China Healthcare Sector:Comment on 2016medicinehealth product import and export figures

Medicine/health product imports and exports rose 0.73% YoY

    According to the China Chamber of Commerce for Import & Export of Medicines andHealth Products, China's medicine/health product imports and exports stood atUS$103.4bn in 2016, up 0.73% YoY; exports fell 1.82% YoY to US$55.4bn, whileimports rose 3.83% YoY to US$48bn. Excluding the effects of the exchange rate,imports and exports jumped 7.12% in RMB terms, with exports/imports up4.41%/10.42%. Overall imports and exports showed steady growth.

    TCM raw materials/decoction pieces suffered biggest fall

    Imports and exports of TCM raw materials/decoction pieces were US$1.164bn, down4.85% YoY; imports were US$139m (-15.84% YoY) and exports were US$1.025bn(-3.13% YoY). TCM raw materials/decoction pieces suffered the biggest fall among allmedicines. We attribute their sluggish imports/exports mainly to the following: 1) somecompanies' TCM raw materials are substandard and industry standardization has justbegun; and 2) due to the uniqueness of TCM, barriers to entry are high in places suchas EU.

    Medical equipment export mix improving

    Medical equipment imports and exports grew 1.10% YoY to US$38.9bn in 2016;imports/exports were up/down 6.28%/3.14% YoY, at US$18.4bn/20.5bn. Looking atthe mix of medical equipment imports and exports, the proportion of traditionalmedical dressings is falling, while that of higher-value hospital diagnosis/treatment andhealthcare/rehabilitation equipment is rising.

    Optimistic about preparation exporters

    Preparations have a higher value compared with APIs (low gross and net margins).

    More and more companies are shifting from API intermediate to preparation exportsand preparation-exporting countries are shifting to developed nations. We areoptimistic about preparation exporters with an improved export mix and companiesexpanding distribution channels overseas, such as Huahai Pharmaceutical.