The pharmaceutical industry in China enjoyed a phenomenal growth at a compound annual growth rate of 21.1% during the period of 2004-2008. According to Datamonitor (2008a), the market size was US$20.7 billion in 2008, and is projected to reach US$24 billion by 2010, positioning China as the fifth largest pharmaceutical market in the world. Traditional Chinese medicines and generic drugs dominate the market. Traditional Chinese medicines account for 60% of the market value. Among 6,000 domestic manufacturers, 70% of them produce generic drugs.
The largest players in the market are Jiangsu Yangze River Pharmaceutical Group, AstraZeneca PLC and Pfizer Inc., capturing a total of 10% of the Chinese pharmaceutical market. The State Food and Drug Administration (SFDA) is the regulatory body of the safe production and use of the drugs in China, and has the sole authority to grant market approval for drugs. In recent years, SFDA started to tighten up the regulatory regime, such as the introduction of the Good Manufacturing Practice to approve and audit pharmaceutical manufacturers.
The medical devices (or equipment) industry is developing rapidly. According to Datamonitor (2008b), the market value was US$16.1 billion in 2007, with a compound annual growth rate of 13.6% for the period of 2003-2007 (compared with US$16.7billion at an annual growth rate of 0.1% for the Japanese market and US$5.3billion at an annual growth rate of 8.8% for the Indian market). The market is polarised: a large number of domestic manufacturers compete on the low-end product market, whilst 90% of the high-end product market is dominated by foreign companies, such as GE, Siemens, Philips, Shimadzu and Toshiba. GE alone captures 50-60% of the high-end product market in China.
Medical devices are categorised by SFDA into three classes:
The authority to grant market approval for Class I and II medical devices manufactured in China is vested in provincial-level Food and Drug Administration (FDA), while Class III lies in the state-level SFDA. Imported medical devices are also governed by the General Administration of Quality Supervision, Inspection and Quarantine of P. R. China. Overall, the regulatory regime for medical devices lags behind that for drugs.
The information technology industry has experienced extraordinary growth since the 1990s. Based on the China Statistics Year Book (2001), the market size was US$10.21 billion in 2005, with a total of over 8,800 companies employing 50.5 million people in the industry. There are several key sectors in the industry: personal computers, computer hardware, software, networking equipment and Internet access services. According to Datamonitor (2008c) each sector shows substantial differences in terms of market segmentation, regional and global competitive pressure, and distribution networks. Consumer awareness of brand is improving, though price competition remains critical to most companies.
Many multinational corporations operating in the industry have expanded their businesses in China. Recent years have seen that multinational corporations relocate their research and development function to China or set up a regional development centre. Collaboration in research and development and innovation projects between multinational corporations and large domestic companies has also appeared on the horizon. Microsoft’s alliance with Inspur to set up software development centres is an example of this type of collaboration.
The Chinese government exerts substantial influence on shaping the landscape of the telecommunication market, and heavy-handed state involvement and non-transparency characterise the industry. The telecommunication industry includes several key sectors: fixed-line communication equipments manufacturers, mobile phone manufacturers, and telecommunication service providers. The service provider sector is largely dominated by four state-owned enterprises: China Telecom and China Netcom in the fixed-line business, China Mobile and China Unicom in the mobile service sector. Two collectively owned companies, China Tietong and China Satcom, joined the market in the late 1990s, but their market share is much smaller.
The mobile communication equipment sector has witnessed the dominance of multinational corporations. The key mobile phone manufacturers are primarily joint ventures or subsidiaries of European and North American companies, such as Nokia, Sony-Ericsson and Motorola. Japanese manufacturers, such as NEC, Panasonic and Mitsubishi Electronics, used to occupy some market share, but were forced to withdraw from the market due to severe competition from the rising local manufacturers. The Chinese manufacturers, led by Huawei Technologies and ZTC Telecommunications, have gradually gained a strong foothold, and some have turned to South American, Southeast Asian and African countries for business expansion.