SWOT Analysis and Countermeasures Study on TCM Industry in Hainan Free Trade Port

Liu Tianchi,Zeng Yu

(1.Institute of Chinese Medical Sciences,University of Macao,Macao 999078,China;2.Hainan South China Sea Health Industry Research Institute,Hainan 570145,China)

Abstract Objective To study the status of the Hainan’s traditional Chinese medicine (TCM) industry and propose countermeasures to promote the construction of Hainan’s modern TCM industry against the background of Hainan Free Trade Port construction,thus transforming the TCM industry into a modern TCM industry.Methods Sociology method and SWOT model in strategic management were used to analyze the current situation of the Hainan TCM industry.Results and Conclusion By using sociological methods (field investigation,policy research,and exchange interviews) and adopting the SWOT model in strategic management,and the current situation of the Hainan TCM industry was clarified,such as strength and weakness,opportunities and threat,thus nine suggestions were put forward for the construction of Hainan modern TCM industry.

Keywords:SWOT analysis; countermeasures study; TCM industry; Hainan free trade port; sociological method

On April 13,2018,at the celebration Conference for the 30th Anniversary of the Founding of Hainan Province,General Secretary Xi Jinping personally announced that Hainan would build a Free Trade Port with Chinese characteristics and in line with China’s national conditions and Hainan development positioning.Subsequently,Hainan Provincial Party Committee,Hainan Provincial People’s Congress,and Hainan Provincial Government issued a series of policies and regulations according to the instructions of the General Secretary and the requirements of the Central Government,which were the resolutions of the Eighth Plenary Meeting of the Seventh Hainan Provincial Committee of the Communist Party of China.The Provincial People’s Congress issued the Interim Regulations on Anti-Smuggling in Hainan Province.

Under the personal command of the Provincial Political and Legal Commission,the Provincial Public Security Department has established an information platform for effective management of offshore,coastal,and island social management.All the above will lay a solid foundation for the launch of the current Free Trade Port and the closure of the port in 2025.At the same time,the provincial party committee further clarified the tourism industry,the modern service industry,and high-tech industries as the three major development neighborhoods.Hainan’s traditional Chinese medicine (TCM) industry,which has always been the focus of development,also the ushers in a golden age of development.And in the face of opportunities,there are huge challenges too.The author used the SWOT model in strategic management,sociological methods such as fieldwork,semi-structured interviews,policy and regulation research to analyze the strengths,weaknesses,opportunities and threats of the Hainan TCM industry.

1 SWOT analysis

1.1 Strength analysis

1.1.1 Regional advantages

Hainan Island is located at 18°10’-20°10’ north latitude and 108°3’-111°03’ east longitude.It has a land area of 35 000 square kilometers with a tropical maritime climate.As an independent geographical plate,its special location and climatic conditions make it rich and unique plant resources.There are more than 6 000 plant resources,of which 2 400 are medicinal plants.Nearly 300 Chinese pharmacopeias are included,and they are south medicines (genuine medicinal materials) such asAreca catechuL.,Alpinia oxyphyllaMiq.andAquilaria sinensis(Lour.) Gilg.Famous Li ethnic medicineCallicarpa nudifloraHook.et Arn.[1]andTinospora hainanensis[2],hippocampus and spirulina are the representatives of the marine drugs[3].Therefore,Hainan has the ecological priority for green development.One of the tasks of building a Free Trade Port is to turn Hainan into a national pilot zone for ecological civilization.In the future,the development of the TCM industry in Hainan can draw lessons from the concept and model of ecological pharmacy to realize harmonious development between humans and the natural environment[4].

1.1.2 Industrial advantages

After more than 30 years of rapid development,with the cordial care and strong support of the Provincial Party Committee and the government,and with the joint efforts of colleagues in the pharmaceutical industry of Hainan Province,a relatively complete industrial chain of TCM has been formed.There are 258 varieties of Chinese patent medicines in Hainan.Besides,49 pharmaceutical production enterprises have Chinese patent medicine varieties of which 30 are hospital preparations.From 2017 to 2019,the output value of TCM was 1.763 billion yuan,2.137 billion yuan,and 3.263 billion yuan respectively,accounting for 9.0%,10.0%,and 12.4% of the province’s total pharmaceutical output.The output value of TCM in 2018 and 2019 increased by 21.2% and 52.7% respectively over the previous year.Up to now,Hainan has built 2 national famous TCM studios and 11 national famous old Chinese medicine experts inheritance studios.Talents with TCM characteristic technology inheritance can get 210 000 yuan each as an award.By August 2020,the Provincial Drug Regulatory Bureau has formulated and issued 129 crude drug standards and 7 Chinese herbal slices processing standards,and published Hainan Chinese Crude Drug Standards (Volume 1)[5-7],providing a legal basis for production and circulation of real estate crude drug and Chinese crude drug prepared slices[8].

1.1.3 TCM agriculture

Hainan Island has a history of more than 1 500 years of planting medicinal materials,such asAlpinia oxyphyllaMiq.,which was used as one of the imperial court tributes in ancient times (Table 1).

Table 1 The status of planting some representative Chinese medicinal materials in Hainan (2018)

1.1.4 TCM Industry

Since the establishment of Hainan Province in 1988,there have been nearly 100 pharmaceutical production enterprises,of which less than 10 enterprises are in normal operation (Table 2).In 2019,the industrial output value was nearly 30 billion yuan,of which the TCM industry reached 2 billion yuan[9].

Table 2 Some representative TCM manufacturers in Hainan

1.1.5 TCM service industry

There are about 300 pharmaceutical marketing enterprises in Hainan with a sales volume of about 30 billion yuan.The sales of TCM reach about 10 to 15 billion yuan,accounting for 5%.Hainan Province is weak in TCM clinics and TCM education,because it has only been established for more than 30 years.However,since the beginning of the new China,it has made remarkable progress in TCM clinic practice.Now there are four Level A TCM hospitals and they are the provincial TCM hospital,Haikou,Sanya,and Qionghai TCM hospitals[10].Besides,the number of the special provincial TCM hospitals has reached or exceeded the national average level in clinic,research,and education. At the same time,Hainan Medical College opened the undergraduate majors of TCM and Chinese Materia Medica in 2002 and 2007 respectively,filling the gap in higher education of TCM.Hainan Medical College is the only one that has TCM undergraduate program.There are about 7 institutes engaged in the research and development of TCM (Table 3).

Table 3 Hainan representative R&D institute of TCM

1.2 Weakness analysis

As a small and young province,Hainan’s economy is falling behind,and its per capita income has not reached the national average level.Although Hainan has a pleasant climate and beautiful scenery,it is short of high-end talents.These talents are more likely to choose jobs in the nearby big cities like Guangzhou and Shenzhen first.At the same time,compared with the neighboring provinces,the investment in scientific research is insufficient.The lack of high-end talents,the blank of talents training,and the difficult creation of high-level R&D platform have all become the major bottlenecks restricting the sustainable development of the Hainan TCM industry(Table 4).

Table 4 Weaknesses restricting the development of the Hainan TCM industry

1.3 Opportunity analysis

1.3.1 Regional advantage

Since the central government launched the construction of the Hainan Free Trade Port,it has made a series of favorable policies,such as zero tariff and low tax.This will reduce costs and increase revenues for manufacturers and research institutes in Hainan.Low tax rate is the basic institutional arrangement for free trade ports.Corporate income tax rates in all the free trade ports around the world are lower than 17%,and some free trade ports are exempt from corporate income tax.The Plan for the Construction of Hainan Free Trade Port stipulated that by 2025[11],the corporate income tax would be reduced by 15%to encourage more industrial enterprises to register in Hainan Free Trade Port.After 2025,the enterprise income tax will be reduced by 15%,which is different from the general tax of 24%-26%.Besides,zero tariffs will be carried out for the production or research and development of imported equipment and reagents by enterprises or research and development institutions.When the added value of imported raw materials used by manufacturers is increased by 30%,there will be zero tariffs on imported raw materials.These policies are exclusive in China and will undoubtedly attract many enterprises and R&D institutions to start businesses in Hainan.Making good use of the preferential corporate income tax policy will help Hainan participate in international competition,seize the opportunities of the new round of global scientific and technological revolution and industrial reform.Then it can cultivate the advantages of cooperation and competition with Hainan characteristics to lead China’s opening up in the new era.

1.3.2 Personal income tax advantages

Recently,the central committee of the communist party of China,the State Council issued the Construction Plan of Free Trade Port in Hainan[12].The Ministry of Finance,and Administration of Taxation issued Notice on Individual Income Tax Policy for High-end Talents in Hainan Free Trade Port[13].Besides,the People’s Government of Hainan Province issued the Personal Income Tax Preferential Policies for High-end Talents in Hainan Free Trade Port[14].These policies intend to solve the problem of the shortage of high-end talents.The actual tax burden more than 15% of individual income tax shall be exempted.They also enjoy the policy of comprehensive income (including wages, salaries,labor remuneration,remuneration,and royalty four),operating income and the talent subsidized income.This income tax liquidation policy would be carried out since January 1,2020 to December 31,2024.After 2025,the Hainan Free Trade Port will levy individual income tax at three progressive rates of 3%,10%,and 15%,which will be applied to a wider range of people with greater preferential treatment.

On April 15,2019,Hainan released four key policies to attract more talents,such as Measures for Talent Team Building (Trial)[15],Measures for Optimizing the Service of Talents[16],Measures for the Construction and Management of New Think Tanks in Hainan Province[17],Implementation Opinions on Promoting the Reform of “1+N” Talent Evaluation Mechanism[18],which cover the construction of talent teams,new think tanks,service,and talent evaluation.The key construction funds are specified for the contents of innovation and entrepreneurship support,comprehensive service guarantee.Meanwhile,the individual income tax of high-income groups is also levied at 15% (top 45% in mainland China),which undoubtedly attract more high-level talents to come to Hainan for innovation and entrepreneurship.

1.3.3 “Boao hope city” advantage

On September 10,2019,according to the“Implementation Plan of Supporting the Construction of International Medical Tourism Leading Area of Boao Hope City”,Boao hope city carried out realworld data application research.Foreign medical apparatus and instruments used in Boao hope city can apply for import approval document according to the requirements from National Medical Products Administration (NMPA).As usual,it takes 3-5 years,but now it only takes 5 months or so.Therefore,the implementation of this policy not only saves time but also reduces risks.If TCM preparations in Chinese hospitals can be applied for national registration numbers through this policy,it will provide a more effective and safe way for TCM innovation.There are many mature in-hospital TCM preparations in China,and these Chinese patented drugs have been used in clinical practice for many years.The efficacy and safety of these Chinese patent drugs are reliable and guaranteed if they are obtained and marketed.

1.4 Threat analysis

1.4.1 Resources threat

The fourth survey of TCM resources showed that due to the introduction of exotic species(Eucalyptusrobusta Smith) and the reduction of land areas in Hainan,local species are decreasing.For example,Morinda officinalis,one of the four southern medicines,is difficult to find now.

1.4.2 Industry threat

Although Hainan has a wide variety of medicinal plants,the total reserve is insufficient.There is no mature medicine market,which makes the price of medicine fluctuate greatly.The number of enterprises producing Chinese patent drugs is small.Therefore,the consumption of medicinal materials is also small.

1.4.3 Registration threat

In particular,the registration of TCM in China still is not guided and managed by the theory of TCM,which causes the increased risk of TCM development.All the above factors are challenges to the development of the Hainan TCM industry.

2 Countermeasures study

The author used the SWOT model in the strategy to analyze the strengths,weaknesses,opportunities,and threats of the TCM industry in Hainan.In the context of Hainan Free Trade Port construction with the Chinese characteristics and the development direction of Hainan,a series of policies are made to provide funds,talents and other key development factors for sustainable development of Hainan TCM industry.We all know that the Convid-19 is a world disaster in 2020.By 14 October 2020,nearly 38 million people worldwide have been diagnosed and more than one million died.In the United States alone,more than 8 million have been diagnosed and nearly 220 000 died.China,on the other hand,has fought against the epidemic well.The main reason is China’s institutional advantage.In addition,TCM has also played an important role in the fight against the epidemic.For example,the team led by academician Zhang Boli,President of Tianjin University of Chinese Medicine,used TCM therapy in Wuhan Jiangxia Mobile Cabin Hospital to cure some patients in the mild cases.The government has confirmed that “three prescriptions and three medicines” are the effective drugs for the pandemic.Thanks to the outstanding performance of TCM in fighting against novel coronavirus,the development of the TCM industry has been further enhanced with confidence.At the same time,Hainan’s relatively complete TCM industry chain,including its agriculture,industry,and service industry,has laid a solid foundation for its sustainable development.In the future,as long as Hainan makes full use of strong points and overcomes the shortcomings,especially increasing the cooperation with famous institutes or state key laboratories at home and abroad,sustainable development of the Hainan TCM industry will surely be achieved.The following are suggestions for the development of Hainan’s TCM industry.

2.1 Countermeasures to take advantage

(1) The government will increase investment in basic research of large quantities of genuine medicinal materials,such as establishing international standards ofAreca catechuL.andAlpinia oxyphyllaMiq.And other medicinal materials to lay a solid foundation for their entry into the international market.(2)Pharmaceutical enterprises should be encouraged and supported to pay attention to new products for bigger market.(3) Hainan medical colleges should apply for the right to confer master’s and doctor’s degree in TCM and Chinese Materia Medica as early as possible.

2.2 Countermeasures to take opportunities

The functional departments of provincial and municipal governments at all levels should deepen the reform of delegating power,strengthening regulation,and improve services,creating a top-notch business environment.Meanwhile,the various preferential policies introduced by the state and local governments should be implemented since the establishment of the Free Trade Port to attract high-end talents.Large enterprises and projects are welcome to settle down in Hainan for their development.

2.3 Countermeasures for weaknesses

(1) Following the principles of learning other people’s expertise to serve Hainan,cooperation with well-known colleges and universities or state key laboratories at home and abroad should be strengthened.(2) From all over the world,Hanna province has actively introduced talents with TCM masters’ degree,and their teams with an international background,vision,and leadership.It has cooperated with famous universities or state key laboratories at home and abroad to cultivate high-end TCM talents with doctor’s degree.For example,it has cooperated with Institute of Chinese Medicine Sciences and University of Macao.(3) Cooperating with key laboratories at home and abroad can create a highlevel innovation platform for TCM in Hainan.For instance,it has worked with State Key Laboratory of Quality Research in Chinese Medicine,University of Macao.(4) The mature free trade port platform of Hong Kong and Macao can be used to open the international window of Hainan TCM products export.Hainan’s high-quality TCM products will be promoted to the international market.

2.4 Countermeasures for threats

It is suggested that Hainan provincial government,in consultation with the NMPA should make “real-world data research” to be applied to the national registration number of the hospital preparation applications as soon as possible.

The above-mentioned countermeasures in Hainan can provide a reference for Hainan provincial government and relevant functional departments,teaching and research institutions,and pharmaceutical enterprises to promote the sustainable development internationalization and modernization of the Hainan TCM industry against the background of Hainan Free Trade Port construction.