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China Offers Tremendous Market Opportunity: CII Surveys
On the occasion of the visit of the Hon'ble Prime Minister of India to China, CII conducted a series of survey reports on knowledge based industries, including IT, Biotech and Drugs and Pharmaceuticals. These surveys were prepared with the objective to understand the Chinese market better & to identify opportunities for Indian Industry in China.
The CII IT Survey lists several reasons for Indian software and IT firms to look east; Incentives for investment include significant reduction in national and local taxes, land rentals and import and export duties among others. The clearance processes of government departments such as customs are streamlined and generally efficient.
Further, the small and medium enterprise sector has immense potential - SMEs account for 30 percent of the total IT market in China, with IT products and application consumption in SMEs expected to touch $12 billion in 2003 (up 23 percent from 2001), and $27 billion in 2006.
According to the CII survey on Drugs & Pharmaceuticals, China is expected to emerge as the fifth-largest pharmaceutical market in the world by 2010, with revenues of over $24 billion-more than triple its current size. Such growth would catapult China's market, which currently ranks seventh behind the markets of Italy and the United Kingdom, to a position right behind the drug markets of France and Germany. Driving this growth are China's ongoing economic development and its recent entry into the World Trade Organization (WTO).
The most promising opportunities will emerge in the areas of greatest unmet need: innovative ethical, or prescription, drugs and differentiated over-the-counter (OTC) products. The market for ethical drugs in China, valued at $5.8 billion in 2000, and will climb to approximately $19 billion by 2010.
Best positioned to fill these needs are Indian Multinationals with superior R&D capabilities as well as scale and experience in marketing, distribution, and sales. According to CII, Indian companies must move forward more aggressively as changing regulations and economics open the window of opportunity. That means better anticipating the needs of the market as it evolves in order to build true local capabilities as well as relationships with regulators and distributors.
The CII Survey on BioTechnology suggests the market demand for biotech reagents required by Chinese institutes engaged in lifescience research provide a good example of development opportunities. The government's devotion to developing life science research guarantees a long-term, growing demand for reagents. The five most promising categories in China's reagent industry are immuno-blotting, Sanger sequencing, in situ hybridization, chromosome mapping, and bacteriophage plaque. These categories boasted sales of about $2.2 million in 2002.
The three main strategies for Indian biotech companies to enter China's marketplace are exporting, licensing, and setting up a wholly foreign-owned enterprise (WFOE) or joint venture.
According to CII, time is of the essence in penetrating China's market. Indian companies should enter China's market as soon as possible to best take advantage of China's exponential economic growth. Delayed entrance will be difficult and costly. The bottom line is that China is a highly complex but profitable economy for companies operating in knowledge based sectors, and the best time to enter China is now.
Coinciding with the Prime Minister's upcoming visit to China, Mr. Anand Mahindra, President, CII is leading a 30 member strong, CEOs business delegation to Beijing and Shanghai. Buoyed by the interest displayed with a number of
initiatives by the Government of India to broaden ties with China, the Confederation of Indian Industry (CII) has decided to strengthen it efforts to promote economic and commercial cooperation with China through a focussed five point agenda. The agenda includes the launch of a comprehensive website on India-China trade and investment relations, launch of an "India Club" in Shanghai, development of a India China Joint CEOs forum, and hosting of a "Hi-Tech" Show and "Made in India" Show in Beijing in October later this year. CII is developing a strong East Asia office in China that will serve the India and China business communities to strengthen economic relations.
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