The pharmaceutical industry is currently navigating a complex landscape shaped by policy shifts, industrial transformation, and evolving global market dynamics. With continuous updates to medical insurance, volume-based procurement, and innovative drug regulations, multinational corporations (MNCs) in China are rethinking their talent deployment, while local pharmaceutical companies are facing new hurdles in their globalization efforts. Capital confidence, the mobility of high-end R&D talent, and government-enterprise collaboration mechanisms have emerged as core variables influencing the sector's medium-to-long-term trajectory, rendering the traditional transaction-focused government affairs model insufficient for the demands of high-quality industrial development.
China, bolstered by supportive policies, a vibrant capital market, and a deep pool of returnee R&D talent, remains the epicenter of life sciences innovation in the Asia-Pacific region. However, the industry is still grappling with the transition from fast-follower imitation to global first-in-class innovation. Both local companies expanding overseas and foreign firms committing long-term to China face multifaceted challenges related to mindset, innovation, and policy communication.
To delve into these critical topics—including changes in MNC executive talent allocation in China, the core deficiencies of local globalizing pharmaceutical companies, the evolution of government-enterprise collaboration, the region's competitive landscape, and growth opportunities over the next three to five years—a recent discussion was held with Zhu Hefeng, Senior Partner and Head of the Life Sciences Practice for Asia-Pacific at Korn Ferry, who also leads its Government Relations sector in China. Additionally, he serves as a board member of Mundipharma (China) Pharmaceutical Co., Ltd. and is a Senior Advisor to Carlyle Group. This comprehensive dialogue explores new trends in MNC talent strategy in China, dissects the bottlenecks hindering local innovative drug companies' global expansion, outlines the transformation of government relations from tactical execution to strategic synergy, compares the strengths and weaknesses of the pharmaceutical industries in China, Japan, Korea, and Southeast Asia, and offers professional insights and long-term outlooks on innovation upgrades and the sustainable development of the capital and talent ecosystem in China's life sciences sector.
Q1: As the Partner leading Korn Ferry's Asia-Pacific Life Sciences practice and its Government Relations sector in China, what key changes have you observed in the strategic executive talent allocation of multinational pharmaceutical companies in China over the past year?
A: The life sciences industry spans pharmaceuticals, medical devices, diagnostics, and consumer health, with the pharmaceutical segment maintaining overall growth. Despite market volatility, the fundamentals for long-term development in China remain innovative. Innovation primarily stems from two sources: internal R&D capabilities and external collaboration with local biotech firms. Over the past decade, China's biotech sector has rapidly ascended to become a global R&D powerhouse, establishing the country as the world's second-largest pharmaceutical innovation center after the U.S. However, the industry also faces the challenge of slowing revenue growth.
This environment has led to significant changes in talent selection, demanding individuals with high policy sensitivity, a deep understanding of the local market, and the ability to win market share competitively. This involves several key aspects:
1. Evolving Talent Requirements: There is an urgent need for a new generation of commercial leaders who possess policy acumen and familiarity with the local market. For companies to thrive in China, four essential elements are indispensable: innovative products with differentiated competitiveness, a corporate culture and talent management model suited to the local context, a robust organizational structure, and strong policy support.
2. Elevated Strategic Importance of China: From a pan-Asia perspective, China remains the largest market for multinational life sciences companies. Its vast population base continues to generate significant healthcare demand, leaving ample room for market growth.
3. Long-term Vision as a Management Prerequisite: China is a market for long-term players, and short-term operational thinking is insufficient. MNCs now require their management to formulate medium- and long-term operational plans, integrating government affairs and policy analysis into top-level corporate strategy. Executives who combine a long-term vision with actionable, sustainable government-enterprise collaboration plans are increasingly favored.
Furthermore, China has its own unique cultural characteristics. It is essential to develop long-term strategic plans and tactical models based on these characteristics to achieve effective localization.
Q2: You have previously mentioned that a leading local global pharmaceutical company will emerge from the current industry downturn. From the perspectives of talent and government relations, what are the most critical shortcomings for such companies today?
A: For local companies aiming to become global leaders, two core deficiencies stand out, rooted in a lack of developmental vision and innovative capability:
1. Short-term Profit-Seeking Mentality and Underinvestment in Intangible Assets: Most local companies currently prioritize short-term, immediately visible business results over sustained investment in intangible assets like talent development and supporting services. In contrast, mature Western companies adopt an "old money" mindset, investing patiently in talent systems and service capabilities to build sustainable competitive barriers through long-term commitment. A shift in this mindset will take considerable time, and this short-sighted approach also poses a significant obstacle to entering mature overseas markets.
2. Lack of First-in-Class Innovation and Dependence on Imitation: Global competition hinges on four core dimensions: innovation capability, price, product quality, and supporting services. Many local companies remain in the imitation or fast-follower stage of R&D and lack the capability for independent, breakthrough innovation. To genuinely compete globally, companies must build first-in-class innovation capabilities, backed by long-term R&D investment plans, to break free from the path of pure replication.
Q3: With continuous policy updates on medical insurance, procurement, and innovative drug regulations, corporate government relations has moved beyond a mere public relations function. How do you see the government-enterprise collaboration model in the life sciences industry evolving, and what is its future direction?
A: The pharmaceutical industry is a vital contributor to domestic economic growth, and a key national priority currently includes stabilizing and attracting foreign investment. Objectively, the ongoing push for medical insurance cost control, set against the backdrop of attracting foreign capital, presents real operational challenges for pharmaceutical companies operating in China. The industry hopes for policies that can better balance the sustainability of medical insurance funds, patient access to medications, and the high-quality development and foreign investment appeal of the biopharmaceutical sector.
In this context, the function of government affairs (GA) and the nature of government-enterprise collaboration are undergoing fundamental transformation:
1. Dual-Directional Function: In the past, GA teams focused solely on domestic, single-dimensional matters. Now, they must serve a two-way communication function. Internally, they help companies adapt to the local market, formulate appropriate operational strategies, and buffer against various business challenges. Externally, they are responsible for conveying the true state of the Chinese market to global headquarters and overseas decision-makers, acting as a bridge between global stakeholders and the domestic market. During stable periods, the need for cross-regional communication was lower, but in today's complex environment, the value of this dual-directional function has significantly increased. The core role of a government affairs team is to help mitigate business challenges, not necessarily solve structural industry problems, while continuously reinforcing the long-term value of the Chinese market to global leadership to solidify their commitment to long-term investment in China.
2. Upgrade from Tactical to Strategic: Early government-enterprise collaboration was mostly focused on transactional, execution-level work. The future points towards a more macro, in-depth, and long-term partnership. Company GA teams need to adopt an industry-wide, long-term perspective, fostering deep, mutual understanding with industrial and regulatory bodies to jointly drive the industry's long-term coordinated development.
Q4: From a pan-Asia viewpoint, comparing with Japan, Korea, and Southeast Asia, what are China's unique advantages and disadvantages in the life sciences sector regarding talent pipeline, policy support, and industrial clustering? What development opportunities exist in the next 3-5 years?
A: Horizontally compared to markets like Japan, Korea, and Southeast Asia, China is the most critical growth frontier and the most prominent development sector for pharmaceutical innovation in Asia. Its core competitive advantages are threefold: first, the state consistently introduces supportive industrial policies that provide fundamental backing for innovative development; second, the high level of activity in the domestic capital market provides a stable funding channel for R&D and industrialization; third, a significant portion of China's core R&D and innovative talent possesses overseas study and work experience, giving the country a substantial advantage in high-end R&D talent pool within Asia.
However, the industry also faces several development challenges:
1. Upgrading the Innovation Model: The previous growth model, which relied on Me-too drugs, fast-follower R&D, and serving only the domestic market, has hit a bottleneck. The industry is moving into a 2.0 or 3.0 upgrade phase, where the market demands globally relevant, first-in-class innovations and an integrated R&D system "rooted in China, facing the world."
2. Uncertainty in Capital Confidence and Talent Repatriation: Global capital confidence in the Chinese healthcare sector has shown some fluctuation. Since a large portion of core R&D talent in innovative drug companies consists of returnees, the industry's sustainable innovation could be directly impacted if overseas talent no longer views China as a premier platform for entrepreneurship and development. The long-term stable growth of the industry is inseparable from a consistent supply of capital and a continuous return of high-end talent.
It is also important to objectively recognize the boundaries of corporate government affairs functions. Grassroots GA teams are unlikely to influence the direction of top-level macro-industrial policies. The structural development challenges currently facing the industry cannot be reversed by grassroots government-enterprise collaboration alone. The overall pace of industry development largely depends on the optimization and adjustment of top-level industrial guidance, which can have a certain lag time.
Looking ahead to the next 3-5 years, the industry's development opportunities are anchored in a stable and favorable policy environment. Capital and talent are inherently profit-seeking; a continuously improving industrial environment will attract increased overseas investment and encourage high-end foreign talent to return for entrepreneurship, thereby solidifying China's innovative industrial foundation. As the domestic pharmaceutical industry undergoes the painful transition from scale expansion to high-quality innovation, leveraging its existing policy, capital, and talent base to continuously optimize the development environment will allow China's life sciences sector to cement its leading position in Asia-Pacific innovation and complete its upgrade from fast-follower to first-in-class global innovation.
Note: This article was originally produced in collaboration with Sina Finance's ESG Rating Center, an initiative dedicated to promoting sustainability, responsible investment, and ESG values in China.