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Economy

Chinese medicines catch a market cold(2)

1
2015-06-09 09:09China Daily Editor: Si Huan

The major problem facing the traditional Chinese medicine industry is oversupply. "Medicinal herb growers planted more after the boom period when prices went up," Liu Zhanglin, deputy director of China Chamber of Commerce for Import and Export of Medicine and Health Products, said. "So now there is an oversupply, even though the market is growing."

Small famers are also partially to blame for the turmoil engulfing the sector. They stockpiled valuable herbs when wholesale prices were high, hoping to get even more for their products. Eventually, they were forced to flood the market or suffer substantial losses.

Another factor is how the industry has been structured, Liu pointed out. Investors poured in after 2013, and encouraged small farmers to increase production with financial support. "The demand and supply structure was affected by the investors," Liu said.

He also singled out local governments and industry associations for failing to provide detailed advice and data to the farming community. This could have controlled the rapid expansion in production.

Increased competition was another problem, which resulted in the market being flooded. Major medical companies moved in as prices soared and set up cultivating areas.

China Beijing Tong Ren Tang Group Co Ltd is one of the country's most famous drugstores with a history dating back to 1669. During the height of the boom, the firm set up farms growing herbs such as codonopsis and astragalus.

"We decided to build up our own industrial chain from the planting stage," Gao Zhenkun, general manager of China Beijing Tong Ren Tang, said. "This has helped our production supply."

Still, wholesale prices continue to fall and this has hit the export market. Data from the China Chamber of Commerce for Import and Export of Medicine and Health Products show a 10.2 percent fall in export revenue during the first four months of this year compared with the same period in 2014. No detailed figures were released.

"The export business is also facing difficulties these days," Liu said.

But while the decline in wholesale prices appears to benefit major pharmaceutical companies, consumers are not convinced they are getting a better deal.

"I have not noticed a price change," Zhang Jing, 32, a businesswoman, said, adding that she spends almost 2,000 yuan on the traditional Chinese medicines each month. "But I still believe Chinese medicine is good for some chronic disease," she added.

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