Listing Success | Frost & Sullivan Supports Sichuan Xinhehua Traditional Chinese Medicine Tablet Co., Ltd. in Its Successful Listing in Hong Kong (2206.HK)

Sichuan Xinhehua Traditional Chinese Medicine Decoction Pieces Co., Ltd. (hereinafter referred to as "Xinhehua") was successfully listed on the stock market on November 11, 2026. The company plans to issue 6.5173 million H shares, of which 90% will be an international offering and 10% a public offering. The issue price per share is HK$40.20, with the total funds raised approximately HK$260 million.

During this Hong Kong listing process, Sullivan primarily performed the following tasks: helping the issuer accurately and objectively understand its position in the target market, using objective market data to identify, support, and highlight the issuer’s competitive advantages, assisting the issuer, investment banks, and other intermediaries in preparing the relevant sections of the prospectus (such as Overview, Competitive Advantages and Strategy, Industry Overview, Business, etc.), helping the issuer communicate with the Stock Exchange and investors, and assisting investors in quickly understanding the market ecosystem and competitive landscape, as well as assisting the issuer in responding to various industry-related questions from the Stock Exchange.

Sullivan has always been a leader in assisting enterprises with their Hong Kong listing. According to LiveReport Big Data (statistical data as of September 30, 2026), during the statistical period from January to September 2026, and over the past 12 and 36 months, Sullivan provided listing industry advisory services for 76 (market share: 66%), 111 (market share: 68%), and 223 (market share: 69%) Hong Kong IPO listings, ranking first in number and boasting extensive industry experience and communication expertise with regulatory bodies, exchanges, investment and financing institutions, and related entities.

The history of traditional Chinese medicine dates back thousands of years and represents a continuously growing segment within the global healthcare industry, providing an integrated treatment approach that combines traditional wisdom with modern medical practices. With increasing product standardization, quality control, and international market accessibility, traditional Chinese medicine has gained increasing recognition both in China and globally. In 2025, traditional Chinese medicine accounted for 25.8% of the total Chinese medical market; in 2024, the number of traditional Chinese medicine treatments in China reached 1,684.0 million, and the number of traditional Chinese medicine medical facilities increased to exceed 100,000, including traditional Chinese medicine specialty hospitals, comprehensive medical centers providing traditional Chinese medicine treatment, traditional Chinese medicine clinics, and research institutions. The proportion of traditional Chinese medicine revenue in the average pharmaceutical revenue of Chinese public hospitals also steadily rose from 17.9% in 2019 to 24.6% in 2024, reflecting public acceptance of traditional Chinese medicine and the continuous increase in institutional investment in it.

Traditional Chinese medicine products mainly include proprietary Chinese medicines, traditional Chinese medicine decoction pieces, traditional Chinese medicine formula granules, traditional Chinese medicine injections, and traditional Chinese medicine health products. Among them, traditional Chinese medicine decoction pieces are standardized and pre-treated medicinal material products that can be directly used for clinical preparation or formulation production under the guidance of traditional Chinese medicine theory, and they are an important component of personalized traditional Chinese medicine decoctions and a key raw material for proprietary Chinese medicines. Decoction pieces retain the traditional Chinese medicine treatment concepts while offering higher convenience, standardization, and quality control compared to traditional decocting methods. They can be divided into toxic and ordinary decoction pieces, based on raw material type into plant-based, animal-based, and mineral-based decoction pieces, and based on usage into formula decoction pieces and ingredient-based decoction pieces.

The Chinese traditional Chinese medicine product market grew from RMB 393.8 billion in 2020 to RMB 426.6 billion in 2025, with a compound annual growth rate of 1.6%. The market is expected to remain relatively stable from 2026 to 2030, with a compound annual growth rate of approximately 0.1%, reaching RMB 421.2 billion in 2030; it is expected to grow at a compound annual growth rate of approximately 2.5% from 2031 to 2035, reaching RMB 469.2 billion in 2035.

Source: Sullivan Analysis

Driven by technological advancements in processing methods and the growing market demand for standardized, convenient traditional Chinese medicine treatments, the traditional Chinese medicine decoction pieces market has experienced rapid growth over the past period. The Chinese traditional Chinese medicine decoction pieces market grew from RMB 200.7 billion in 2020 to RMB 320.5 billion in 2025, with a compound annual growth rate of 9.8%, higher than the overall growth rate of the traditional Chinese medicine product market during the same period. The market is expected to grow at a compound annual growth rate of 0.8% from 2026 to 2030, reaching RMB 338.4 billion in 2030; it is expected to grow at a compound annual growth rate of 2.0% from 2031 to 2035, reaching RMB 371.0 billion in 2035.

Source: Sullivan Analysis

(I) Toxic Traditional Chinese Medicine Decoction Piece Market

Toxic traditional Chinese medicine decoction pieces are products obtained from processed and prepared toxic Chinese medicinal materials. The primary purpose of processing is to reduce or eliminate toxicity and side effects, alter the medicinal properties, and enhance therapeutic efficacy. According to the Chinese Pharmacopoeia, toxic traditional Chinese medicine decoction pieces are classified according to their toxicity and the severity of possible adverse reactions in clinical use. According to the Measures for the Administration of Toxic Drugs for Medical Use, only 28 products are classified as toxic.

Representative toxic traditional Chinese medicine decoction pieces include Pinellia ternata, Anshen, processed Aconitum carmichaeli, Aconitum kusnezoffii, and Aconitum sibiricum, which have effects such as drying dampness and resolving phlegm, restoring yang and rescuing from collapse, dispelling wind and dampness, and warming the meridians and relieving pain. These products are covered by medical insurance but are not included in the centralized volume-based procurement. Toxic decoction pieces require specialized methods to reduce or control toxicity and precisely control processing temperature and time, thereby reducing toxicity while maintaining efficacy, thus requiring higher technical standards than ordinary decoction pieces.

The Chinese toxic traditional Chinese medicine decoction piece market grew from RMB 6.5 billion in 2020 to RMB 10.7 billion in 2025, with a compound annual growth rate of 10.3%. The market size is expected to reach RMB 12.7 billion in 2030 and further rise to RMB 16.6 billion in 2035, with the compound annual growth rates for 2026–2030 and 2031–2035 being 2.8% and 5.6%, respectively. As the regulatory framework improves and the acceptance of toxic decoction pieces in clinical treatment increases, the proportion of revenue from toxic decoction pieces in the total revenue from traditional Chinese medicine decoction pieces is expected to rise from 3.3% in 2025 to 4.5% in 2035.

Source: Sullivan Analysis

(II) Ordinary Traditional Chinese Medicine Decoction Piece Market

Ordinary traditional Chinese medicine decoction pieces are made from non-toxic medicinal material varieties, processed and prepared, and can be directly used in traditional Chinese medicine clinical practice or formulation production. The 2020 version of the Chinese Pharmacopoeia includes 1,169 types of ordinary traditional Chinese medicine decoction pieces. Representative varieties include Fritillaria thunbergii, Ophiopogon japonicus, Coptis chinensis, Cyathula sinensis, and Ziziphus jujuba, which are used for clearing heat and resolving phlegm, nourishing yin and promoting fluid production, clearing heat and drying dampness, dispelling blood stasis and regulating menstruation, and nourishing the heart and calming the mind; these products are covered by medical insurance, and Ophiopogon japonicus and Cyathula sinensis have also been included in the centralized volume-based procurement.

The Chinese ordinary traditional Chinese medicine decoction piece market grew from RMB 194.1 billion in 2020 to RMB 303.8 billion in 2025, with a compound annual growth rate of 9.8%. The market sizes for 2030 and 2035 are expected to be RMB 325.7 billion and RMB 354.3 billion, respectively, with the compound annual growth rates for 2026–2030 and 2031–2035 being 0.7% and 1.8%, respectively. Ordinary decoction pieces remain the dominant segment of the traditional Chinese medicine decoction piece market, but their revenue share is expected to decline from 96.7% in 2020 to 95.5% in 2035, primarily reflecting the relative growth in the toxic decoction piece market.

Raw materials for traditional Chinese medicine are the foundation of the value chain for traditional Chinese medicine decoction pieces; their supply is influenced by climate conditions, pests, natural disasters, changes in planting areas, fluctuations in market demand, and regulations. Toxic Chinese medicinal materials require stricter management during transportation, storage, and processing, whereas ordinary Chinese medicinal materials are managed more flexibly. Authentic medicinal materials remain the core of the quality standards and pricing mechanism for traditional Chinese medicine, and their quality is closely related to specific geographical environments, cultivation techniques, and processing methods. Entering the authentic medicinal material production areas and establishing stable procurement relationships help decoction piece enterprises strengthen raw material quality control, supply assurance, traceability, and vertical integration of the supply chain.

According to the National Authentic Medicinal Material Production Base Construction Plan (2018–2025), the national authentic medicinal material bases are divided into seven regions. The planting area proportions in the Northeast, North China, East China, Central China, South China, Southwest, and Northwest regions are 5%, 7%, 11%, 16%, 6%, 25%, and 30%, respectively. Regarding raw material prices, the prices of representative medicinal materials such as Ophiopogon japonicus, Fritillaria thunbergii, Pinellia ternata, Coptis chinensis, Ziziphus jujuba, White Annshen, and HeiShun etc. have varied to varying degrees, primarily due to climate, planting patterns, supply-demand imbalances, and periodic overproduction.

With the increasing global recognition of the therapeutic benefits of traditional Chinese medicine and the influence of the global Chinese community, traditional Chinese medicine decoction pieces are gradually entering some overseas markets. China’s export volume of Chinese medicinal materials and decoction pieces increased from 201,000 tons in 2019 to 255,000 tons in 2025; the export value increased from $1.1 billion in 2019 to $1.3 billion in 2025, with a compound annual growth rate of 1.5%.

In 2025, China’s top ten export markets for Chinese medicinal materials and decoction pieces were Japan at $305.3 million (24.4%), Korea at $135.6 million (10.8%), Hong Kong at $130.8 million (10.5%), Taiwan at $125.3 million (10.0%), Vietnam at $119.8 million (9.6%), Malaysia at $53.7 million (4.3%), Cambodia at $41.0 million (3.3%), the United States at $40.6 million (3.2%), Germany at $28.3 million (2.3%), and Thailand at $24.9 million (2.0%). Japan, Korea, Hong Kong, Taiwan, and Vietnam together accounted for approximately 65.3% of the export value, indicating that the Asian markets remain the primary destinations for China’s export of traditional Chinese medicine and decoction pieces.

The Chinese traditional Chinese medicine decoction piece market is relatively fragmented, and most market participants have a small scale and limited capacity. In 2025, the total number of Chinese traditional Chinese medicine decoction piece companies with production licenses reached 2,337, and the top five participants combined had a market share of only 2.7%. Raw material sources, local market preferences, and processing requirements in authentic medicinal material regions create certain regional limitations, and some small enterprises primarily operate in regional markets. The fragmented market structure means that, with the support of capital investment, standardized production, and technological advancement, large enterprises have significant room for growth in market share through industry consolidation or organic growth. Based on 2025 sales revenue, the company’s revenue from traditional Chinese medicine decoction pieces was RMB 13 billion, with a market share of 0.4%, making it the second-largest producer of traditional Chinese medicine decoction pieces in China. The company had 100% self-produced goods and offered 770 types of traditional Chinese medicine decoction pieces.

The competition in the toxic decoction piece market primarily revolves around professional expertise, regulatory compliance, and market position. Improvements in standardization, automation, and quality control capabilities help enterprises with experience and technical accumulation to consolidate their market position. In 2025, the top five participants in the toxic decoction piece market combined had a market share of 5.3%; based on sales revenue, the company’s revenue from toxic decoction pieces was RMB 1.376 billion, with a market share of 1.3%, making it the second-largest participant in the toxic decoction piece market in China.

The ordinary decoction piece market also exhibits a fragmented and competitive structure. In 2025, the top five participants in the ordinary decoction piece market combined had a market share of 2.7%; based on sales revenue, the company’s revenue from ordinary decoction pieces was RMB 12 billion, with a market share of 0.4%, making it the second-largest participant in the ordinary decoction piece market in China.

Favorable government policies are a crucial foundation for the development of the industry. The Chinese government promotes the development of the traditional Chinese medicine industry through various policy measures and regulatory frameworks, including the Opinions on Improving the Quality of Traditional Chinese Medicine and Promoting High-Quality Development of the Traditional Chinese Medicine Industry, the Implementation Plan for the Major Projects to Revitalize and Develop Traditional Chinese Medicine (2023), the Several Policy Measures to Accelerate the Characteristic Development of Traditional Chinese Medicine (2021), the Implementation Opinions on Promoting the Innovative Development of Traditional Chinese Medicine (2020), and the China’s Medium- and Long-Term Plan for Preventing and Treating Chronic Diseases (2017–2025). These policies emphasize the role of traditional Chinese medicine in preventing and treating chronic diseases, promoting its integration into public medical facilities and insurance, and providing support for innovation in traditional Chinese medicine.

Public recognition of the value of traditional Chinese medicine and the expansion of the customer base have driven demand growth. The younger generation’s focus on natural therapies, preventive health care, and sustainable lifestyles has increased the acceptance of traditional Chinese medicine in overall health care; the dissemination of health-related content on social media and in health care platforms has also facilitated the popularization of concepts such as acupuncture, herbal medicine, and dietary therapy. Meanwhile, population aging, rising incidence of chronic diseases, and increased public health awareness, disposable income, and per capita healthcare expenditure have expanded the population that requires long-term treatment and health management, providing the basis for demand for decoction pieces in disease treatment, chronic disease management, and preventive health care.

The combination of medicinal and food properties provides retail and consumer health market opportunities for herbal slices companies. The medicinal and food-related substances possess both food raw material and traditional Chinese medicine attributes; standards such as the 'Chinese Pharmacopoeia' list more than 100 substances that can serve both medicinal and nutritional purposes, common examples including Astragalus, Codonopsis, and Angelica sinensis. Related products can be sold without a prescription, and some can also be used as cooking ingredients, thereby expanding the market beyond traditional medical channels. In 2024, the market size for Chinese medicinal and food-related substances in China reached RMB 10 billion, providing a new source of revenue for brands to develop healthy products and value-added services.

The centralized volume-based procurement and quality supervision policies promote industry consolidation. The policies introduced in 2024 include requirements for quality weighted assessment, digital traceability of raw material sources, and third-party verification of consistency of active ingredients. The first round of centralized volume-based procurement for traditional Chinese medicine decoction pieces covers 45 varieties and 84 specifications, emphasizing Good Agricultural Practices, a traceability system, and the source of authentic medicinal materials. These related policies raise the standards for production scale, quality consistency, and comprehensive quality control systems, which is beneficial for leading companies with vertical integration capabilities and may also accelerate the consolidation of smaller manufacturers.

Full-channel Development and Retail Expansion. As the e-commerce platform enters the traditional Chinese medicine market, the retail channel is expected to occupy a larger share. The integration of online and offline channels helps to expand market coverage and transition the industry from a traditional distribution network to a consumer-centric business model. The development of artificial intelligence-assisted diagnosis technology may also enhance the diagnostic capabilities of traditional Chinese medicine, creating new distribution channels and accelerating market penetration.

International market expansion and penetration. Regions such as Southeast Asia have a high level of familiarity with traditional Chinese medicine culture; the Chinese diaspora and mainstream chain pharmacies in countries like Malaysia and Vietnam provide a market foundation for sliced medicine products. Traditional Chinese medicine has been incorporated into the mainstream healthcare system and insurance frameworks in countries such as Singapore and Malaysia. Over 60% of the Malaysian population has received traditional Chinese medicine treatment and has promoted the institutionalization of traditional Chinese medicine practices through the 'Traditional and Auxiliary Medicine Act'; Vietnam, on the other hand, is actively developing its domestic medicinal plant industry and issued a draft regulatory framework for the registration of traditional drugs, medicinal ingredients, and herbal medicine distribution in 2025; the improved market supervision framework provides conditions for Chinese medicine enterprises to enter the local market.

Quality control and industry standards continue to be strengthened. The traditional Chinese medicine decoction pieces industry is moving toward standardization under GMP guidelines and unified quality assessment standards, with enterprises gradually adopting digital traceability systems and blockchain technology to enhance supply chain transparency and product quality monitoring capabilities. The processing standards are also transitioning from local standards to national standards. The 'National Standard for the Processing of Traditional Chinese Medicine Decoction Pieces' was launched in 2019, covering 77 leading manufacturers; the first batch of 22 processing standards was issued in December 2022, and 39 additional varieties were issued in March 2024. In the future, multidisciplinary research methods such as traditional Chinese medicine, botany, pharmacokinetics, physics, chemistry, and biology may provide support for the evaluation of processing techniques and the improvement of product quality.

The product forms of traditional decoction pieces continue to innovate. In response to the limitations in traditional preparation efficiency, storage, and international quality control recognition, new forms such as ultra-micro and small-packaged decoction pieces are gradually being introduced to the market. These small-packaged decoction pieces enhance usability, quality control, and export compliance capabilities, making them one of the key directions for the modernization of decoction pieces.