Few recent happenings have significantly impacted India-China Trade & Pharma sector is also not being spared.

1. Doklam issue: One of the Borders of dispute between India and China. Doklam (Zhoglam or Droklam or Donglang) is a narrow plateau lying in the tri-junction of India, China and Bhutan. The Doklam standoff has ‘damaged and affected’ the bilateral ties between India and China, Foreign Minister Wang Yi commented once in a press conference.
2. Fosun & Gland Pharma Deal: Fosun from China, which once targeted 86% stake in Gland pharma, was not able to do so as Indian Government intervention was blocking this deal. Since the 74% is allowed in Brownfield projects under automatic route (without prior permission) in the pharmaceuticals sector, Fosun has decided to buy 74% stake in Gland Pharma for $1.1 bn in a revised deal.
3. Anti-dumping duty on 93 products from China: Chinese media criticized India for imposing anti-dumping duties on more than 93 Chinese products. Countries impose anti-dumping duties to guard domestic industry from surge in below-cost imports. In order to ensure fair trade and provide a level-playing field to the domestic industry, this step seems necessary.
4. Make in India: Due to make in India initiative, few chinese firms are moving their manufacturing base in India. It will lead to job cuts in China & its not a good signal for them. This issue will lead to worsening of trade relations & the API industry of Pharma will be impacted too.

The above mentioned recent happenings have shaken the trade relations of India-China & the pharma industry will be impacted soon. It is more than obvious that the changes are political as well as related to trade. China’s interest in supporting India’s neighbouring countries makes this highly evident.
How is this going to impact Indian Pharma Industry in particular?
Let’s understand the data first!
India is leader in Finished Generic Products but China is the preferred source for API due to low costs.

To manufacture finished generic products, India imports about 84% of the APIs . In 2016, India imported APIs valuing Rs 13,853 crore from China which is 65.3% of the Rs 21,217-crore total. It shows Indian Pharma Industry critical dependency over China for APIs.
In general trade, India exports less to China(mainly raw material & not finished products) but imports major chunk of finished products(mostly electronics, which are in high demand currently & other finished products) due to low costs.
China exports only 2% to India out of its total exports. If we talk about Pharmaceuticals, it’s not a priority area for China; it is its 39th largest export item, but for India, pharma is of greater importance, as its 5^th largest export item. To manufacture generic medicines APIs are needed, which makes India further dependent on China.
A comparison between India & China vis-à-vis Pharma Exports in Fiscal Year 2016.
India exports more than half of its production of pharmaceutical products and is fourth largest supplier of drugs to the US. India is doing better than China in exports to the European Union as well. The UK is the second largest market for Indian pharma exports, which valued $464 million in 2016. India also exported to other developed markets in 2016, including Australia ($220 million), Germany ($161 million), France ($145 million), Netherlands ($143 million), Canada ($143 million) and Belgium ($125 million)

It is to be emphasized here that India procures raw materials from domestic and foreign sources, with China being the largest supplier of APIs to India.
There are a few critical questions in relation to India-China pharma ties:
Is the changing Political & Trade scenario going to Impact Indian pharma industry & why?
There may be varied opinions over this issue. But if we consider the data, China exports only 2% of its exports to India. But India gets about 65.3% of total APIs from China due to low costs.
Further, India is a major exporter of finished generics to US & EU. This demand is going to further increase as countries are very much interested to use more generics to cut down the cost of healthcare. It’s a big opportunity for India. But if the APIs exports from China are blocked then the cost of Generics will increase & countries will start looking for some other alternatives.  In fact the impact on China will be lesser but Indian Pharma industry would be hit severely.
What CHINA is doing currently to counter the Indian-china plummeting relations?
Looking to other countries: With disruptions in political ties & trade, China has started taking this as cues. Due to this reason, it has now started approaching neighbouring counties to India for its exports.  Due to Beijing’s protectionist policies, China does not allow imports of finished generic drugs from India. China’s more focus is on exports of APIs only.
Looking for Mergers & Acquisitions with Indian Manufacturing Units: Fosun’s interest in buying 74% stake as brownfield project has shown China’s intentions as how it is going to enter Indian pharma market. If it’s a success deal then more Mergers & Acquisitions will follow. These acts of M & A are also motivated by the regulations coming up in China to control severe impact on environment due to Pharma industries. The China manufacturing hubs are being asked to shift their manufacturing bases & India seems to be the perfect location. With taking over of Indian manufacturing hubs of Pharma, China will be able to cut down its unit economics due to its major control over manufacturing & supplies supported by Horizontal & vertical integration of pharma business.
Preparing for finished generics exports to US & EU: Although currently India is leading the pharma generics exports, China is gearing up fast in this race. It seems to be exploring l more manufacturing bases in Asian & African countries. The main mode of entry may be through M & A in already running manufacturing bases. With EU & US looking to cut down cost of healthcare by imports of more generics due to low cost, it will be a great opportunity for China which it would never like to miss.

India pharma industry can become self-sustainable under Make in India initiative but there is a time constraint!
With development of manufacturing capabilities & APIs self-sustainability along with a strong Pharma research base in India, Make in India can be a hit for sure. But to build required infrastructure & APIs self-dependency, a lot of efforts are required  from the policy makers & Pharma industry.
Until manufacturing & research capabilities are not achieved, the dependence on China cannot be ignored & imports of APIs needs to be continued. As the demand of generics is going to increase, especially in the western world, India should be ready with all its capacities to fulfill the demand.
It seems, in the contemporary scenario, Cooperation will be better than Competition!