The Impact of Sino-US Trade Warfare on China's Biomedical Industry Exports

Medical Network September 19th, US Eastern Time on the afternoon of September 17, US President Trump announced the addition of 10% tariff on China's 200 billion products, effective September 24, since January 1, 2019, The tax rate will increase to 25%, the Sino-US trade war will continue to escalate, and the long-term trade war between the two countries will kick off. From the biopharmaceutical industry structure of China and the United States and the tax collection list of both sides, the trade war will produce biomedical exports to China. The actual impact is limited.

Since March 2018, the Sino-US trade war has intensified. The United States has issued a list of taxable goods totaling 250 billion U.S. dollars. With the implementation of China’s counter-measures, the Sino-US trade war has continued to escalate in the past six months. The biopharmaceutical industry structure and the taxation list of both sides show that the actual impact of trade wars on China's biomedical exports is limited.

Figure 1 China-US trade war process Source: Flint creation according to public information

First, the impact of Sino-US trade war on China's bio-pharmaceutical industry's exports has not yet appeared. The overall impact of increasing tariffs on China's bio-pharmaceutical industry's exports in the short term is limited. In the long run, the future of trade wars may constrain the development of China's high-end medical devices.

As can be seen from the Sino-US trade war process, on April 3, the United States issued a list of taxable Chinese goods exports totaling about 50 billion US dollars, covering the fields of specialty raw materials, biological products, preparations, medical devices, etc. Starting on July 6 Implementation of the trade list involving 3 billion US dollars of goods plus 25% tariffs, involving electronic diagnostic patient monitoring systems, ECG recorders, cardiac pacemakers and other 22 medical device products. From the first half of 2018 China's exports of bio-medicine to the United States In the first half of 2018, China's biomedical field exports to the United States amounted to about 635 million US dollars, basically the same as last year. It failed to reflect the trade war has a significant impact on China's biomedical products exports to the United States.

Figure 2 China's exports to the US in the first half of 2017-2018 (US$10,000)

Source: Flint Creation is based on customs data, and the statistical caliber is HS30.

In addition, according to the statistics of the Customs Department of the Ministry of Commerce, the volume of APIs, pharmaceutical preparations and medical devices exported to the United States in 2017 was US$3,912,58 billion, respectively, accounting for the total exports of APIs, pharmaceutical preparations and medical devices in China. 13%, 35%, 27%. Therefore, due to the small scale of exports to the United States, China's biomedical industry as a whole is limited by the Sino-US trade war.

Source: Flint Creation is organized according to customs data

In the long run, the United States launched a trade war aimed at the development of high-tech fields in China's 'Made in China 2025'. From the current tariffs on 22 medical device products, the United States aims to suppress the upgrading of China's medical device industry. Therefore, In the future, China's MRI, CT scanners, ultrasonic instruments and knee implants, etc., will be restricted in the development of high-end medical device industry.

Second, China drug Exports are not affected by trade wars, and the risk of trade wars is small in the future. The specialty APIs such as Coenzyme Q10 must be subject to tax increase.

1. The Sino-US trade war has a limited impact on the export of China's APIs. China's APIs are mainly exported to Asia and Europe. The US market exports account for only 13.47% of China's total exports of APIs.

Figure 3 Distribution of China's API export market

Source of data: China medicine Health care products Import and Export Chamber of Commerce

Judging from the industrial structure of China and the United States, the API industry is shifting the industry to the United States. Therefore, the US pharmaceutical industry has a relatively rigid demand for APIs in China. In the future, the United States will have less risk of incorporating APIs into tax collection lists. High-pollution, high-energy industry, and US pharmaceuticals enterprise Most of them are preparation companies. The cost of producing APIs in China is relatively high. Therefore, they tend to choose to import APIs from China, India and other countries to produce medicine preparations. In the context of the US trade friction against China's APIs in recent years, China's exports of APIs to the United States have continued to grow steadily for many years, indicating that the demand for APIs produced by China in terms of quality and price competitiveness continues to be strong. The United States will add Chinese APIs to the tax increase list, which will increase its domestic medicines. The production cost of the preparation enterprises, therefore, the risk of incorporating the bulk drug products into the taxation list in the United States in the future is relatively small.

Judging from the breakdown of APIs, the current US tax-increasing list mainly involves special raw materials such as psychology and hormones. However, the actual implementation of the tax increase list has removed the characteristic raw materials, but it does not rule out the increase in the future. Possibility. For example, Coenzyme Q10 was initially included in the first tariff list, but it was eventually cancelled and not in the newly proposed tariff list. However, as the trade war continues to escalate, it is not ruled out that such specialty drugs are again The possibility of including a tax increase list.

2. The Sino-US trade war has a limited impact on China's exports of biological products and preparations. In 2017, China's exports of Western medicine preparations to the United States were about 1.2 billion US dollars, and the total export value of preparations in China accounted for about 35%. But from the perspective of trade methods China's preparations are mainly processed trade. In 2017, preparation and processing trade accounted for 45% of China's total export of preparations. Among them, processing trade is mainly based on foreign-invested enterprises in China, and only AstraZeneca, Merck and Pfizer's preparations Incoming processing accounts for 97% of the entire processing trade, while processing trade is not affected by the Sino-US trade war plus tax.

From the list of US tax increases, a variety of biologic products were included in the first tariff list, but were eventually cancelled during implementation, such as human veterinary vaccines, blood products, insulin drugs, etc. The number of exports to the United States is small. Therefore, the Sino-US trade war has limited impact on the export of Chinese preparations and biological products.

Third, the Sino-US trade war will lead to high-end China medical instruments Exports are reduced, but in the short term, the overall impact on medical devices is small. In the long run, trade wars will affect the development of high-end medical devices in the global market to a certain extent.

1. Short-term ECG recorders, optical instruments and instruments, electronic diagnostic patient monitoring systems, etc., will be reduced to the United States.

From the implementation of the trade tax collection list in the United States on July 6, it can be seen that the current US taxation goods to China mainly involve high-end medical device products such as electrocardiographs, optical instruments and instruments, electronic diagnostic patient monitoring systems, etc. Mainly relying on price advantage to seize the market, once the 25% tariff is added, its price advantage will cease to exist, and exports to the US will be greatly affected in the short term.

2. The scale of medical device exports in China is not large, and the total amount of medical equipment exported to the United States in China is small. The overall medical equipment is limited by trade wars. According to China Customs statistics, in 2017, China’s medical equipment exports The total amount is about 21.7 billion US dollars, and the export value to the United States is 5.8 billion US dollars, accounting for about 27% of the total medical device exports. The United States has become China's largest exporter of medical devices, but from the perspective of export scale, China's medical device exports and The volume of exports to the United States is not large.

From the perspective of China's medical device export product structure, China's medical device export products are still dominated by low-value consumables, although in the high-end medical device field, domestic ultrasound, monitoring and other imaging equipment and artificial joints and other high-value consumables in the international market The force is gradually emerging, but the scale of exports is still small. In 2017, the top 14 export products, mainly massage and health care equipment and medical consumables, accounted for 44% of the total export of medical equipment. Electronic diagnostic patient monitoring system, ultrasonic scanning Electronic diagnostic equipment, magnetic resonance equipment (MRI), B-type ultrasonic diagnostic equipment and other tax-increasing products accounted for less than 10% of China's total exports of medical equipment to the United States.

Figure 4 The proportion of China's major medical products exported to the United States

Source: Flint Creation is organized according to customs data

3. In the long run, MRI, CT scanners, ultrasonic instruments, etc. China's key high-end medical instrument products will grow or become significantly affected in the global market. Currently, from the perspective of high-end medical device segmentation, imaging Domestic proportion is about 10-20%, in vitro diagnosis is about 30-40%, and the high-end products in diagnosis such as chemiluminescence currently have a market share of about 10%, and the dependence on foreign imports is still high. Add 25% Import tariffs, for China's medical device industry to expand overseas markets by price advantage, China's high-end medical equipment exports to the United States and long-term development will be greatly restricted in the future.