BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE
BUSINESS WEEK E.BIZ -- STRATEGIES Drug Coup in China? (int'l edition) To meet foreign rivalry, China Pharmaceutical is hustling along with an online exchange Jason Ding was not hired by China Pharmaceutical Enterprise & Investment Corp. to be an Internet revolutionary. But that's what the company got. The 34-year-old Beijing native joined in January to help the company add traditional Chinese medicine to its line of Western drugs. That way, it could fight off foreign competition after China enters the World Trade Organization. But Ding, who worked as a computer technology consultant before managing a natural-medicines joint venture in southern China, had other ideas. Even though China Pharmaceutical is one of China's largest drug companies, with 13,000 employees and more than $500 million in revenues, its use of technology was confined to the accounting department. Ding warned his bosses that when foreign companies come in with online marketplaces to buy and sell medicines, ''the Chinese pharmaceutical industry is going to die.'' That got management's attention. Hong Kong-based China Pharmaceutical did something that most traditional Chinese companies would never do: It gave Ding carte blanche to set up a Web site to handle e-commerce with its suppliers and customers. PharmB2B.com launched in May, but it still has formidable hurdles to clear. It must persuade China Pharmaceutical's customers, many of whom don't even know what the Internet is, to do business online. PharmB2B also must contend with China's inadequate online payment system, high telecom fees, and a regulatory morass. Ding, the subsidiary's CEO, has spent weeks visiting Chinese bankers to work out payment solutions, because each one has its own online payment scheme that doesn't jibe with those of other banks. Unless they collaborate, Ding will have to try to persuade suppliers and customers to work with a single bank. Not likely. ''People are always saying the infrastructure is probably 10 years behind in China, but the mentality is probably 30 years behind,'' Ding says. So far, a payoff for Ding's hard work is nowhere in sight. Most Chinese companies have not yet attached their computers to networks. Shanghai No.1 Department Store, for example, won't be able to streamline its purchasing by going online until next year because it has only stand-alone PCs. That's why analysts believe e-commerce will represent only a small portion of China's overall economy for a very long time. In 1999, Chinese businesses spent just $35 million to purchase goods online, according to market researcher IDC. ''The overall market potential is grossly exaggerated,'' says Pratik Gupta, Salomon Smith Barney's head of Asia-Pacific Internet research. He figures online commerce will amount to just 4% of China's gross domestic product by 2005, or $65 billion. Ding isn't waiting around for the climate to improve. By the end of the year, he hopes to have his site running smoothly. He'll wait until next year before inviting in other major pharmaceutical manufacturers, both domestic and international. ''We need to do all our homework,'' says Ding. With cutthroat competition coming, he had better get straight A's. By ALYSHA WEBB _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS EBIZ Contents for issue dated Oct. 23, 2000 Asia's Internet Deficit (int'l edition) CHART: Asia Execs Tiptoe into E-Commerce TABLE: Playing Catch-Up (int'l edition) Prodding Singapore (int'l edition) Revving Up in India (int'l edition) Korea's B2B King (int'l edition) Drug Coup in China? (int'l edition) ONLINE EXTRA: Q&A with Gartner Group's Lane Leskela INTERACT E-Mail to Business Week Online

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