At this year’s BioCentury China Healthcare Summit in Shanghai last month, nine trends were highlighted within the country’s health care sector: economic reform; CFDA reform; accelerated pricing and access reform; restructuring of the generic drugs industry; a shift towards tiered diagnostics and treatment; a push for localization; the acceleration of private health care; the emergence of more innovative business models; and future outbound health care deals. Chinese companies have lower profit margins in the pharmaceuticals, semiconductors, communications equipment and automobile industries compared to global contemporaries.

In 2013, three out of China’s eight engineering-based industries were above the country’s share of global GDP, while nine out of the country’s twelve efficiency-based industries were above China’s share of global GDP. However, there is a major discrepancy in China’s science-based industries, of which zero out of the four industries (branded pharmaceuticals, specialty chemicals, semiconductor design and biotechnology) performed above the country’s global share of GDP.

M&A in China are also increasing, with the volume of M&A peaking in the fourth quarter of 2015. Though M&A has decreased in 2016, it is still at a record high for the country, especially in regards to outbound M&A, which grew almost eight times the amount of inbound M&A. This was largely due to ChemChina’s acquisition of Sygenta for $43 billion. In 2016, the total value of outbound M&A in the health care industry was $8.5 billion. Chinese health care innovation has been increasing throughout 2016, with 2015’s CFDA reform raising aspirations that regulatory processes will be accelerated, allowing for more scientific advancements and an improved quality of prescription drugs. The majority of industry experts are hopeful that the “well-designed” CFDA reform will actually be implemented.

Source: McKinsey Global Institute

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