China won’t hold drug materials supply hostage against Washington

By Zhou Qing Source:Global Times Published: 2020/2/25 21:23:41

Illustration: Luo Xuan/GT

There has been some noise on social media over the possibility of China hammering the US by not selling it raw materials for the manufacturing of drugs. Such discussions are pointless. China will not interrupt its drug-related exports. Nor should other countries around the world do so. 

Decades of globalization have integrated the healthcare industries of many countries. China has grown into one of the world's largest active pharmaceutical ingredient (API) manufacturers. Many US and Indian drugmakers and biotechnology companies now rely on China for raw materials and manufacturing. 

Almost 70 percent of raw materials that India uses to manufacture drugs are from China, CNN reported last week. If this coronavirus continues for more than a month, it will begin to create a huge number of issues for the pharma sector, Umang Vohra, CEO of India-based generic drug producer Cipla, has been quoted in the report as saying.

The novel coronavirus pneumonia (COVID-19) epidemic has led to city lockdowns and halted production for companies in China, which has created temporary difficulties in global supply chains. However, the country is well aware that, in a highly interdependent world, global drug companies need raw materials from China and Chinese firms needs to import drugs from other countries. The last thing China wants is to cut off the supply chain, which generates products and profit for the country. 

Moreover, the current predicament will not last long. With the efforts of the entire country, China has managed to put the coronavirus in check. Slowly but firmly, the world's factory has fired up its engines. Manufacturing companies in key industries have resumed operations at full capacity. Sinopec was reportedly increasing its medical-grade resin production plan for January and February to 160,000 tons, 45,000 tons more than during the same period last year, to support the manufacturing of injection syringes and masks. Many pharmaceutical companies in provinces other than Hubei returned to work more than a week ago. 

But it takes time for supplies to restore their original levels. China has to first meet domestic demand for equipment and medicines to combat COVID-19. Moreover, Hubei, which is an important source of raw materials for drugs, is the epicenter of the epidemic, remains under lockdown and faces delayed production. 

Despite these hardships, China will not intentionally hold back its exports of medical ingredients. The country has the incentive to hold its position in the healthcare industry supply chain, which has taken it many years of hard work to achieve. Chinese companies are also incentivized to continue selling their products to generate profits. The only barrier right now is the epidemic, which will be a short-term shock. Supply and demand will again be balanced as companies gradually resume operations. Those advocating that China will punish the US by interrupting its API supply do not understand economics. 

The measures China has adopted to quell the virus have been effective and timely. We have seen a glimpse of victory and the country has begun to return to normalcy. There is no reason to exaggerate the temporary supply shortage by calling it a Chinese strategy. This rhetoric, which only attempts to cause panic and cut China out of the global healthcare supply chain, should not be heeded in any shape or form.

The author is a reporter with the Global Times.


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