and product concentration in this segment also increased. Meanwhile, the rural market saw growth, although it accounted for around 14–15% of total sales. In 2007, the rural market reached 60.4 billion yuan, a 19.84% increase over the previous year.
Pharmaceutical listed companies also performed well. From January to June 2008, the sector generated 102.57 billion yuan in operating income, 9.175 billion yuan in operating profit, and 7.342 billion yuan in net profit—up 19.67%, 45.83%, and 44.56% respectively.
Import and export activities also improved. From January to July 2008, drug imports totaled $4.497 billion, up 40.79%, while pharmaceutical exports reached $841.19 billion, increasing by 44.27%. The export of raw material medicines maintained a strong upward trend, with chemical raw materials rising by 44.67% year-on-year. Although export volumes for some key products like penicillin and vitamin C remained stable or slightly declined, their average prices increased significantly, reflecting a shift toward higher-value exports.
Lin Jianning highlighted that the rise in raw material medicine export prices is worth noting. Factors such as stricter environmental regulations, rising labor costs due to the new Labor Contract Law, and currency appreciation have increased production costs. These pressures have led to slower profit growth in the chemical preparation and proprietary Chinese medicine sectors.
Looking ahead, Lin Jianning identified two main factors influencing the pharmaceutical economy in 2009: the promotion factor, including improved market standardization, new medical reform initiatives, and increased investment, and the uncertainty factor, such as slower macroeconomic growth and unstable export conditions.
He emphasized that as long as China's macroeconomic level does not suffer a sharp decline, the pharmaceutical industry is expected to continue growing. According to the "China Pharmaceutical Economic Analysis System" model, the total industrial output of the seven key sub-sectors is projected to exceed 10 trillion yuan in 2009, up 23.2% year-on-year. The chemical preparation industry is expected to reach 270 billion yuan, up 20%, while the proprietary Chinese medicine industry is forecasted to hit 200 billion yuan, a 17% increase.
Overall, the pharmaceutical economy is expected to maintain strong growth in 2009, driven by new medical reforms and market expansion, despite challenges in export and policy environments.
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