India-China pharma trade: India built its reputation as the “pharmacy of the world” by supplying affordable, high-quality medicines to advanced and emerging markets alike. This strength rests on the country’s vast network of formulation manufacturers, deep technical capabilities, and a regulatory record that has won trust in the United States, Europe and Africa. But the global environment in which this success was built is changing fast.
Trade tensions, tariff unpredictability, and increasingly rigorous environmental and quality norms are forcing Indian firms to rethink their markets and their dependence on specific geographies. As these pressures intensify, an unconventional opportunity has begun to take shape in India’s trade equation with China — a country traditionally seen as both a competitor and a supplier rather than a market.
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New Delhi and Beijing are now exploring a reverse-trade model that upends the old hierarchy of roles. India currently imports about $4 billion worth of bulk drugs from China. Under the proposed arrangement, these inputs would be processed into higher-value finished dosage forms (FDFs) in Indian facilities and then exported back to China’s expanding pharmaceutical market.
The Pharmaceutical Exports Promotion Council (Pharmexcil) estimates that such exports could open a $6 billion opportunity for India, making it the first significant recalibration of bilateral pharma ties in more than a decade. The shift is not merely commercial; it reflects a broader reality that India must diversify its export base and adapt to new sources of global demand, even if they emerge from a strategic rival.
India-China pharma trade shift
India’s long-standing dependence on China for active pharmaceutical ingredients (APIs) and intermediates has shaped a narrative of supply risk and the push for self-reliance. China supplies more than 70% of India’s API requirement. But the global trading environment is shifting. The United States has become increasingly unpredictable with tariff swings, while Europe is tightening sustainability and quality norms under frameworks such as the EU Pharmaceutical Strategy.
In this context, China has emerged as both a challenge and an opportunity. Under the proposed arrangement, India would convert Chinese bulk drugs into higher-value formulations and ship them back into China’s expanding but heavily regulated market. This allows Indian exporters to diversify away from the US, which still absorbs a large share of India’s pharma shipments but where market conditions have grown volatile.
China’s procurement reforms
China’s pharmaceutical ecosystem has historically been one of the most protected in the world, designed to favour domestic firms through regulatory opacity and localised distribution. Yet, Beijing’s Volume-Based Procurement (VBP) programme, intended to cut drug prices and reduce healthcare expenditure, has changed the incentives. Its demand for low-cost, high-quality products has opened a narrow but meaningful path for Indian manufacturers.
This shift is evident in recent regulatory approvals. The National Medical Products Administration (NMPA) has cleared Zydus Lifesciences’ venlafaxine capsules and Glenmark’s Ryaltris nasal spray, decisions that would have been unlikely a decade ago. Companies such as Hetero, Natco, and Cipla have also secured VBP contracts for therapies including dapagliflozin, a key diabetes drug. These wins show that Indian firms can meet China’s demanding mix of tight price ceilings, guaranteed large-volume supply, and stringent regulatory expectations. They also confirm that as China tries to optimise its value chain—retaining its dominance in chemical intermediates and APIs—it increasingly needs dependable global partners capable of delivering complex generics and specialty formulations at scale.
Risks behind the opportunity
The emerging partnership offers promise but comes with substantial risks. China’s procurement system is engineered for aggressive price compression. Indian drugmakers entering the market may find the economics quickly tightening once Chinese competitors learn from early foreign entrants and move to undercut them. Operational challenges also remain significant. Payment cycles are longer, distribution systems are fragmented, and language barriers complicate coordination across hospitals, provincial regulators, and tendering agents.
Geopolitical volatility adds another layer of uncertainty. India–China relations have been tense for years, and even modest diplomatic friction can influence regulatory approvals, customs clearances or tender awards. Beijing’s approach to economic reciprocity has often been transactional rather than long-term. Indian firms entering Chinese supply chains must therefore prepare for sudden policy changes, delays, and non-tariff barriers.
Pharma export diversification strategy
Despite these risks, the opportunity is strategic. The global generics market, currently estimated at $35–40 billion, is expected to nearly triple by 2035 as health systems face mounting cost pressures. India enjoys a strong position in conventional generics but must now move into complex generics, biosimilars, combination therapies, and specialty formulations to maintain its competitive edge. China offers scale, tighter but predictable quality norms, and a demand profile that still rewards price competitiveness.
To tap this potential, India must align its external trade moves with domestic manufacturing goals. The push to build indigenous bulk drug capacity under initiatives such as the Production-Linked Incentive (PLI) Scheme must continue even as companies explore China’s evolving market. The US will remain important, but the concentration risk is now visible. Europe’s rising compliance costs will challenge margins. Middle-income countries offer volume but lower returns.
China sits at the intersection of these pressures. The reverse-trade model offers India a chance to embed itself deeper into global pharmaceutical value chains while partially insulating itself from tariff volatility and regulatory shifts elsewhere.
India’s pharmaceutical sector is at an inflection point. The proposed reverse-trade arrangement with China is not merely a commercial opening; it is a geoeconomic adjustment driven by shifting trade blocs, rising healthcare costs, and the need for resilient supply chains. For companies, the goal should be to build durable footholds in China rather than chase short-lived tender wins. For policymakers, the priority lies in balancing export diversification with domestic capacity building, particularly in bulk drugs and APIs.
The risks are real. But in a world where trade alliances are fluid and economic nationalism is rising, India’s ability to engage selectively—even with strategic rivals—may define its next phase of growth as the pharmacy of the Global South.