About China: China's Economy
The growth of the Chinese economy over the past decade has been robust. This growth has been fueled by both export and domestic consumption.
The Chinese economy is growing at a much faster pace than the major developed economies and is also out-pacing the growth of other Asian markets as well. Figures 2 and 3.
During the first half of 2006 the Chinese GDP grew at just over 10% despite efforts to control money supply and to raise interest rates. Most observers expect that the economy in China will grow at 8-9% over the next decade. Although many of these projections are subject to local and national policy changes, Cinkate is particularly encouraged by the changes, particularly in pharmaceutical distribution and insurance practices, that are occurring now and are not likely to be reversed.
Because of its substantial economic growth, China has accumulated a sizable foreign currency reserve as well, as the data from International Monetary Fund show. Figure 4. In 2006 the foreign currency reserve grew to more than 800 billion USD. This flourishing growth of foreign currency reserves has helped in the modernization of China's improving state run health insurance program and other health and welfare issues.
While the national statistics on economic growth are impressive, they under-estimate the rates of growth in the coastal cities of eastern China, of which Shanghai is the most striking example. This growth is reflected in the growing trade surplus with the US. The surplus tripled last year to 102 billion dollars and this year is expected to reach 150 billion or more. The inevitable pressure by the US to accelerate the re-valuation of the Yuan is not expected to impact significantly the pharmaceutical markets.
This economic growth is not uniform across China, as the coastal cities have grown at 2-3 fold the rates of the country as a whole. The graph below shows the considerable differences in economic development across China. Figure 6. Approximately 75% of pharmaceutical sales occur in the coastal cities.
Regional Per Capita GDP in 2002
Chinese Economic Future
China’s explosive growth over the past decade has seen dramatic changes in its consumption of various commodities, and these have had major impact on world prices. The graph below illustrates the major impact on the increased consumption of commodities that has come from China in the past decade.
Commodities: China’s Share of Increase 1998- 2003
The economy in China is expected to grow at a rate of 8-9% annually for the next fifteen years and will quadruple its current GDP by 2020. The Chinese GDP will surpass Great Britain by 2010. A report from the Mackinsey and Company has estimated that the 150,000,000 people currently comprising the Chinese middle class (net worth above $90,000) will reach 500,000,000 by then and the disposable income of this group is expected to exceed 1.5 trillion USD.
The pharmaceutical market in China is expected to parallel this growth. While China will be a market for modern medical care, there will be distinct differences from the economic systems of health delivery, pharmaceutical pricing and health care financing that exist in the US. The ability to anticipate and successfully meet these challenges will separate the winners from the also rans.
The events of the past 12 years since Cinkate first entered China, support most of our expectations. The pharmaceutical industry growth has so far paralleled this growth and the respect for pharmaceutical IP is ahead of most predictions. Although the domestic pharmaceutical industry is still in its early phases of development, the total spent of healthcare is growing at a pace of more than 20%.
Chinese Economic Factoids
- China now uses one-fourth of the world's steel products
- The Chinese Government is making greater efforts to quadruple its GDP, to US$4 trillion, by 2020. (Would be world's third largest economy)
- Chinese mobile phone users sent 217.76 billion short messages in 2004, up 58.8 per cent from the previous year.