|Last weekend, China’s Commerce Ministry announced it is dropping costly regulations that required several key products get domestic approval before export, as long as they are already approved by the regulations of importing countries.
This move comes at a critical time, as China has seen exports of medical supplies soar in the wake of COVID-19’s global spread. In total, China exported 3.86 billion masks, 37.5 million pieces of protective clothing (also known as Personal Protective Equipment, PPE), 16,000 ventilators, and 2.84 million COVID-19 testing kits to 50 countries between March 1 and April 4.
The policy, introduced on March 31 to boost quality control of Chinese medical-supplies exports, led to a significant shipment bottleneck in items including masks, ventilators, surgical gowns and testing reagents, now in high demand from countries still wrapped in the throes of COVID-19. One firm in Jiangsu that produces rapid test kits for Covid-19 said they expected the new export restrictions to cost the business more than 500 million yuan ($70.3 million).
According to Li Xingqian, a senior official with the commerce ministry, the difference has been palpable, pushing China’s exports of medical masks to 1.06 billion units on April 24, a 373% rise from the 224 million shipped while restrictions were still in effect on March 31. In early April, average daily output of protective medical clothing exceeded 1.5 million sets, but that figure can be expected to rise with the new regulatory framework in place.
Due to China’s unfortunate status as ground zero for the global COVID-19 pandemic, they managed to contain the virus much earlier than Western nations, as well as some of their Asian neighbors, who are now desperately in need of medical supplies. China’s outbreak timeline, combined with their surplus of supplies leftover from a furious dash to produce medical goods for domestic use, has left them in a position to export excess inventories and to increase manufacturing of additional product as many Chinese return to work.
China has managed to ramp up their exports of many healthcare goods to some degree, but certain obstacles have thus far limited their output from reaching its full potential.
“China has 21 multifunction ventilator makers and eight of them have obtained the European Union’s compulsory CE marking,” Xu Kemin, an official with the Ministry of Industry and Information Technology told China Daily. The companies have already signed contracts for 20,000 multifunction ventilators, and many more are pouring in every day. However, as of April 9, Politico reports that current supply conditions only allow China to produce about 2,200 invasive ventilators per week – not even a fifth of the world’s total production capacity – creating a sizable backlog.
Various regulatory requirements have also been a burden as certain mask and ventilator products have been below certain countries’ standards. While some of these Chinese-manufactured goods have indeed been faulty, the Wall Street Journal reports that many of the export issues have arisen from product standards that differ by country.
Though China has not reached its full export capabilities, the country continues to make strides in quality control, and will focus on closing gaps in their supply chains, allowing them to scale up their manufacturing capabilities to meet the continually rising needs of healthcare facilities combatting the Coronavirus pandemic. MRP believes China’s exports will continue to rise with demand in coming months as tens of millions across the globe begin returning to public life.
The return of millions of workers to their offices, sales floors, and other places of business over the next couple of months, across the US, Europe, and Asia, will undoubtedly spur a renewed surge in purchases of medical masks. Meanwhile, demand for medical equipment will be sustained as hospitals will use the warm summer months to stock up on ventilators, PPE, and other critical supplies as they prep for the next wave of COVID in the fall. This second wave will coincide with the beginning of flu season – a potentially overwhelming scenario for hospitals in densely -populated areas.
At the same time, Chinese pharmaceutical firms have seen success in pursuing a vaccine for COVID-19, already seeing some success in trials involving primates.
Science Magazine writes that researchers from Sinovac Biotech, a privately held Beijing-based company, gave two different doses of their COVID-19 vaccine to a total of eight rhesus macaques. Three weeks later, the group introduced SARS-CoV-2, the virus that causes COVID-19, into the monkeys’ lungs through tubes down their tracheas, and none developed a full-blown infection.
The monkeys given the highest dose of vaccine had the best response: Seven days after the animals received the virus, researchers could not detect it in the pharynx or lungs of any of them. In contrast, four control animals developed high levels of viral RNA in several body parts and severe pneumonia.
With financial backing from the Chinese government, Sinovac will erect a new vaccine production facility on 230,000 square feet of land with hopes of producing 100 million COVID-19 shots per year if the vaccine proves successful. If those plans fall through, the drugmaker would pivot the facility’s use for other vaccines. Per Fierce Pharma, two other firms, CanSino Bio and the state-owned Wuhan Institute of Biological Products, also received government approval to move ahead with trials.
China’s pharmaceutical sales reached $122.6 billion in 2017. This number is projected to grow to $175 billion by 2022, according to healthcare information company, IQVIA. In March, MRP noted China’s critical position in global drug manufacturing, now emerging as the world’s second-largest pharmaceutical market.
Additionally, upside for Chinese healthcare is not only limited to Coronavirus. Brendan Ahern, Chief Investment Officer of KraneShares, notes that China has historically underspent on healthcare, with significantly lower per capita spending compared to both other major economies and emerging markets. More healthcare spending will be necessary to support the country’s aging population, which is projected to increase the burden of chronic disease by 40% by the year 2030.
Overall, WHO data shows China is now one of the fastest-growing major healthcare markets in the world, notching a ten-year compound annual growth rate of 13%, compared to just 3% in the United States.