China's largest market for materials used in traditional Chinese medicine in Bozhou, Anhui province. Industry leaders have called for a national materials' reserve system. [Photo / China Daily]

BEIJING - China should establish a reserve system for traditional Chinese medicine (TCM) materials as soon as possible, according to the nation's pharmaceutical businesses and industrial associations.

"A reserve system would help to prevent speculation in the raw materials for TCMs on the international and domestic markets, and would protect natural resources and guarantee sustainable development for China's TCM sector," said Li Zhenjiang, a deputy on the National People's Congress (NPC) and chairman of Hebei-based Shineway Pharmaceutical Group, one of China's leading private drug companies.

He also suggested the government should encourage TCM manufacturers to become involved in the system, thus helping businesses to establish a long-term supply mechanism and perform a role in upstream resources protection.

The price of TCM materials has surged dramatically during the past two years, with the average growth exceeding 100 percent as a result of a rise in raw material prices and because of speculation, according to Yu Mingde, chairman of the China Pharmaceutical Enterprises Association.

With an eye on the increasing profits in the sector, speculators have been entering the sector.

This has resulted in further price rises, over-exploitation of some natural resources, such as Ginseng, and environmental damage

So far, 168 TCM plants such as Snow Lotus and Aweto - plants which are heavily used in the TCM sector - are on the nation's list of endangered plants.

Liu Jiakun, an NPC deputy and chairman of Shandong Qihuang TCM Co Ltd, said that the high price of TCM materials also leads to the production of counterfeit materials, and stricter government supervision is required.

A national reserve system may also facilitate improved quality control.

TCMs have gained growing recognition in the international market, leading to a surge in exports.

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Output of the materials reached 700,000 tons in 2010, with around 300,000 tons, more than 40 percent, of high-end materials being exported to Japan and South Korea.

TCM materials are a natural resource, and the government should formulate policies to protect it and assuage of growing concerns about the environment and conservation, said Guan Yanbin, a NPC deputy and chairman of Heilongjiang-based Sun Flower Pharmaceuticals.

TCM materials importers overseas have also got in on the act and have used Chinese prescriptions to produce Kampo medicine - Japanese treatments based on the original Chinese practices - which usual aren't as efficacious but are sold at much higher prices.

Kampo medicine now accounts for 90 percent of the global TCM market, and 80 percent of the materials used by foreign producers came from China, according to a report in the China Pharmaceutical News.

"It is undermining the competitiveness of Chinese companies on the international market, and this phenomenon - less power with a higher price - will damage the image of TCM's in the long run," said Li.