Life Sciences Sector Profile[1] - China

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May 2010 Produced by the Canadian Trade Commissioner Service

Table of Contents
Sector Overview o Subsectors Market Opportunities and Challenges o Opportunities o Challenges Key Government Agencies o Canadian Government Contacts in China Useful Internet Sites Key Events

1. Sector Overview

Population approaching 1.34 billion: large aging cohort Rising incomes and demand for quality health care Expanding public and private health care systems Strong support from the Chinese government Asias second largest market for medical devices Worlds 7th largest pharmaceutical market Highly competitive market - numerous foreign and domestic players Highly fragmented market - immature and regionalized distribution Complicated and unpredictable regulatory approval process IPR protection and enforcement still a concern

A growing population, with an insatiable demand for quality health services and healthy living, has led to the rapid development of Chinas life sciences industry. In 2008, the medical industry grew rapidly with total industry output (synthetic chemicals and drugs, prepared Chinese medicines, medical devices, apparatus and instruments, hygiene materials, packing materials, and pharmaceutical machinery) valued at CNY 866.68 billion ($126.7 billion USD[2], up 25.7%). Total sales were

valued at CNY 825.36 billion ($131.48 billion USD, up 26.5%).[3] Chinas overall industry imports and exports reached $48.69 billion USD, up 26.1%.[4] The majority of foreign imports came from the US, Germany, and Japan. The Chinese health care market is characterised as being highly competitive with numerous domestic players operating in the Life Sciences industry (over 12,000 medical device manufacturers and over 4,600 pharmaceutical manufacturers). Nonetheless, Chinas promising market continues to attract international attention and investments. The worlds top 20 pharmaceutical and medical device companies have all set up joint ventures or wholly owned facilities in China. In 2007, there were over 1,800 foreign-funded pharmaceutical enterprises operating in China. In addition, Multinationals have actively established R&D centers in China in order to benefit from lowered costs, large patient pools for clinical trials, and tax incentives. To date, Multinationals have invested approximately $500 million USD in establishing R&D centers in China.[5] For example, in February 2009, Bayer announced that it plans to invest EUR 100 million to build a global R&D center in Beijing.[6] In order to change Chinas image from The Worlds Factory to The Worlds R&D Center, the Chinese government has also put in place policies designed to foster innovation, such as building 15 national bio-industry bases, launching national programs to fund new drug innovations, and setting up a national alliance of medical device innovation. It also strongly supports bio-industry development in nine specific areas: vaccines and diagnostic kits, innovative drugs, Traditional Chinese Medicine, biomedical engineering, biotech breeding, green agriculture with biotech products, bio-energy, bio-based material, and organism manufacturing. Today, China has major life science industry clusters established in the Bohai economic rim, the Yangtze River Delta area, and the Pearl River Delta area. The combined output value and sales income of these three regions account for over 80% of the national total. Most of the manufacturing takes place in Southern China (e.g. Guangdong), while the R&D tends to happen in Northern and Eastern China (Beijing and Shanghai). Figure 1: Life Science Clusters in China

Map source: Bike Tours Shanghai Despite significant government effort, the market is still fraught with issues surrounding IP protection, product registration and testing, procurement and tendering, regulatory data protection, clinical trial application delays, counterfeit medicine, low economic returns, and reductions in drug prices. Furthermore, Chinas new health reform plan, which aims to provide universal healthcare to all Chinese residents by 2012, will bring mixed results to an already unpredictable industry. It is believed that government funding, CNY 850 billion ($124 billion USD) over the next three years, will benefit medical device suppliers overall, as it will be implemented by building and upgrading 2,000 county hospitals, 5,000 township clinics, and 3,700 community health centers in rural areas, and 11,000 community health stations in cities. However, the new essential drug list, logistics, and government tendering procedures will lead to the restructure and reorganization of the entire pharmaceutical industry, including the Traditional Chinese Medicine (TCM) sector. Industry consolidations are expected to increase in the future, especially with regard to multinational companies targeting the medium and low end markets. Top of Page

Subsectors
Bio/pharmaceuticals
In 2008, the bio/pharmaceutical industry in China produced CNY 690 billion ($100.88 billion USD) worth of products, an increase of 25.5% over the previous year.

At the same time, Chinas imports of bio/pharmaceutical products totalled more than CNY 75 billion ($11 billion USD; please see Table 1). Despite high growth rates, this market segment in China is characterized as being very fragmented, with over 4,600 producers of Active Pharmaceutical Ingredient and generic drugs, which produce an estimated 97% of drugs in China.[7] Figure 2: Sales in China's Pharmaceutical Industry 1998-2007

Source: National Development and Reform Commission, China Statistics Yearbook Table 1: 2008 China Pharmaceutical Imports and Exports Category Exports (Billions CNY ) Chemical API 120.06 29.59 89.7 2 Chemical Drug s Biopharm Total 6.16 133.81 39.67 30.66 4.61 100 5.28 75.56 42.71 18.1 6.99 100 7.59 41.8 5.67 27.16 40.11 35.94 % Increas e % Imports (Billions CNY ) 43.12 5.44 57.07 % Increas e %

Source: China Pharm Newspaper (Zhong Guo Yi Yao Bao) 2009-02-12 B2

Unlike other major markets, there are no clear market leaders in China. For example, in 2008, sales of the top 20 companies were valued at CNY 202.5 billion ($29.61 billion USD): approximately 43% of the overall market.[8] In addition, although most of the largest multinational drug companies are active and growing rapidly in China, their overall market share is quite modest. Table 2: Top 10 Foreign Pharmaceutical Companies in China (2006) Rank 1 2 3 4 5 6 7 8 9 10 Company Name Xian-Janssen (Johnson & Johnson) Country U.S. Revenue (Millions CNY) 3,214 2,500 1,837 1,186 1,596 1,240 1,236 1,205 1,145 984

Shanghai Roche Pharmaceutical Corp. Switzerland Astra Zeneca China Bayer Schering Pharma China Novo Nordisk China Pfizer China Bristol-Myers Squibb China SK&F Tianjin (GSK) Beijing Novartis Pharma Corp. Novozymes China Biotech Corp. U.K. Germany Denmark U.S. U.S. U.K. Switzerland Denmark

Source: China Economy Database Imitation is more prevalent than innovation in this segment of the market with the majority of domestic drug manufacturers producing generic drugs. However, examples of Chinese biopharmaceutical companies developing new innovative drugs are emerging. For example:

Iodine [1311] Tumour Necrosis Therapy Monoclonal Antibody Injection, produced by Shanghai Huachen Cancer Therapy Pharmaceutical Company, Ltd.: the first drug for treatment of primary liver cancer in the world.

Taixinsheng-Nituozhu monoclonal antibodies, produced by Baitai Biopharmaceutical Corp. Ltd.: the first human monoclonal antibodies drug approved in China.

Worlds first helicobacter pylori oral vaccine, developed by PLA 3rd Military Medical University jointly with Chongqing Kang Wei Biotechnology Ltd.

Top 20 Pharmaceutical Companies in China by Sales Value in 2008[9]

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. China National Pharmaceutical Group Corp. Shanghai Pharmaceutical Corp. Ltd. Jointown Pharmaceutical Group Co. Ltd. Nanjing Pharmaceutical Corp. Ltd. Guangzhou Pharmaceutical Corp. Ltd. Anhui Huayuan Pharmaceutical Corp. Ltd. BeijingPharmaceutical Corp. Ltd. Chongqing Pharmaceutical Corp. Ltd. Chongqing Tong Jun Ge Corp. Ltd. Sichuan Kelun Bio-Tech Pharmaceutical Co. Ltd. Harbin Pharmaceutical Group Holding Co. Ltd. Hangzhou Huadong Pharmaceutical Group Yunnan Pharmaceutical Corp. Ltd. Zhejiang Int'l Pharmaceutical Co. Ltd. Shijiazhuang Lerentang Medical Group Co. Ltd. CITIC Pharmaceutical Co. Ltd. Hebei Dongsheg Yinghua Pharmaceutical Co. Ltd. Shandong Haiwang Yinhe Pharmaceutical Co. Tianjin Pharmaceutical Holdings Pacific Co. Ltd. Tianjin Tasly Group Co. Ltd.

China Pharmaceutical Enterprise Management Association's Healthcare Executive magazine, Peking University's China Center for Pharmaceutical Economic Research, and Beijing-based H&J Vanguard Research and Consulting Co. Ltd analyzed 132 Chinese public pharmaceutical companies with annual sales exceeding CNY 100 million ($14.62 million USD) in 2008, which are either listed overseas or locally. Using this information, they jointly ranked what they deemed to be the top 20 most competitive public pharmaceutical companies. These top 20 companies have exhibited high growth rates in their main business revenues: over 80% of those on the list had growth averaging 20% year-over-year from 2006 to 2009. Eleven companies in the list generated at least CNY 2 billion ($292.40 million USD) in sales revenues in 2008.

Top 20 Most Competitive Pharmaceutical Companies in China in 2008[10]

1. 2. 3. 4. 5. Yunnan Baiyao Group Co. Ltd. Shanghai Fosun Pharmaceutical (Group) Co. Ltd. China National Pharmaceutical Group Corp. Shandong Dong-E E-Jiao Co. Ltd. Sanjiu Medical & Pharmaceutical Co. Ltd.

6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Tiantan Biological Products Co. Ltd. Simcere Pharmaceutical Group Shenzhen Accord Pharmaceutical Co. Ltd. Guangdong Kangmei Pharmaceutical Co. Ltd. Tianjin Tasly Group Co. Ltd. Jiangsu Hengrui Medicine Co. Ltd. Mindray Medical International Ltd. China Pharmaceutical Group Ltd. Zhejiang Int'l Pharmaceutical Co. Ltd. Beijing SL Pharmaceutical Co. Ltd. Beijing Double Crane Pharmaceutical Co. Ltd. Zhejiang NHU Co. Ltd. Zhuhai United Laboratories Co. Ltd. Zhejiang Medicine Co. Ltd. Sino Biopharmaceutical Ltd.

Medical Devices
The medical device market in China, the second largest in Asia, produced CNY 75.41 billion ($11.02 billion USD) worth of products in 2008. This is an increase of 31.4% over the previous year. Annual sales are currently CNY 73.43 billion ($10.74 billion USD), an increase of 31.3%.[11] Overall, the medical device market is forecast to increase by 84% between 2007 and 2012, reaching $28 billion USD by 2014.[12] The Chinese government has recently become more involved in regulatory activity, in order to increase standardization of quality and pricing across the industry. Most Chinese medical device companies are at the low end of the market, but some leading Chinese medical device manufacturers have put in great efforts in R&D to catch up with multinationals in high end medical device manufacturing, in particular PET, CT, and MRI. For example, several Chinese manufacturers have had their products approved by the USFDA, and export to the US and abroad: Beijing Wandong, Aeonmed (Beijing), Neusoft (Shenyang), and Mindary (Shenzhen). However, local capabilities in producing state-of-the-art medical devices are still lacking. Over 90% of high end medical devices (70% of Chinas medical device market) are imported, mainly from the US, Germany, and Japan. Imports from the US alone amounted to $1.5 billion USD. China's imported medical devices are primarily value-added hightech devices, such as medical x-ray equipment and color ultrasonic diagnostic apparatuses with higher value. These imports have continued to increase year over year. Table 3: 2008 China Medical Device Imports and Exports Category 2008 2008 % 2007 % 2006 % 2005 % 2004 %

(Billions CNY) Increase Increase Increase Increase Increase

Exports Imports Total

75.60 35.65 111.25

31.5 21.8 28.2

22.6 16.3 20.4

28.5 1.1 17.4

29 15.6 23.2

26.9 23.5 25.4

Source: China Pharm Newspaper (Zhong Guo Yi Yao Bao) 2009-02-72 A8 In an effort to increase standardization of quality and pricing across the industry, the Chinese government has started to take on a more active role concerning regulatory issues. The SFDA is now in the process of revising Regulations for the Supervision and Administration of Medical Devices. The revised draft regulation is said to lengthen the registration process of medical devices, and have more strict quality monitoring of domestic manufacturers. Although in the long term these actions may make Chineseproduced medical devices more competitive globally, pricing caps and implementation of Good Manufacturing Practice (GMP) rules may squeeze margins and put some businesses in danger of becoming unviable. In addition, in order to support medical device innovation, the Ministry of Science and Technology initiated a China Strategic Innovation Alliance of Medical Device Technology in June 2009. This alliance aims to integrate the R&D resources of manufacturers, research institutes, universities, and medical institutes, and to promote the innovation of key medical devices technologies in China. Figure 3: Current Consumption and Forecast for Medical Equipment through 2012 (Millions USD)

Source: BCC Research

Table 4: Top 10 Medical Device Companies by sales in China (2007) Rank Company Name Revenue (Millions CNY) 1 2 GE Hangwei Medical Systems Co. Ltd. Shangdong Zibo Shanchuan Medical Instrument Co. Ltd. 3 4 5 6 Shenzhen Mindray International Ltd. OMRON (Dalian) Co. Ltd. Knowles Electronics (Suzhou) Co. Ltd. Siemens HearingInstruments (Suzhou) Company Ltd. 7 8 9 10 Ceragem Siemens Shanghai Medical Equipment Ltd. GN ReSound Corporation Turumo (Hangzhou) Co. Ltd. 750 660 640 640 1,500 1,080 1,020 750 1,900 1,760

Source: China Pharma Newspaper (Zhong Guo Yi Yao Bao), A8, 2009/04/28

Traditional Chinese Medicine

The Traditional Chinese Medicine subsector accounts for approximately 40% of the total pharmaceutical market in China. Sales of TCM products are expected to exceed CAD $30 billion by 2010. Companies are required by law to follow GMP regulations to maintain product consistency; however, enforcement remains weak. According to PriceWaterhouseCoopers, less than one third of TCM manufacturers have been able to meet the most recent mandatory changes to the guidelines. A new R&D trend in China deals with the extraction of active compounds from groups of Chinese herbal medicines according to conventional TCM pharmacology. The functionality and safety of these compounds is determined through scientific pharmacological and clinical trials. One example is research on Weinaokang (WNK) extracted from three Chinese herbs for vascular dementia (VaD) under Sino-Australian collaboration. Table 5: 2008 China TCM Imports and Exports Category Exports 2008 (Billions USD) 8.94 2008 % Increase 10.94

Imports Total Source: www.bioon.com

3.03 11.97

24.46 14.08

Contracting Organizations (CROs & CMOs)

Chinas contract research and contract manufacture organizations offer R&D and production outsourcing at very competitive prices. Chinas ever-improving reputation for biotech capabilities, in conjunction with its well-equipped science parks and favourable government policies, have led such organizations to become very attractive to foreign companies, especially those who are unable or unwilling to make large capital investments to set up their own facilities. A market survey by JTMed Inc. indicates there are 250 professional service providers, 50 multinational service providers, 150 traditional Chinese pharmaceutical companies, and 20 Chinese biotechnology companies operating in this industry. Shanghai and Beijing, two main clusters of CROs and CMOs, have set up Alliances to assist with sector development. Domestic CROs such as Wuxi AppTech, Sundia Meditech, HD BioSciences, Pharmaron have become well-known for providing high quality services to many of the worlds leading multinationals. Most of their clients are foreign multinationals, since Chinese pharmaceutical companies are currently still far behind in their R&D investing. In August 2009, Wuxi AppTech announced they would invest $85 million USD to build a Good Laboratory Practices-following drug safety evaluation center in Suzhou, one which would become Asias largest. The rapid development of the CRO market in China has also been attracting more and more foreign players, such as Covance, MPI, and MDSPharm.

E-Health
According to the China Hospital Information Management Association (CHIMA), China is still in the early stages of E-health development and adoption. This is especially evident with respect to the unbalanced development from region to region, and in particular, urban to rural. Beijing, Shanghai, Guangdong, Fujian, and Jiangsu are the leading regions in E-Health development in China. Annual investment on E-health development is estimated to be between CNY 6-8 billion ($877.19 million to $1.17 billion USD) per year, and is expected to increase to CNY 10 billion ($1.46 billion USD) in 2009. With approximately 500 domestic and international vendors, competition is fierce. In addition to domestic giants such as Tianjian Meditech, Neusoft, DHC, Xian Huahai, multinationals such as Microsoft, CISCO, IBM, and Oracle, are all active in China. In addition to the most commonly adopted health information systems, other E-health

solutions such as PACS, PIS, RIS, LIS, PEIS, and CMS, are developing quickly. Electronic medical records (EMRs) are much more likely to be more widely adopted in China due to the governments support of health reform. The Chinese Ministry of Health recently released a draft EMR standard for public comment in order to improve consistency. The MOH is also drafting a few key policies such as the National Health Information System Plan (2009-2015), the China Regional Health Information Resource Planning Guideline, and the Regional Health Information Platform Basing on Health Record, to guide and better administer E-health development in China. Figure 4: Clinical Information Management Solutions Adoption Rate among Regions in China

Source: China Hospital Information Management Survey Report 2008/09 by CHIMA

Nutraceuticals
The nutraceutical (diet supplement) industry is growing quickly in China. According to the China Healthcare Association, annual sales are now estimated at US $6 billion. There are over 3,000 domestic manufacturers and 11,239 nutraceutical products (10,549 domestic and 690 imported) registered with the State Food and Drug Administration (SFDA) as of August 2009. This industry has great potential due to Chinas large and aging population, increasing awareness of healthy living, and the one child policy. However, as the industry is the early stages of development, there are issues regarding uncertain standards, an overly strict regulatory framework, a complicated and costly registration procedures, and fierce competition. There are also issues with false or exaggerated claims in advertisements. The Chinese government

has put great effort into improving regulations and streamlining management of this industry. In 2003, the management of the nutraceutical industry changed from the Ministry of Health to the SFDA to enhance oversight of the industry. However, SFDAs efforts to clear the market of unqualified manufacturers and products with false claims simultaneously made it extremely difficult for new companies to enter the market. The newly revised draft Regulation for the Supervision and Administration of Nutraceuticals may improve the situation. Currently, the US is the dominant import player in this industry, with a 53% share of the import market and 21% share of the overall market.[13] China exports nutraceuticals to 21 countries, with the US and Japan making up about 61% of the total exports in the first half of 2009. Chinese pharmaceutical and TCM manufacturers also provide OEM services to foreign and domestic nutraceutical brands. For example, Guangzhou Sirio Pharmaceutical Co. Ltd. ranked first in exports in first half of 2009. [14] Top of Page

2. Market Opportunities and Challenges

Opportunities
Life Science companies around the world are attracted to China, not only for its rapidly growing market and expanding customer base, but also to take advantage of its technologically advanced research facilities, government incentives and tax breaks, and relatively low cost of labour and material supplies. Certain types of research, such as studies involving stem cells or animal subjects, are subject to less stringent regulatory requirements than in other parts of the world. In particular, the Chinese governments policies toward health care reform and biotech incubators have helped stimulate investment and development in the Life Sciences industry. In this respect, a key trend has been the relocation of major multinational drug corporations R&D facilities to China and move from a made in China strategy to a developed in China approach. Chinas large and aging population offers a large market for life sciences products and services. Rapid economic growth, infrastructure development, extremely large purchasing power by the government, and rapidly increasing real wages of individuals bring potentially lucrative opportunities for Canadian companies wishing to do business in China, particularly with regard to:

Medical Device and Nutraceutical Exports

In 2008, there were 269,000 registered health facilities, including 19,712 hospitals totalling 4.036 million beds in China. There is a significant amount of medical equipment in China which has been identified as requiring upgrading or replacement. The need for upgrading in Tier I level hospitals offers great market potential for high end medical device suppliers. Foreign imported products are in demand by safety and quality-conscious customers. Canadian companies may wish to take advantage of opportunities in exporting high-end medical devices or niche technologies to China. The nutraceuticals market is also considered a promising and rapidly growing segment in China. Quality and safety conscious consumers are looking to foreign suppliers to meet the demand. Canadian companies could obtain market share through exporting high quality nutraceuticals to China, however, should bear in mind the heavy regulations surrounding the time-consuming and costly registration process.

Collaboration in Biopharmaceutical and Bioengineering R&D

Licensing of Technology to Chinese Companies
Due to the changing lifestyles of the Chinese, there has been an increase in diseases such as diabetes, obesity, eating disorders, hypertension, cerebrovascular disease, arthritis, and heart disease. In addition, respiratory disease has become a cause for concern due to environmental issues. The increasing incidence of these diseases has led to greater demand for medicines used in their prevention and treatment. Treatments for genetic diseases and vaccines for infectious diseases are also in great demand. The expansion of Chinas insurance system will continue to further increase the demand for pharmaceuticals. Bio-health is also identified as a priority under the Canada-China S&T Agreement signed in January 2007. There are opportunities for Canadian biopharm companies to collaborate with Chinese institutes and companies with joint government funds available on R&D. There are also opportunities for licensing niche technologies to Chinese pharmaceutical and biotech companies to commercialize and sell products in the Chinese market.

Providing Niche E-health Solutions to Developed Regions in China

Over the long term, as Chinas health care sector modernizes and the urban-rural divide is narrowed, there will be increasing opportunities for innovative e-health solution providers. In this respect, finding a good local partner will be essential to entering the Chinese market. The difference in health system management, hospital management, patient referrals, reimbursements, and clinical service practice would

make it difficult for an E-health solution, such as EMR, to adapt to the Chinese market without customization. The issues are far greater than just of language translation.

Providing Contracting Services to Chinese Companies Wishing to Internationalize

Outsourcing of R&D and Manufacturing to China
As Chinese companies start looking abroad, those pharmaceutical companies aiming to enter the North American market will start to look for partners that can provide CMO services, clinical trials, and R&D in North America. At the same time, China has mature CROs and CMOs which meet international GMP and GLP standards. Canadian companies may also consider outsourcing their R&D and manufacturing to China to reduce cost and enhance the overall competitiveness of its products.

Biotech Incubators
To date, 53 National Science and Technology Parks and 15 National Biotechnology Bases have been created to facilitate the commercialization of new products. Beijing is in the process of building Asias largest biotech incubator: the China Biotech Research Center. Universities partner with the government and private companies to share scientific knowledge and commercial know-how in order to expedite the process of bringing new products to the market. Through licensing new products, universities receive the funding necessary to conduct future research. Canadian companies may wish to take advantage of R&D partnership opportunities in these specialized facilities. Top of Page

Challenges
Companies should also be aware of a number of challenges present in Chinas Life Sciences sector. Fierce competition, especially due to the popularity of generics, has reduced profit margins. Fragmented sales and distribution capabilities make customer order fulfillment a challenge. Law-abiding companies may inadvertently be negatively affected by the actions of other companies involved with bribery and corruption. Intellectual property issues are of particular importance in this market due to the large amounts of capital investment required to develop each product. Major challenges can be summarized as follows:

Highly competitive market - numerous foreign and domestic players Highly fragmented market - immature, regionalized distribution IP protection issues, including enforcement Efficiency issues with regard to product registration and testing

 Lack of international brand recognition Uncertain regulatory environment characterized by frequent change Inconsistency regarding tender service fees, commissions, and government
procurement

Changes to taxes and import duties, i.e. cancellation of VAT exemption Counterfeit medicines Language (everything needs to be translated) Time necessary to nurture contacts and partnerships
Uncertainty with regard to the outcome of the governments health care reform plan may make companies hesitant to move forward with plans. Some companies that may presently have large contracts with hospitals may find their customer base vanish should their drug not be placed on the governments approved list. Alternately, the companies that are chosen for the contracts may find it difficult to operate within the pricing and logistic requirements set by the government, and may not be able to continue with further R&D activities. There are also some additional issues with regard to consistency and enforcement of regulations that remain of concern in the Life Sciences sector. Testing redundancies and registration backlogs reduce a companys competitive advantage, as other companies are inadvertently given additional time with which to bridge the technological gap. Depending on the class of product being registered, it can take 2-3 years to obtain the proper licenses for sale in China. The government has taken steps toward improving the consistency and training of its registration service providers, and increasing transparency and fairness in procurement practices. However, there are still concerns prevalent with regard to favourable treatment given to domestic products over imports in government procurement projects, as evidenced by the recent elimination of VAT exemptions on imported medical equipment for hospitals. The American Chamber of Commerce in China found that 80% of US companies rate Chinas intellectual property (IP) enforcement as less than effective. IP protection is of special importance in the Life Sciences field, due to the large amounts of R&D activities and international joint venture partnerships present in China. The Chinese government has recently taken a number of steps to enforce the rights of both domestic and international companies. Companies which place particular emphasis on brand value, corporate image, and goodwill may face additional challenges, as these criteria are not measured by GAAP or other international accounting standards, and thus their financial value may not be easily demonstrated. Furthermore, counterfeit drugs in particular not only bring numerous health issues, but also result in lost profits. The Chinese government has recognized the importance of strengthening the legal framework and enforcement of IP laws. For more information on IPR issues in China, please consult our separate report on recommendations for protecting your IPR.

Tariffs
China has reduced tariffs on medical products after joining the WTO, but they do still exist. A preliminary examination of duties show that tariff rates range from 0%-16%. The exact tariff rate will depend on the HS code that your products fall under.

HS 30 (pharmaceutical products): 0-10% (mostly 5-5%) HS 3822 (diagnostic/laboratory reagents): 4-16% (mostly 6.5%) HS 9018-9022 (medical devices): 0-15% (mostly 4%)
For more information on specific tariff rates for your product, please contact the Canadian Embassy in Beijing. Top of Page

3. Key Government Agencies

MOH: Ministry of Health o regulates Chinas healthcare system, approves and allocates quotas for
large equipment purchases (Category A), manages central purchasing of large equipment; supervises Chinese public hospitals, allocates funds to these hospitals on behalf of government, and supervises equipment in use.

SFDA: State Food and Drug Administration o under the MOH: oversees and regulates the research, production and
distribution of pharmaceuticals and medical devices, regulates cafeteria and restaurant food hygiene, health products and cosmetic industries, oversees registration of imported and domestic pharmaceuticals and medical devices

MOST: Ministry of Science and Technology o the source of all macro-level science policy initiatives involving basic
and applied research in China

directives involve the research and formulation of policies and measures to strengthen Chinas fundamental research, high-tech development, and industrialization and commercialization of new or adapted technologies

AQSIQ: Administration of Quality Supervision, Inspection and Quarantine o involved with establishing technical standards for import and export of
compulsory products. Are you a Canadian company in the Life Sciences field interested in China and Hong Kong? Our network of Trade Commissioners across China and Hong Kong can help.

Canadian Government Contacts in China

Embassy of Canada (Beijing) Dana Duan Email: Nan.Duan@international.gc.ca Consulate General of Canada in Shanghai Carrie Gu Email: Carrie.Gu@international.gc.ca Consulate General of Canada in Guangzhou Eric Song Email: Eric.Song@international.gc.ca Consulate of Canada in Chongqing Peter Liao Email: Peter.Liao@international.gc.ca Consulate General of Canada in Hong Kong Fatima Lai Email: Fatima.Lai@international.gc.ca Department of Foreign Affairs and International Trade Canada 125 Sussex Dr. Ottawa, ON K1A 0G2 Website: www.tradecommissioner.gc.ca Top of Page

Useful Internet Sites

Key Associations in China

China Association for Medical Devices Industry China Chamber of Commerce for Medical and Health Products Import and Export China Hospital Information Management Association China National Center for Biotechnology Development China Center for Pharmaceutical International Exchanges under SFDA China Health Care Association China Medical Biotech Association Chinese Pharmaceutical Association China Pharmaceutical Packing Association Chinese Academy of Sciences

Useful information

Database of Chinese Biotech Research Institutes and Companies (Chinese only) Checklist of Medical Device Classification by Jiang Su Provincial FDA (Chinese only) Recommendations for Protecting Your Intellectual Property Rights in China Top of Page

Key Events
Medical Devices
China Medical Equipment Fair (CMEF) Sino-Dental China Dental Exhibition International (CDEI) Hong Kong International Medical Device & Supplies Fair

Pharmaceuticals
China International Pharmaceutical Exhibition (CHINAPHARM) China Pharmaceutical Exhibition (PHARMCHINA) API CHINA - Semi-annual CPhI

Biotechnology
China Bio-Industry Forum International Conference for Bioeconomy (BIOECO) Bio-Forum Biotech-China

E-Health
China Hospital Information Management Network Conference

Nutraceuticals

 Healthplex Expo International Conference & Exhibition of the Modernization of Chinese Medicine
& Health Products (ICMCM)

International Congress & Exhibition on Nutrition, Fitness and Health

Investment and Finance

China Healthcare Industry Investment Summit 2009

Instrumental Analysis
The Beijing Conference and Exhibition on Instrumental Analysis (BCEIA)

First Aid
China International Emergency Medical Expo (CEME)

[1] The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information. [2] Exchange rates as per xe.com, 2009/09/10: $1 USD = $1.08 CAD, $1 CAD = CNY 5.82, $1 USD = CNY 6.84, 1 EUR = CNY 9.76. All figures have been kept in or converted to CNY and USD for ease of comparison. All figures are approximate and have been rounded. [3] China Pharma Newspaper (Zhong Guo Yi Yao Bao), B2, 2009/03/19 [4] China Pharma Newspaper (Zhong Guo Yi Yao Bao), A8, 2009/02/17 [5] www.bio-industry.org.cn/News_View.asp?NewsID=104 [6] www.bayer.com.cn/scripts/pages/en/index.php [7] news.pharmnet.com.cn/news/2009/08/14/276003.html [8] China Pharma Newspaper (Zhong Guo Yi Yao Bao), B2, 2009/08/03, author China Association of Pharmaceutical Commerce

[9] Rankings by China Association of Pharmaceutical Commerce, China Pharma Newspaper (Zhong Guo Yi Yao Bao), B2, 2009/08/03, author China Association of Pharmaceutical Commerce [10] Rank by the Industry report 2009, produced by China Pharmaceutical Enterprise Management Association's Healthcare Executive magazine, Peking University's China Center for Pharmaceutical Economic Research, and Beijing-based H&J Vanguard Research and Consulting Co. Ltd [11] China Medical Newspaper (Zhong Guo Yi Yao Bao), B2, 2009/03/19 [12] Estimate by Episcom [13] Chinas Nutraceutical Industry: Market Potential & Regulatory Environment, By Jeff Crowther, Chief Representative & Director, Natural Products AssociationChina [14] Analysis of Nutraceutical Import and Export of China in 2009, Huo Wei, China Chamber of Commerce for Import& Export of Medicines & Health Products