Chinese demand for pharmaceuticals has knock-on effect on European stocks
The Chinese middle class is growing and with it the consumption of pharmaceuticals. European pharmaceuticals are benefiting from the increasing demand.
As a growing number of the 1.3 billion Chinese have money to spend, their demand for pharmaceuticals and an efficient health-care system also rises.
Over recent years, China has made a giant leap up the list of the world's largest pharmaceutical markets – and is now surpassed only by the USA and Japan.Claus Johansen of Danske Capital, adviser to Danske Invest on investment in European stocks, has visited China to take a closer look at the growing Chinese consumption of pharmaceuticals, offering a potential also for European pharmaceuticals.
"Demand for pharmaceuticals has risen faster than anyone had predicted. One reason is that a vast number of Chinese – also outside major cities – have some kind of job-related health insurance," says Claus Johansen.
Poised to become the world's largest pharmaceutical market
The Chinese middle class is expected to swell from 130 million people in 2010 to a staggering 340 million people by 2016. As the Chinese middle class is growing and an increasing number of Chinese people adopt a Western lifestyle, they become more prone to heart disease, blood clots and cancer.The growing elderly population will also place a burden on the Chinese health-care system.By 2020, almost one-fourth of the Chinese population will be over 65.
This leads Claus Johansen to expect that the demand for pharmaceuticals will continue to increase and he predicts that, five years from now, China will be the world's largest pharmaceutical market.But there is a limit to the sky.
"In the short term, China is an attractive market for European pharmaceuticals, but in the longer term China aspires to create an efficient pharmaceutical industry of its own and gradually claim a growing share of the pharmaceutical market."
Moved headquarters to China
Growth in the Chinese pharmaceutical market has inspired European pharmaceuticals to look east when drawing up their growth strategies. German pharmaceutical Bayer e.g. moved its headquarters for family medicine, e.g. diabetes and antibiotics, to China.
"Moving the headquarters from Germany to China is a huge cultural decision for Bayer.But China – and the rest of the world – is moving so quickly that the Management found that global decisions had to be made in China, not Germany," says Claus Johansen.
The relocation also sends the signal to the Chinese government that Bayer is taking China seriously as a business partner.
