Many of these medications are derived from plant or animal sources and little formal effort has been apparent in the past to control the levels of pollutants such as heavy metals, toxic elements (e.g. aflatoxins) and pesticide residues in these medications. The new regulations make it compulsory that these toxins are tested for in every medication sold, as is the requirement for all such substances sold into the European marketplace.
Unfortunately these new regulations have been brought in with apparently little notice (approximately one week - Similar efforts in Europe were carried out over several years and only come into force in April 2011) and this has caused large numbers of unregistered medications to become illegal almost overnight. Around one third of all chinese medications are untested, unregistered and now illegal. Testing takes time and costs money, it is not known how many medications will fail the tests and be effectively useless.
Though these measures have inflicted economic pain, especially when enforced with so little notice they are an essential part of removing as many toxins as we can from the food chain. The health effects of these toxins are often slow to appear and easy to miss though nontheless serious with long term implications for those who take them.
Once we know these substances are safe to take there may well be an upswing in the potential markets for these substances in the developed world, compensating for the short term losses currently being experienced by producers in China.
However European regulation also brings in some control over the claims made about what these substances can do & how well they do them. This is likely to be much harder to provide evidence for - perhaps there are a few more headaches to be overcome by this industry before they can be too confident about their future.