COMPLEMENTARY MEDICINES IN CHINA A guide for Australian business CONTENTS INTRODUCTION 1 EXECUTIVE SUMMARY 2 OVERVIEW 4 Market drivers 5 Products by category 7 Market trends 9 REGULATORY REQUIREMENTS 10 Definitions 10 Food categories in China 10 Regulations for food categories 11 Product registration and filing 13 EXPORTING TO CHINA 16 General trade 16 Cross-border e-commerce 18 Postal route 21 Manufacturing in China 22 COMMON RISKS AND HOW TO AVOID THEM 23 Trademarks 23 Working with distributors 23 Advertising and labelling risks 24 Professional claimants 24 FURTHER RESOURCES 25 Export readiness 25 China checklist 25 Professional advice 25 APPENDIX A: AUSTRALIAN CAPABILITY AND INDUSTRY/GOVERNMENT ORGANISATIONS 26 Key industry capabilities and strengths 26 Research centres and collaborations 26 Industry and government organisations 26 HOW AUSTRADE CAN HELP 27 Austrade in China 27 Disclaimer This report has been prepared by the Commonwealth of Australia represented by the Australian Trade and Investment Commission (Austrade). The report is a general overview and is not intended to provide exhaustive coverage of the topic. The information is made available on the understanding that the Commonwealth of Australia is not providing professional advice. While care has been taken to ensure the information in this report is accurate, the Commonwealth does not accept any liability for any loss arising from reliance on the information, or from any error or omission, in the report. Any person relying on this information does so at their own risk. The Commonwealth recommends the person exercise their own skill and care, including obtaining professional advice, in relation to their use of the information for their purposes. The Commonwealth does not endorse any company or activity referred to in the report, and does not accept responsibility for any losses suffered in connection with any company or its activities. Copyright © Commonwealth of Australia 2017 Publication date: March 2017 INTRODUCTION This guide has been developed to assist Australia is well placed to respond to this Australian companies interested in exploring market opportunity and position itself as a the rapidly growing and evolving market trusted source of complementary medicine in China for complementary medicines products thanks to its ‘clean, green and safe’ and nutritional supplements. It provides reputation, underpinned by robust regulatory an overview of the drivers of demand, key systems for food and medicines. channels of distribution and the regulatory environment that applies to these products, While the potential business opportunities along with practical information about doing are huge in Australian terms, the regulatory business in China. environment in China for complementary medicines and nutritional supplements is Austrade would like to acknowledge the significantly different from Australia’s and has assistance of King & Wood Mallesons undergone a number of important changes China in the preparation of this publication, recently. Professional advice is strongly particularly the information on recommended for any company looking to regulatory requirements. export these products to China. Chinese consumers’ demand for This guide is designed as a starting point complementary medicines and health foods for Australian companies considering – driven by factors like population ageing, entering the Chinese complementary limited availability of primary healthcare, medicines market. The China Food and Drug increased disposable incomes and concerns Administration regularly reviews and amends about food safety and environmental regulations pertaining to complementary pollution – has been well publicised in medicines. Austrade will monitor regulatory recent years. developments and periodically update exporters on any major changes. The boom in e-commerce and personal shopper (‘daigou’) channels for Austrade can provide Australian companies complementary medicines have also with market guidance and access to attracted widespread interest. information and referrals. More information, resources and contacts are available at austrade.gov.au. We wish you every success on your export journey. COMPLEMENTARY MEDICINES IN CHINA | A guide for Australian business 1 EXECUTIVE SUMMARY The demand for complementary medicines is growing rapidly in China as an increasingly health-conscious population searches for products that enhance their wellbeing. The Chinese health food market – which A market with wide-ranging This guide includes sections on navigating the includes vitamins, dietary supplements needs regulatory environment for complementary and minerals, animal and herbal extracts, medicines, including registration and filing and traditional Chinese medicine (TCM) – Despite there being over 15,000 registered for different product categories; the pros is currently valued at RMB200 billion health foods in the Chinese market, there is and cons of various export channels; and (US$30 billion) and is projected to grow by still great potential for more, as consumers common risks and pitfalls that exporters 10 per cent every year until 2025. The Boston receive better healthcare advice and become can avoid with thorough preparation. Consulting Group forecasts that China’s more sophisticated in their consumption. There is high demand for health foods with overall health and wellbeing market could Seizing the opportunity be worth over RMB400 billion (US$60 billion) functional claims, and nutritional supplements by 2020. 1 (vitamins and mineral products). Other The Australian complementary medicines growth areas include over-the-counter sector is well positioned to compete for The growing market for complementary medicines, food for special medical purpose emerging market opportunities. Australian medicines has been driven by a heightened and sports supplements. vitamins, minerals, supplements and health awareness of health, wellness and safety products are highly regarded in China for issues among Chinese consumers. A large While there is demand for all forms of being ‘clean, green and safe’. Australia’s ageing population is seeking to manage complementary medicines, the opportunities strong regulatory frameworks are well known specific conditions while younger consumers, for products based on TCM principles are and its complementary medicines research particularly women, want to maintain their among the highest, due to strong interest is well respected. These favourable attributes health. Many prefer international brands and trust in TCM among Chinese consumers. put Australian businesses in a prime position and have the income to pay for Another area of opportunity is supplying to capitalise on China’s rising demand for foreign-made products. herbs and other ingredients to Chinese high-quality complementary medicines. pharmaceutical companies looking to The Chinese Government has also made source uncontaminated raw materials. health a priority in its 13th Five-Year Plan (2016–2020), with a suite of national initiatives Be informed and prepared that support demand for complementary medicines. This includes promoting the Australian exporters should be mindful that development of TCM by building research the Chinese complementary medicines institutions and standardising TCM products market is increasingly regulated. While the and services. Chinese Government has assisted exporters by streamlining the registration process for health products, it has also introduced various policies to protect consumers’ rights and reviewed regulations on cross- border e-commerce. The latter may have considerable implications for Australian business as online channels are a popular and effective way of selling to China’s tech-savvy population. 2 COMPLEMENTARY MEDICINES IN CHINA | A guide for Australian business US$30bn 15,000 US$60bn CURRENT VALUE OF CHINESE HEALTH FOODS REGISTERED PROJECTED VALUE OF CHINESE HEALTH FOOD MARKET WITH POTENTIAL FOR MORE WELLBEING MARKET BY 2020 COMPLEMENTARY MEDICINES IN CHINA | A guide for Australian business 3 OVERVIEW The complementary medicines market in China is booming, driven by rising incomes and consumer spending, greater interest in health and wellbeing, and regulatory reforms. The China Healthcare Association Health Food A 2016 survey of 12,430 consumers by the Market Working Committee currently values Market drivers China Consumers’ Association found 58 per the health food market in China at RMB200 A number of demographic, social and cent of interviewees reported purchasing billion (US$30 billion). It forecasts that the policy factors are driving the demand for health foods. The survey also examined market will grow 10 per cent year-on-year complementary medicines in China. frequency of consumption, monthly between 2015 and 2025 and estimates expenditure on health foods and attitudes consumers’ purchasing power for health Rising incomes and consumer towards domestic and imported products, 8 foods can potentially reach RMB1 trillion spending as shown in Figures 1, 2 and 3. (US$150 billion). 2,3 The rapid expansion of China’s middle class According to the China Chamber of population in both rural and urban areas has Commerce for Import & Export of Medicines been well documented. A 2013 McKinsey & Health Products, imports of health foods report estimated that by 2022, more than and nutritional supplements (including 75 per cent of China’s urban consumers will ingredients and finished products) into China earn RMB60,000 to RMB229,000 (US$9,000 to were worth US$2.67