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On the Value Chain and International Specialization of China’s Pharmaceutical Industry

Author(s)

Yansheng Zang, Dawei Li, Changyong Yang, Qiong Du


Abstract

This article studies the characteristics of the global pharmaceutical industry value chain and China’s position in it, using the tools of value chain analysis, the Grubel & Lloyd (GL) index, and an input-output model. Research shows that in the global pharmaceutical value chain, proprietary medicine’s value chain belongs completely to the producer-driven type, and the core added value is mainly from the input of research and development (R&D). Meanwhile, in the nonproprietary medicine value chain, raw medicine is comparatively independent and has a weak relation with the R&D stage. Based on the aforementioned findings, we conduct a concrete study of China’s position in the global pharmaceutical industry value chain. The results of the study show that China now mainly produces nonproprietary medicine and stands at the lowest point of the “smile curve.” Based on this, we calculate the Vertical Specialization (VS) Index, and analyze China’s position in the R&D stage of the world pharmaceutical value chain. We conclude that China’s cheaper labor cost is the main reason why multinational companies move their clinical trials to China.