In BMI's Q213 Asia Pacific Pharmaceutical Risk/Reward Ratings (RRRs), which assesses pharmaceutical markets according to attractiveness to multinationals, the region scored 53.4 out of 100, which is a slight increase of 0.2% from Q412's score of 53.3. This score is behind Western Europe (65.8) but ahead of Central and Eastern Europe (50.7), the Americas (49.4) and the Middle East and Africa (44.2).

China's Pharmaceutical Risk/Reward Rating (RRR) score for Q213 is unchanged from the previous quarter. This is also the case for all other countries in BMI's proprietary system that ranks pharmaceutical markets according to attractiveness to multinational drugmakers. A minor re-weighting of one of the RRR components is being implemented to improve the tool, and the adjusted scores for all markets will be published in the Q313 updates of the Pharmaceuticals & Healthcare reports. China has a RRR score of 66.2 out of 100, making it the fourth most attractive pharmaceutical market in Asia Pacific. The key components of China's score are:

Rewards

The industry and country rewards scores are weighted and combined to form the overall rewards score. China's score of 67 is considerably higher than the average (49) for the 18 regional markets surveyed by BMI.

Industry Rewards

The country scores highly for the size of its pharmaceutical sector, which is valued at around US$66.8bn. China's double-digit annual growth is also very attractive. However, low per capita consumption - just US$49.60 a year among its population of 1.3bn - is a major drawback.

Country Rewards

There is definite urban/rural split, with developed cities and built-up regions accounting for the bulk of healthcare spending. Population growth is moderate and the skewed male-to-female ratio has a noticeable impact on the overall market.

Risks

Industry and country risks are weighted and combined to form the overall score for risks. China's score of 63 is above the regional average, which is 63 for the quarter. The country, while posing some risks to the operations of multinationals, is a respectable long-term prospect in the region.

Industry Risks

Until two years ago, China's operating climate could easily have been described as challenging. Intellectual property (IP) laws were far from ideal, the approval process was tainted by corruption and manufacturing was not up to international standards. However, following the execution of the former State Food and Drug Administration (SFDA) head for corruption in 2007, the situation has improved significantly. BMI forecasts further encouraging developments in the near term.

Country Risks

Despite an extremely high score for policy continuity - the Communist Party has governed under a single-party system since the state's establishment in 1949 - the country is let down by the presence of overwhelming bureaucracy and a poor legal framework. The scores for economic structure and corruption meet the global average.