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Investing for Global Growth through Hong Kong

In March, Xiangxue Pharmaceutical injected HK$130 million into its wholly owned Hong Kong-based subsidiary, the Xiangxue Group. In one move, this raised its registered capital from HK$70 million to HK$200 million, with the intent of boosting the group's trade in the import and export of Chinese and Western drugs and medical equipment.

There were several reasons why the Guangzhou pharmaceutical company chose to establish and nurture a subsidiary operation in Hong Kong. While the city's free-trade status was a major lure, Hong Kong's pre-eminence in the fields of capital flow, information exchange and biological research were also key factors. It is also hoped that this latest investment will allow the company's Hong Kong offshoot to expand its marketing activities, both domestically and internationally, while providing a boost to its R&D initiatives.

Medical Roots

ASEAN-bound: Xiangxue's proprietary pharmaceutical range
ASEAN-bound: Xiangxue's proprietary pharmaceutical range

The history of the business dates back to 1986, when Xiangxue Pharmaceutical was launched, initially trading solely in Guangzhou’s Luogang District. In 2010, it listed on the Shenzhen Stock Exchange.

In the early days, the company focused on the production and sale of Chinese and Western medicines, medical equipment, medical supplies and healthcare products. In recent years, the business has diversified somewhat – most notably, into beverages, with the launch of several soft drinks brands, including Yashashi, Bhengbao and Bining. Its highest profile move, however, has been into the world of football, with the company now a lead sponsor for both the Chinese Super League and the China League.

Indeed, the brand is arguably best known in Hong Kong for its previous sponsorship of Hong Kong First Division League football team Sun Hei. It also played a key role in combatting the 2003 SARS outbreak with two of its pharmaceutical products: Xiangxue Oral Anti-viral and Isatidis Radix.

The HKTDC's Guangzhou office caught up with Zeng Lun, Xiangxue's Vice-President, for an update on the company's current plans, particularly with regard to its domestic and international expansion.

In terms of recent initiatives, Mr Zeng said Xiangxue has bought a sizable stake in Chuangmei Pharmaceutical, southern China's third-largest pharmaceutical distributor. With Chuangmei currently distributing more than 5,700 types of medical products through its southern China network, this acquisition is seen as a considerable boost to Xiangxue's overall reach across China.

In terms of overseas expansion, Xiangxue has partnered with an Indonesian company to jointly launch 10 of Xiangxue's pharmaceutical products into the Indonesian market by the end of this year. Xiangxue's Indonesian partner is said to a have a 10,000-strong affiliate network of retailers across Indonesia. On the back of this, Xiangxue also hopes to introduce its soft drinks range to the country.

Xiangxue's joint venture, however, is not solely about gaining access to Indonesian consumers. The alliance also positions the company to serve the wider and more lucrative ASEAN market.

Looking ahead, Mr Zeng believes that innovation will be key to Xiangxue's continued success. That’s why the company is looking to acquire compatible overseas technology as well as set up strategic partnerships with appropriate foreign companies. It is through such tactical investments that the company hopes to develop increasingly sophisticated medical products for both the domestic and overseas markets.

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Content provided by Hong Kong Trade Development Council
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