Impact of Cross-border Mergers and Acquisitions on the Development of Chinese Pharmaceutical Exports and Imports

Abstract

The article is devoted to the research into the impact of cross-border mergers and acquisitions, conducted by international pharmaceutical companies in China, on Chinese participation in international pharmaceutical trade. Relevance of the study resides in the importance of mergers and acquisitions as instruments that are widely used in a foreign markets penetration process and that lead to the enhancement of intercorporate trade, thus significantly influencing country’s foreign trade. International pharmaceutical companies expanded their operations in Chinese market during the last two decades as a result of the market liberalization. Mergers and acquisitions, conducted by international players, have directly or indirectly led to higher growth rates of Chinese foreign trade in pharmaceutical products, to geographic diversification of pharmaceutical exports and to an increase in deliveries from developed countries. China more than doubled its share in global exports of pharmaceutical products and almost quadrupled its share as an importer of pharmaceuticals. The specific features of Chinese pharmaceutical trade are high growth rates in imports and imports’ significant excess over exports. Substantial proportion of Chinese imports is constituent by pharmaceutical components, that are needed to ensure production of high quality pharmaceuticals in China. Mergers and acquisitions play important role in this process and cause changes in geographical structure of imports. Seven biggest suppling countries, which hold more than two thirds of imports to China, represent the countries of origin of companies that are actively involved into mergers and acquisitions in Chinese pharmaceutical market. The research results can be used by public regulatory authorities for the elaboration of industrial development policies through stimulating or deterring foreign direct investments. Research can be of use to pharmaceutical companies in formulating competition strategies for domestic and foreign markets.