China's Venture Capital Landscape in 2025 – Slump and Retreat

China's biotech venture capital (VC) sector in 2025 is recovering from a deep slump. After peaking at $15.7 billion invested in 2021, annual venture funding for Chinese biotechs plummeted to just $4.2 billion in 2024, amid a broader market downturn.

This decline was driven in large part by an exodus of foreign investors. Geopolitical tensions, Beijing's tech crackdown, and strict capital controls have prompted Western VC firms to pull back or spin off their China operations. In fact, foreign capital in China's VC markets fell over 80% in 2024, and China-focused venture funds raised only $1.4 billion in U.S. dollar funds in 2024 – a small fraction of the record $17.5 billion raised in 2022.

Major Silicon Valley players have scaled down their China presence: for example, Sequoia Capital carved out its China arm (now independent as HongShan) and GGV Capital split its Asia business. The result is a far more locally-driven VC market, with 84% of new capital in 2024 coming from RMB-denominated domestic funds.

Domestic VC firms and government-backed funds now dominate Chinese biotech financing. Leading local investors such as Qiming Venture Partners, Hillhouse Capital, Matrix Partners China, TF Capital and the rebranded Sequoia China (HongShan) remain active. A few global healthcare investors continue to participate – for instance, U.S.-headquartered OrbiMed and Eight Roads (F-Prime) have taken stakes in Chinese biotech rounds – but these are the exceptions.

Overall, Western venture money is now only a trickle in China. The Chinese government is attempting to fill the gap: Beijing has urged state banks, insurers and guidance funds to "invest early, small, long-term and in hard sciences" to bolster innovation. Large state-backed funds have been launched (e.g. a new ¥1 trillion fund for advanced industries). This influx of state capital is helping sustain early-stage biotechs, though it also increases the role of the government in picking winners.

Despite these headwinds, 2025 shows tentative signs of stabilization. Venture investment has not fallen further and may even uptick slightly from 2024's low base. For example, 24 Chinese biopharma startups raised RMB or USD financings in January 2025 totaling about $490 million.

By mid-year, industry trackers noted a "resurgence" in biotech financings – with 23 venture funding deals by July 2025 (17 disclosed) totaling roughly $481 million. While modest by historical standards, this suggests cautious optimism returning.

Notably, investors are favoring later-stage and crossover rounds for companies with near-term commercialization prospects, given the higher risk of early-stage science amid capital scarcity. IPO markets have also partially reopened: Hong Kong's exchange saw 14 biotech listings in the first 8 months of 2025 raising HK$18.2 billion (~$2.3 billion) – about 4× the 2024 total. Dozens more offerings are in the queue, indicating improved exit opportunities.

Why Cross-Border Deals Are Booming

Paradoxically, even as pure VC funding tightened, deal-making between Chinese biotechs and foreign partners has surged. Chinese drug developers have increasingly turned to "license-out" deals and partnerships with Western pharma as an alternative financing channel to fund their R&D.

Rather than rely on scarce domestic venture dollars, many biotechs are monetizing their assets globally – trading ex-China rights for upfront cash, equity investments, milestones and royalties. This trend has accelerated dramatically in 2024–2025. By one analysis, outbound licensing deals from Chinese biopharma firms reached $51.9 billion in 2024, up 27% year-on-year, and accounted for nearly one-third of the global biotech licensing value.

The momentum only grew in 2025: in the first half of 2025, China-origin deals represented ~32%–45% of worldwide out-licensing deal value, a leap from ~21% in 2023. In absolute terms, 61 China-to-International partnering deals were announced in H1 2025 (37 involving U.S. companies), with aggregate disclosed deal value of $48.5 billion in H1 2025 alone, already exceeding the $44.8 billion total for all of 2024.

What's driving this boom? One factor is clearly the funding squeeze at home. As noted by a China venture advisor, "Scientific progress has not translated into ease of fundraising… This forces many firms, especially startups, to leverage license-out agreements as an alternative financing channel."

In other words, Chinese biotechs that struggle to raise enough growth capital domestically are striking licensing deals to obtain the resources needed to advance their drug candidates. These partnerships bring in hundreds of millions in non-dilutive funding (upfront payments and near-term milestones) that can sustain operations and further trials. Cui Cui, head of Asia healthcare research at Jefferies, confirms that by early 2025 roughly one-third of global innovative drug licensing value was coming from China – a direct outcome of companies "leveraging license-outs" to make up for venture shortfalls.

Another driver is the strong demand from multinational pharma. Facing their own "patent cliffs" (a wave of blockbuster drug expirations), Western pharmas are aggressively scouting for innovative assets – and China's biotech sector has become a prolific source.

Over the past decade, China invested heavily in life sciences R&D and regulatory reforms, yielding a pipeline of competitive therapies (especially in oncology and immunotherapy). Many Chinese biotechs now offer "first-in-class" or "best-in-class" drug candidates at relatively attractive deal terms. In fact, Chinese assets often come at a 40–50% lower total deal cost (and ~60–70% lower upfronts) compared to comparable Western deals.

This cost-effectiveness, combined with credible data (e.g. China's first-in-class approvals like Akeso's PD-1/VEGF antibody), makes them appealing targets for pharma companies seeking to bolster pipelines "affordably and within a manageable time frame."

Meanwhile, from the Chinese perspective, partnering with a global player confers validation, worldwide development expertise, and a share of lucrative international markets – all crucial as pricing pressures at home (e.g. China's volume-based procurement policy) squeeze margins on older drugs. Thus, these cross-border alliances are win-win: they give Chinese biotechs much-needed capital and global reach, and give multinationals innovative products to commercialize.

Notably, the Chinese government has not stood in the way of this trend. Unlike certain sensitive tech sectors, biotech has not been subject to strict decoupling measures. There are low national security concerns in drug licensing, and U.S./China regulators have so far not opposed pharma collaborations.

In fact, Beijing actively encourages innovation monetization: policies like the Hong Kong Chapter 18A listing rule (allowing pre-revenue biotech IPOs) and the Shanghai STAR Market aim to facilitate capital-raising. Local authorities also offer tax breaks and grants to biotech firms. These support measures, however, cannot fully offset private capital flight – hence the reliance on external dealmaking remains vital.

Key Players and Deals: Who's Active in Chinese Biotech?

On the domestic VC side, a handful of experienced healthcare investors continue to back Chinese biotechs despite the downturn. Qiming Venture Partners, for example, has been a leading early-stage backer of biotech startups. Firms like Lilly Asia Ventures (linked to Eli Lilly), 3E Bioventures, Hillhouse Capital, IDG Capital, Legend Capital and CITIC/SDIC funds are also prominent in life sciences funding.

Many of these local VCs have strong scientific teams and long-standing government relationships, positioning them to source deals as foreign competitors retreat. Some corporate venture arms of Chinese pharma (e.g. Fosun Pharma's investment unit) and state-guidance funds are also increasingly active in biotech financing.

Table 1 – Selected 2025 VC Funding Rounds for Chinese Biotechs (YTD as of Oct 2025)

Meanwhile, Western VC presence is now very limited. A few global specialists like OrbiMed and Novo Holdings (via its Asia team) still participate in select rounds, often co-investing alongside local firms. But the broad trend is that U.S. and European generalist VCs have largely stepped back – partly due to China's capital controls (which complicate exits and cash repatriation) and partly due to Western regulatory scrutiny of China investments.

Minghui Pharmaceutical is a late-stage biotech developing immunology and oncology drugs (e.g. a pan-JAK inhibitor cream and bispecific antibodies). Its August 2025 pre-IPO round was led by a mix of foreign and domestic healthcare funds, exemplifying how global investors like OrbiMed can still collaborate with top local VCs (Qiming, TF) on promising assets.

Chai Discovery, by contrast, is an AI-driven antibody discovery startup founded by returnee tech entrepreneurs; its $70 million Series A in August drew mainly U.S. venture investors (Menlo, Thrive, OpenAI-affiliated backers) alongside a few Chinese funds. This indicates that frontier tech/biotech crossover plays in China may attract Western capital if the value proposition is unique enough (in Chai's case, AI talent and an ex-Pfizer CSO on board).

Overall, however, such sizable fundraising rounds have been rare in 2025. Many Chinese biotechs have downsized financing targets or delayed private raises, relying on joint ventures and licensing deals instead to fund operations.

On the cross-border deal front, 2025 has already seen a string of headline-grabbing partnerships between Chinese biopharma firms and multinational pharmaceutical companies. These deals span oncology, immunology, metabolic disease, and more, involving both well-established Chinese biotechs and smaller innovators. Below is a snapshot of notable deals this year:

Table 2 – Major China-Related Biopharma Deals in 2025 (Selected)

In the Takeda–Innovent alliance, Japan's Takeda obtained rights to two of Innovent's innovative cancer antibodies. The deal featured a huge $1.2 billion upfront payout (including $100 million equity investment) to Innovent, plus up to $10 billion in future milestone fees – making it the largest-ever licensing deal for a Chinese-developed antibody.

Notably, the partners will co-develop one drug in the U.S., indicating how Chinese biologics are now advancing to pivotal trials on U.S. soil via such collaborations.

The GSK–Hengrui pact is similarly sweeping: GSK is partnering with Jiangsu Hengrui (one of China's biggest pharma firms) on as many as 12 clinical-stage programs, including a novel COPD therapy. Hengrui received $500 million upfront and could earn up to $12 billion if all milestones hit.

This "platform" deal gives GSK an exclusive option on multiple Hengrui compounds, exemplifying a quality-over-quantity approach where a big pharma secures a pipeline of drug candidates from a top Chinese innovator in one go.

Pfizer–3SBio, meanwhile, shows an American pharma licensing a Chinese bispecific antibody (for cancer) for worldwide use. Pfizer's deal (inked May 2025) was worth $1.2 billion and grants Pfizer global rights to 3SBio's PD-1/VEGF immunotherapy, with an interesting twist: Pfizer can extend the license to cover China itself for an additional fee (~$150 million).

This highlights that foreign companies increasingly want full global access, including China's market, to high-potential Chinese drugs – a reversal from a decade ago when Chinese firms mainly licensed in Western drugs for China.

Beyond these, numerous other cross-border deals have been struck in 2025 across biotech subsectors. For example, U.S.-based Zenas BioPharma licensed three autoimmune disease drugs from China's InnoCare in October (a deal up to $100 million upfront/milestones).

In cell therapy, Zhejiang's Novatim partnered with a U.S. firm to globalize a CAR-T treatment (potentially $1.3 billion in milestones).

We also continue to see M&A: in late 2024, AstraZeneca acquired China's Gracell Biotechnologies (CAR-T cell therapy) for ~$1.2 billion, and in early 2025 BioNTech purchased Beijing-based Biotheus (antibody developer) for $800 million, then partnered with BMS on a Biotheus-origin oncology antibody in a multi-billion dollar co-development deal.

These takeovers show that outright acquisitions of Chinese biotechs by Western pharma, while still less common than licensing, are on the rise – providing another avenue for founders and investors to realize value.

Looking Beyond the Hype: Neutral Conclusions

Despite triumphant headlines of a "biotech boom," the reality of China's VC scene in 2025 is mixed. On one hand, China's biotech industry is undeniably producing world-class innovation and a surge of global deals – capturing nearly half of global biotech licensing value this year.

Chinese biopharmas have leveraged their cost advantages, government support, and deep talent pool to become indispensable players in areas like oncology, immunotherapy, and AI-driven drug discovery. The spate of partnerships with pharma giants (GSK, Pfizer, Novartis, Takeda, etc.) attests that China's best drug candidates are now highly sought-after internationally.

Biotech stock indices have rallied, and Hong Kong's biotech IPO market reopened in 2025 on the back of these cross-border successes. In short, Chinese biotechs are "going global" in a way never seen before – reshaping the pipelines of Western pharma and, as one analyst put it, "reshaping the U.S. biopharma landscape" by filling portfolio gaps.

On the other hand, beneath the surface, funding challenges persist at home. Venture investment within China remains a fraction of its peak, and private financing for early-stage biotech innovation is still difficult to secure.

Many startups survive only by striking overseas deals or tapping state-guided capital. The retreat of Western VCs has left a void in mentorship and global connectivity that domestic funds and corporates are scrambling to fill.

The heavy reliance on licensing also has a downside: Chinese companies often give up worldwide rights early, potentially limiting their long-term upside (though recent mega-deals have given them more cash to advance other programs).

Furthermore, geopolitical risks loom – the U.S. is mulling restrictions on U.S.–China biotech collaborations (as indicated by Washington's sharper scrutiny of investments and Senate proposals targeting Chinese biotech ties). Any such measures could cool the cross-border deal flow that Chinese biotechs currently depend on.

Domestically, China's push for a more state-led innovation model carries inefficiencies; private firms still struggle with access to capital and loan financing in some cases.

In sum, the headline narrative of "China biotech is booming" is only partially true. Yes, 2025 has seen a boom in deal-making because Chinese biotechs have become global contenders – but also because many had no choice but to look abroad for funding.

The neutral reality is that China's biotech ecosystem is at an inflection point: its scientific capabilities and pipeline productivity are stronger than ever, even as the venture funding environment remains under pressure.

For a finance or biotech industry observer, the key takeaway is that cross-border capital flows have shifted form. Where a few years ago Western VC money poured directly into Chinese startups, now it more often arrives via pharma partnerships, licensing agreements, or Chinese companies listing on overseas exchanges.

The sector's growth is thus proceeding "beyond the PR hype," fueled less by frothy VC rounds and more by the grind of business development deals and strategic investments. Whether this model is sustainable will depend on policy and market conditions ahead.

But as of October 2025, Chinese biotechs have shown they can adapt – tapping new avenues to finance innovation when traditional venture capital becomes scarce. The result is a landscape where China's life science entrepreneurs continue to push forward, albeit with a different mix of funding sources and stakeholders than in the peak VC years.