Pharma Boost: China+1 Strategy Gains Traction, But Complete Gains Still 2-3 Years Away

In a significant development reshaping global pharmaceutical manufacturing, the China+1 strategy is gaining substantial momentum. Major players across the pharma sector are realigning their production and sourcing strategies to reduce overdependence on China, particularly for active pharmaceutical ingredients (APIs). While the transition has been set in motion, full monetisation of this strategic shift is still projected to take another 2 to 3 years, according to a recent Goldman Sachs report.

The China+1 strategy, which encourages companies to establish an additional base outside China, has seen increasing traction amid geopolitical tensions, trade disruptions, and pandemic-related supply chain vulnerabilities. Pharma companies are now actively looking toward India and Southeast Asia as reliable alternatives for robust, scalable, and diversified supply chains.

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Pharma Industry’s Cautious Optimism Amid Strategic Shift

Goldman Sachs analysts indicate that while the China+1 strategy is already translating into on-ground expansion in countries like India, the financial benefits are yet to be fully realised. Manufacturing setups, regulatory clearances, infrastructure development, and talent alignment are all factors that take time to mature before yielding commercial outcomes.

“We’re seeing strong strategic commitment from global pharma majors, but the pace of monetisation is gradual and will likely take 24 to 36 months to be visibly impactful,” the report highlighted. The timeline reflects the complexity of pharma manufacturing, where quality control, compliance, and economies of scale are critical for long-term profitability.

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India Emerging as a Key Pillar of the China+1 Strategy

India has emerged as one of the most prominent beneficiaries of the China+1 strategy. With a robust pharmaceutical base, cost-effective manufacturing, and a large pool of scientific talent, India is uniquely positioned to absorb much of the relocation in production capacities.

Indian pharma firms have also ramped up investments to meet international standards, especially in API production, where dependence on China has historically been high. The Production Linked Incentive (PLI) scheme by the Indian government has given further impetus to local manufacturing and reduced import dependency.

Yet, while physical and regulatory infrastructure is expanding, companies remain cautious. Transitioning from feasibility studies to full-scale operations involves time-consuming investment cycles, making the path to monetisation a slow but steady journey.

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Southeast Asia Also in Focus

Apart from India, countries such as Vietnam, Indonesia, and Thailand are being considered as secondary hubs under the China+1 strategy. While they may not match India’s scale or technical expertise in pharmaceuticals, they offer logistical and tax advantages, particularly for finished drug formulations and packaging.

However, these nations are still building the capacity to compete with India’s comprehensive pharmaceutical ecosystem, which spans research, bulk drug manufacturing, and global distribution.

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Regulatory Approvals and Quality Compliance: Key Bottlenecks

One of the major roadblocks to quicker monetisation of the China+1 strategy is the high regulatory threshold in pharmaceutical manufacturing. Export markets such as the United States, the European Union, and Japan demand stringent Good Manufacturing Practices (GMP) and international certifications that take time to secure.

While Indian companies are increasingly investing in world-class facilities and quality systems, achieving regulatory compliance at scale across newly set-up units remains a work in progress. The timeline for monetisation is heavily influenced by how quickly these facilities can get certified and begin operations at commercial scale.

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Stock Market Reflects Long-Term Confidence

Investor sentiment around Indian pharma companies has shown a positive uptick, with stock performance mirroring long-term confidence in the China+1 strategy. Several mid- to large-cap pharma firms have announced expansion plans, partnerships with global clients, and acquisitions aimed at bolstering their API capabilities.

However, the short-term impact on earnings remains limited, reinforcing the Goldman Sachs view that while the strategy is directionally sound, revenue realisation will be staggered.

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A Strategic Patience Game

The current phase of the China+1 strategy in pharma can best be described as a period of strategic patience. As companies build, test, and streamline their new operations, the long-term benefits promise to be transformative — both in terms of supply chain security and economic value creation.

For India, this presents an unparalleled opportunity to strengthen its global leadership in pharmaceutical manufacturing, provided it continues to invest in quality, compliance, and innovation.

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Conclusion

The China+1 strategy is undoubtedly gaining speed in the global pharmaceutical space. With India and Southeast Asia standing to benefit, the groundwork is being laid for a less China-dependent and more geographically diverse supply chain. However, the real financial fruits of this transition will only begin to ripen in the next two to three years.

This timeline underscores the complexity and precision required in pharma manufacturing, where success hinges not only on intent but also on execution. For now, the industry is on the right track — and watching the clock.