Bioprocess industry eyes China's stimulus program amid funding woes

In their recent Q1 2024 earnings, multiple bioprocess vendors highlighted challenging economic landscape in China with sales declining in the low single digits. Firms cited periods of “continued market weakness” with, “demand and underlying activity levels remaining weak.”

Vendors referred to the economic slowdown in China and funding shortages as significant macroeconomic factors affecting growth. In July 2023, Thermo Fisher Scientific and Danaher Corporation also indicated slump in economic activity in China causing businesses to become more cautious on what they spend. This was backed by fellow vendor Satorius Aktiengesellschaft as the firm reported a significant decline due to “soft China business,” citing the effects of inventories, build ups, over capacities, and challenging funding environment as some of the key variables.

However, vendors said there is hope of a turnaround in the region as last month the Chinese government approved a Stimulus Package under the 14th Five-year plan 2024 to boost market confidence. The package is a government stimulus program broadly comprising of an investment plan, a set of funding mechanisms, and a series of industrial policies. Setting the growth rate at 5% for this fiscal year, the government announced a hike in the annual budget for science and technology by 10% for 370.8 billion yuan ($51.6 billion).

“During the [first] quarter, it was good to see a couple of positive developments in our end-markets that support this view, including continued improvements in the biotech funding environment and the stimulus program announced by China,” said Marc Casper, CEO of Thermo Fisher.

“I worked in China for many years. It's a multiyear program as opposed to the last one, which was shorter term. So, basically, the government is signaling at least to the economy that they're looking for investments in instrumentation equipment, technological advances, advanced research. So, that's very encouraging in terms of that it's not a short-term program, but rather longer term. And yes, we've already had proposals in front of customers.”

Furthermore, Sartorius’ chairman Joachim Kreuzburg said, “We would expect that measures will be taken that then also will see material effect and such stimulus program, which obviously is targeting not only on the healthcare sector, but also on others, will also probably contribute to that. But again, quantification too early to do anything like that.”

Raising a similar concern, Rainer Blair, CEO of Danaher, which owns bioprocess vendor Cytiva, said, “Certainly, we are closely following these discussions around the stimulus that's in play that you know is very broad-based in terms of an equipment replacement program that ranges from agriculture to heavy industry and includes health care markets like our own.”

“But it's very early days, and it's not clear yet how that's to be implemented, whether that's via the central government, whether it trickles through to the provinces. So, a lot to be seen there,” he added.