At a glance: The National Development and Reform Commission (NDRC) and MIIT released an implementation plan for the active pharmaceutical ingredient (API) industry. Targets for 2025 include:
- Develop high value-added and high-growth APIs
- Foster several internationally competitive API companies
- Cultivate new advantages in international competition, for instance by increasing the scale and concentration of production
- Enhance the resilience of China’s API supply chain system
Attached to the policy are examples of specific technologies, including advanced manufacturing technology, to promote industrial upgrading and innovation.
MERICS comment: China’s leading position in the production of many APIs is at risk. India, the United States and the EU have initiated supply chain reviews and, to varying degrees, proposed diversifying their API supply chains away from China. This is not only related to the Covid-19 pandemic, but also part of a bigger trend to strengthen resilience and industrial production in these economies. To make Chinese API suppliers more attractive and cement their position in the global pharmaceutical supply chain, China intends to cultivate new advantages. For instance, by improving production efficiency through increasing economies of scale and improving production technologies.
But that’s not all. So far China has primarily produced low-value, generic APIs. To cater to the increasing global demand for advanced medicines, which will only rise as China’s own population ages, and to strengthen China’s own supply chain security of pharmaceuticals, the government plans to establish production centers for high-end APIs.
The plan offers an opportunity for certain European firms. To attract high value-added production of APIs and related high-tech equipment, China may roll out the “red-carpet”. Companies engaged in the production of high-end APIs and equipment could benefit from streamlined approval processes and licenses to set up wholly foreign-owned entities. However, it also means that European firms that are unable or unwilling to produce in China will face more competition from Chinese firms that move up the value chain.
Policy name: Implementation Plan to Promote the High-Quality Development of the API Industry (关于推动原料药产业高质量发展实施方案的通知)(Link)
Issuing bodies: NDRC, MIIT
Date: November 9, 2021