By Liu Yukun and Zhong Nan | China Daily |Updated: 2018-03-04 15:32
ChinaNational Pharmaceutical Group (Sinopharm) will invest in more private companiesand attract investors from both private and State-owned businesses to furtherincrease its earnings potential this year.
Thecompany has already made a good beginning in this regard by bringing nearly 90percent of its subsidiaries in the reform push by the end of 2017. It involved660 group companies and accounted for over 85 percent of the group's revenuecontributors.
"Wehave been bringing in strategic investors in sales and pharmaceuticalequipment," said Shi Shengyi, deputy general manager of Sinopharm."Investing in selective private companies can generate high growthpotential as it helps further diversify the company's sales and supplychannels."
SinceState-owned enterprises play a significant role in China's economic growth, thecentral government has been promoting a series of reforms to cut overcapacityand low-productivity, which had dragged down profits.
Reformsinclude changing shareholding structure and reducing non-core assets. SOEs havealso been encouraged to foster innovation and streamline management.
"Such industrial reform benefitspharmaceutical SOEs in general through attracting more research funds, shorteningdevelopment processes and enhancing their overseas performance," said ZhouMi, a researcher at the Chinese Academy of International Trade and EconomicCooperation.
As a major SOE and mainstay for China'spharmaceutical industry, Sinopharm started its reform by adopting a mixedownership.
"Reform in pharmaceutical industrydiffers from the others because it stresses much on patent protection andinformation management, as product development is a long-term process thatneeds huge investment," said Zhou.
To better collect market information andfacilitate research, Sinopharm established a management team with the task toattract talents and private investors, as well as offer executive boardmemberships in its subsidiaries, as a major step.
Forinstance, Sinopharm Group Co Ltd, a key member of Sinopharm, was established inJanuary 2003 through investment from both Sinopharm and privately-ownedShanghai Fosun Pharmaceutical (Group) Co Ltd. Under the deal, the group adopteda shared executive board with members coming from both Sinopharm and Fosun.
Inaddition to attracting private investors, Sinopharm has also been working onmergers and acquisitions.
CMDC, another Sinopharm subsidiaryspecializing in pharmaceutical equipment trade, started its reform in 2014. Ithas been working on mergers and acquisitions ever since the reform for buildinga national distribution network of pharmaceutical equipment.
In addition, Sinopharm has also invested inprivate companies and become some of their major shareholders. It invested inChina Traditional Chinese Medicine Holdings Co Ltd and became its shareholderin 2013.
"Mergers and acquisitions between SOEsand private companies can be challenging due to possible conflicting corporateculture and changes to each other's corporate structure," Zhou said.