Chinese government is set to lower the average tariff on pharmaceutical products from the present 9.6 per cent to 4.2 per cent soon. The tariff charge will cover all subsidiary companies of overseas companies importing pharmaceutical products or ingredients into any part of China and also those engaged in full range of distribution and logistic services. This measure is expected to give a boost to Indian pharmaceutical companies which are now targeting China for their products. What will further boost the chances of Indian companies is the entry of China into the WTO.

China is currently the 10th largest pharmaceutical market in the world and is expected to be the number one market by 2050, according to a study titled "Opportunities and Challenges for Indian Industry in China" commissioned by the Confederation of Indian Industry (CII). Going by the fact that Indian exports to China increased to UD$ 824.57 million in the first five months of the calendar year , up from US$ 759.83 million during the corresponding period last year, it is expected that exports would further increase in the remaining period of the last year. But pharmaceutical exports haven't been much of the scene in these rising figures owing to the tariffs imposed by the Chinese government in order to support its small scale industries.

Currently, the Balance of Trade is in India's favour, and Indian pharmaceutical companies could further tilt the same in India's favour in the next fiscal following the steps to be taken by the Chinese government. The study shows tremendous opportunities for Indian pharmaceutical companies tapping or trying to tap the Chinese market but what will matter is if these companies have subsidiary or subsidiaries in China. Following easing of import restrictions, it would make far better sense to set up subsidiary or subsidiaries in China and import drugs from Indian manufacturing base than to directly export pharmaceutical products from India.

The companies, however, will have to sustain with lower margins owing to price war by manufacturers to capture market shares. What will ultimately help clinch market share is the price competitiveness. Which means Indian companies wanting to tap the Chinese markets will have to keep tab on the pricing of their products.

Currently few Indian companies have looked at China. Of these, Orchid Chemicals and Pharmaceuticals Ltd, the Chennai based country's largest exporter of cephalosporin actives, is the latest entrant, tying up with one of China's largest pharmaceutical company, the North China Pharmaceutical Corporation to set up a joint venture subsidiary in China.