Shanghai Pharmaceutical Co. Ltd., a major domestic drug retailer and wholesaler, has agreed to transform its subsidiary Shanghai Huashi Pharmacy Co. Ltd. into a joint venture with U.S.-based Horizon Pharmacies Inc.
Huashi is one of the nation's two pioneer drug retailers in a trial deregulation program to allow foreign investors into the domestic pharmacy industry.
According to a letter of intent signed by the two companies, Shanghai Pharmaceutical will own 51 percent of the venture, while Horizon will take the rest.
The establishment of the new company, with a registered capital of US$10 million, is pending approval from the State Economic and Trade Commission.
The two parties haven't named the joint venture, but the Huashi brand, popular among Chinese consumers, will be kept.
Early this year, China began to gradually open its domestic pharmaceutical market to foreign investors, in anticipation of fierce competition that may follow the country's entry to the World Trade Organization.
"Last February, we began hunting for a foreign partner, from which we need the state-of-the-art management," said Luo Fangming, Party secretary of Huashi.
"With a foreign partner, we can upgrade management, expand outlets, improve product mix and gain easier access to imported drugs," Luo said.
Established two years ago, Huashi runs 72 drugstores in Shanghai and 108 outlets nationwide. The state-owned firm is among the first batch of 50 drug retailers selected by the State Drug Administration for its program to reshape the drug distribution industry to make it more streamlined and efficient.
"The economies of scale enjoyed by foreign counterparts lead to hefty profits, which partly result from their sound systematic management," Luo added.