Kent Kedl, coauthor of The China Ready Company and a partner at Technomic Asia (Shanghai and Chicago), a firm that guides companies investing in China, describes the market's evolution this way:
"Ten years ago, a company that wanted to make a direct investment was forced to go into joint ventures, which were often arranged marriages from hell. Now, companies can step back, look at the marketplace and choose the best strategy, whether it's a green field, joint venture, licensing deal or acquiring somebody. It has really opened up."
Japanese and Western companies, including those in biopharm, are forging a far richer involvement in the Chinese economy to take fuller advantage of China's rapidly growing consumer market.
China's gradual relaxation of its historic opposition to foreign ownership of companies operating in China, makes it easier for Western companies to pursue capital that is structured more to their liking. This also propels further investment.
Part of this evolution in the sophistication of Chinese foreign direct investment (FDI) is the natural course of any economic relationship. What begins as low-value-add mutual exploitation either evolves into something deeper, or the party soon moves elsewhere, where the drinks are cheaper. Western companies understand that China has been transformed from just a labor market into a vast consumer market. And the Chinese understand that foreign direct investment will dry up if the capital structures available to Western companies are limited to joint ventures with government-owned companies.
Christopher Savoie, CEO of GNI-Shanghai Genomics, also describes in strategic terms the changing nature of biopharm FDI in China.
"There is a new trend in bio research to move outsourcing more upstream, to involve more intellectual property (IP)," Savoie explains.