The use of private capital to fund chain drugstores will help stimulate the country's medical reforms.

The first non-state chain drugstore, Jialun Glory National Chain Drugstore, opened by Jialun Medicine Group based in Zhuhai, Guangdong Province, is expected to begin business this month.

According to Zhao Yue, manager of the drugstore, the shop will reduce unnecessary procedures and offer consumers low prices.

He said the store will carefully select suppliers and establish an efficient distribution system.

The company will open its first store in Zhuhai, but will soon cover the whole of the Pearl River Delta and northern and western parts of Guangdong Province.

Zhao said the chain store then plans to spread its business nationwide, even to remote and poorer areas.

Just few weeks ago, 999 Group, China's largest pharmaceutical maker also announced a plan to set up a chain of 5,000 to 10,000 drugstores across the country.

Industry insiders believe that similar moves by other drugstores will trigger a round of price cuts in the industry, as well as mergers and acquisitions.

"This is really what we want," said Yu Mingde, director of the pharmaceutical department under the State Economic and Trade Commission.

Yu said the government was engaged in medicine distribution reforms to slash the cost of drugs for consumers.

Encouraging the establishment of chain drugstores will be a focal point of the ongoing reforms, Yu said.

He said it is a major change for the sector to be open to private investors rather than being monopolized by state-owned enterprises.

"Competition in drug market will be heated as more and more privately owned chain drugstores are set up," said Yu.

He added about 70 percent of drugstores will belong to chains in two or three years.

Yu expects there to be 10 chain drugstore conglomerates within five years, each with over 1,000 outlets and a turnover of 5 billion yuan (US$604 million).

The commission plans to achieve this goal by expanding existing drugstores, Yu said.

Drugstores with potential will be given the right to do business across provinces.

Jialun Medicine Group and 999 Group were two of 50 enterprises to get initial approval to set up chain stores.

Their establishment is expected to lower prices, which are relatively high under the current system.

Chain store demand will make it easier to get medicine directly from manufacturers to the shops, thus lowering costs and leaving room for price cuts, a move long-awaited by Chinese consumers.

(People's Daily 04/04/2001)