National Unified Market Policy Unveiled, Offering Breakthrough for Chronic Issues in Chinese Herbal Decoction Pieces Market

On April 10, the “Opinions of the Central Committee of the Communist Party of China and the State Council on Accelerating the Construction of a Unified National Market” (hereinafter referred to as the “Opinions”) was officially released. The “Opinions” clearly state that key bottlenecks restricting economic circulation should be removed to facilitate the free flow of goods and factor resources on a broader scale, accelerate the establishment of an efficient, well-regulated, fairly competitive, and fully open unified national market, and comprehensively promote the transformation of China’s market from large to strong. This provides a clear pathway and brings favorable prospects for the development of China’s traditional Chinese medicine (TCM) industry, particularly for the standardization of TCM (material) market transactions.

For a long time, the traditional Chinese medicine (TCM) decoction pieces industry has been plagued by numerous issues, including the lack of cross-regional mutual recognition of quality standards, fragmented and disorganized manufacturers characterized by small scale and scattered operations, low levels of automation, lengthy distribution chains, difficulties in achieving full-process traceability, chaotic trading markets, significant price volatility, and regulatory challenges. These problems have severely constrained the modernization and industrialization of TCM.

How can we address these persistent challenges and truly establish a unified national market? In this regard, the “Opinions” provide a “blueprint” for the sustainable and healthy development of the traditional Chinese medicine (TCM) industry. The “Opinions” designate “ensuring smoother operations across all stages—production, distribution, circulation, and consumption—to improve market efficiency and further consolidate and expand resource advantages” as the primary guiding principle; identify “leveraging economies of scale and agglomeration effects to reduce market transaction costs” as one of the key policy objectives; and propose “accelerating the digital transformation and intelligent upgrading of commodity markets while encouraging the development of integrated commodity trading platforms,” as well as “expediting the full-process digitalization of public resource transactions.”

Notably, several provinces and municipalities across China are also conducting beneficial explorations. On January 6 this year, the Sanming Procurement Alliance (National) launched its inaugural inter-provincial joint procurement of traditional Chinese medicine (TCM) materials. The Shandong Internet TCM Materials Trading Center, designated as the alliance’s trading platform, made its debut. As the first national joint procurement of TCM materials long anticipated by the industry, it saw participation from 19 provinces, 86 cities, and 9,547 medical institutions in volume reporting, with a total scale exceeding RMB 10 billion. On March 3, the joint procurement process officially commenced for the first batch of 21 types of TCM decoction pieces. It is reported that multiple provinces, including Shandong, Ningxia, and Shanxi, have issued notices requiring the submission of data for volume-based procurement. The joint procurement is expected to be completed in April.

The Shandong Internet Traditional Chinese Medicine (Herbal Materials) Trading Center is a key project under Shandong Province’s “Five-Year Breakthrough” initiative for the conversion of old and new growth drivers. It represents Shandong’s recent strategic deployment to establish the largest innovation consortium in the traditional Chinese medicine (TCM) industry nationwide, serving as a significant measure to accelerate the development of a unified national market and facilitate the smooth flow of commodity factors and resources. This initiative fully embodies the principles outlined in the “Opinions,” namely, “giving full play to the decisive role of the market in resource allocation while better leveraging the role of the government,” and “promoting growth, incentivizing innovation, optimizing division of labor, and fostering competition.”

The center has established a comprehensive transaction and service platform supporting the entire journey of traditional Chinese medicine (TCM) materials from “the field” to “the stomach.” Leveraging robust digital capabilities, the center has built five core systems: quality control and traceability, quality insurance, volume-based price negotiation, transaction settlement, and smart pharmacy. These initiatives address numerous industry challenges in the circulation of TCM materials, helping member provinces and cities within the alliance construct a closed-loop TCM service system “from production areas to patients,” and promoting the realization of “quality assurance, grade improvement, and stable supply” for TCM materials across the allied regions.

Industry experts believe that, supported by its core systems, the Shandong Internet Traditional Chinese Medicine (TCM) Materials Trading Center can facilitate joint procurement of TCM materials. By focusing on the core objectives of “effective quality control” and “premium quality at reasonable prices,” it can drive market restructuring and establish a rational, orderly circulation system aligned with the needs of joint procurement. This will compel enterprises to improve their quality control systems and enhance market competitiveness, while also promoting standardized cultivation of TCM herbs upstream. Furthermore, the digital trading platform enables rational “balancing” and “scheduling” of supply, thereby minimizing the impact of upstream price fluctuations on the TCM decoction pieces market. This approach aligns with the direction outlined in the Guidelines and, from a long-term perspective, will have a profoundly significant impact on the standardized and high-quality development of the TCM industry.

The “Opinions” propose to make it a primary objective to continuously promote the efficient circulation and scale expansion of the domestic market, accelerate the creation of a stable, fair, transparent, and predictable business environment, further reduce market transaction costs, foster technological innovation and industrial upgrading, and cultivate new advantages for participating in international competition and cooperation. It also calls for “prioritizing the integration of regional markets, establishing and improving regional cooperation mechanisms, and actively summarizing, replicating, and promoting typical experiences and practices.” It is foreseeable that, under the guidance of national strategic directions and favorable policies, local governments and enterprises will actively follow suit, leveraging joint efforts from both the market and the government to accelerate the industrialization and modernization of traditional Chinese medicine (TCM).