Decoupling Dilemmas: China Biotech's Global Balancing Act

The Biotech Cold War That Wasn't (Yet)

Despite rumblings of a U.S.–China "decoupling" in high tech, the biotech field has remained curiously interconnected. There's no outright ban on East–West collaboration in curing cancer – at least not so far. While semiconductors and 5G felt the chill of a new Cold War, CRISPR gene editing and CAR-T cell therapies have enjoyed a relative détente – for now. The biotech cold war has not fully materialized. As one might quip, cancer cells didn't get the memo about geopolitical rivalry.

China's biotech sector in 2025 faces cross-currents. On one side, Western venture capital has pulled back significantly, a casualty of broader U.S.–China tensions and China's own tech crackdowns. On the other side, domestic funding has ramped up to fill the void. At the same time, cross-border licensing deals between Chinese biotechs and Western pharma are booming, binding the two ecosystems even as political winds grow cooler. It's an ironic state of affairs: talk of decoupling in the headlines, but continued cooperation in the labs and boardrooms.

In this analysis, we examine how China's biotech industry is straddling these worlds – navigating U.S. tensions and domestic pressures – and what lies ahead. The quest for new cures is proving more resistant to divorce than many expected. The question is whether this uneasy balance can hold, or if 2026 will tilt the scales.

The Decoupling Narrative vs. Reality

Geopolitical strains between the U.S. and China have hit many sectors: export controls on chips, blacklists on telecom gear, scrutiny of Chinese apps, and so on. Biotech, however, has not been a primary target of decoupling measures. Drugs and vaccines are generally seen as global public goods rather than strategic weapons. As a result, both governments have tread carefully here. The U.S. did not slap broad sanctions on Chinese pharma, and China did not retaliate by halting medical exports. In the realm of life sciences, collaboration largely continued even when other industries got caught in the crossfire.

That said, the broader climate still had knock-on effects. Western venture capital flowing into China's biotech startups began to recede sharply after 2021. Major Silicon Valley VC firms scaled down their China exposure – for example, Sequoia Capital split off its China arm (now HongShan) and GGV Capital spun out its Asia business. By 2024, most new venture money in China was local RMB funds, as foreign investors became scarce. U.S. funds in Chinese biotech rounds are now the exception rather than the rule. This retreat stemmed from a mix of factors: U.S. regulatory scrutiny of China investments, China's capital controls, and mutual distrust.

Beijing responded by boosting domestic funding to plug the gap. The government leaned on state banks, insurers, and its sprawling "guidance funds" to invest in hard tech and biotech. In 2023, a massive new ¥1 trillion (~$140B) state fund was launched to support advanced industries (biotech included). Local governments also set up biotech investment funds. The aim was to ensure promising drug innovators wouldn't wither for lack of capital, even as private VC funding fell off a cliff.

Regulatory policies adjusted as well. In Washington, there was talk of scrutinizing biotech ties, but nothing as heavy-handed as the tech sector controls. Chinese biotech firms did face stricter auditing oversight for U.S. IPOs (as part of broader audit access disputes), yet an outright delisting wave was averted in 2022 when U.S. and Chinese regulators reached a compromise on audit inspections. In Beijing, new data security and human genetic material regulations were enacted (2019–2022) requiring approvals to transfer patient samples or trial data overseas. These rules added paperwork for cross-border research, but they haven't blocked collaboration outright. Notably, unlike sensitive military-adjacent tech, biotech exports and data flows haven't been broadly restricted by either side up to 2025. A Chinese lab can still share genomic data with an American university, provided they navigate the bureaucratic hurdles.

The upshot: the decoupling narrative in biotech is far more muted than the reality on the ground. Yes, Western VC dollars are scarcer and both countries talk about self-sufficiency in medicines. But in practice, Chinese and Western scientists still co-author papers, pharma companies still do deals, and a cancer drug discovered in Shanghai can be tested in Los Angeles. 2025 actually saw increasing interdependence in certain areas of biotech, even as political rhetoric stayed frosty.

China's Biotech Funding Landscape in 2025

By 2025, China's biotech venture funding is emerging from a deep slump. The boom times peaked in 2021 when $15.7 billion poured into Chinese biopharma startups. That era of plenty abruptly ended as geopolitical worries and China's own tech crackdowns scared off foreign investors. Funding plummeted to just $4.2 billion in 2024 – a drop of roughly 73% from the peak, and the lowest in years. It was a brutal "capital winter" for China's innovators.

Venture Funding Trend (2018-2025):

The reasons for this downturn were multifaceted. Western VCs largely withdrew after 2021, leaving Chinese startups to rely on domestic money. In 2024, only a trickle of foreign capital remained. China-focused VC funds in the U.S. struggled to raise money – only $1.4 billion was raised for USD-denominated China funds in 2024, versus a record $17.5 billion in 2022. In effect, the venture ecosystem "decoupled" financially even if not scientifically. Local investors like Qiming, Hillhouse, and Matrix Partners China became the dominant backers of biotech, with domestic capital now representing the vast majority of new funding. The Chinese government also stepped in aggressively: officials directed state insurers and banks to "invest early, small, long-term and in hard sciences" to support innovation, resulting in new mega-funds and guided investments.

Encouragingly, 2025 has shown signs of stabilization. The free-fall in venture investment halted. In fact, there are early hints of a rebound from the 2024 nadir. In January 2025 alone, 24 Chinese biopharmas raised a total of about $490 million in new financings. By mid-2025, industry trackers noted a "resurgence" as deal activity picked up. These sums are modest by the glory days, but the trajectory is upward. Market sentiment improved enough for IPO windows to reopen.

Chinese authorities, for their part, continue to grease the wheels. Policies like Hong Kong's Chapter 18A (which allows pre-revenue biotech IPOs) have been pivotal. The STAR Board in Shanghai also welcomes early-stage tech listings. Tax breaks and local subsidies are offered to biotech firms. These measures helped fill part of the funding shortfall – though they inherently increase the government's role in "picking winners."

Crucially, late-stage and crossover financings have been the focus of what funding is available. Investors have grown risk-averse, favoring companies with near-term products over speculative early research. A handful of large rounds in 2025 demonstrated this. For example, Shanghai's Minghui Pharmaceutical – an immunology/oncology biotech – raised $131 million in a pre-IPO round led by OrbiMed alongside local VCs. Another case, an AI-driven drug startup called Chai Discovery snagged $70 million in Series A mostly from U.S. tech investors, drawn by its unique AI talent and a former Pfizer scientist at the helm.

Other notable 2025 rounds included OTR Therapeutics ($100 million Series A), VelaVigo ($60 million), and Avistone Biotechnology (~$140 million). Such deals show that exceptional opportunities can still attract global money, but they are rare.

It's worth noting that China's public biotech stocks staged a strong rebound in 2025, reflecting some renewed optimism. The Hang Seng Biotech Index (tracking HK-listed biotechs) climbed approximately 60% year-to-date by autumn 2025, significantly outpacing broader market indices.

Rally drivers included:

• The "DeepSeek Moment" for the biotech sector
• Wave of billion-dollar licensing deals providing validation
• "Made in China 2025" policy support
• BIOSECURE Act legislative delays (prior to December passage)
• Faster NMPA drug approvals compared to the FDA

This surge was driven by positive trial results and the very cross-border deals we'll discuss. After a dire 2022–2023, investor confidence trickled back as it became clear that Chinese biotechs were finding alternative ways to thrive (licensing, global outreach) even without Western VC. In short, the funding landscape in late 2025 can be summed up as: stabilized but altered. The easy money is gone, replaced by a more state-supported and deal-driven financing model.

Hong Kong Dramatically Outperforms Mainland for Biotech

The 2025 stock market data reveals Hong Kong as the clear winner for biotech listings and investment. The Hang Seng Biotech Index gained approximately 60% YTD, dramatically outperforming all mainland Chinese exchanges where biotech indices gained just 15-42%. This performance gap reflects Hong Kong's superior regulatory framework for pre-revenue biotechs, massive southbound capital flows, and renewed IPO momentum that has made the city the preferred destination for Chinese biotech listings.

Mainland Exchange Performance

Shanghai Stock Exchange delivered respectable broad market returns in 2025. The SSE Composite Index climbed from 3,351.76 points at end-2024 to approximately 3,890 points by mid-December 2025, a gain of roughly +16.1% YTD. The blue-chip SSE 180 Index performed slightly better at +18.8% over 12 months, reaching 8,357 points. Top constituents include Kweichow Moutai, Ping An, and notably biotech names like Hengrui Pharmaceutical and WuXi AppTec.

However, healthcare-specific performance on the SSE main board trailed significantly. The SSE STAR Biomedical Index (which tracks 50 biotech companies on STAR Market) showed just +15% YTD through April 2025 – roughly one-quarter of Hong Kong's biotech gains.

Shenzhen Stock Exchange outperformed Shanghai, with the Shenzhen Component Index rallying from 10,414 to approximately 13,140-13,320 points, representing +26-28% YTD. The tech-heavy ChiNext Index was the standout performer among mainland boards, surging from 2,141 at year-end 2024 to roughly 3,120-3,210 points – a gain of +46-50% YTD. The VanEck ChiNext ETF confirmed this with +51.74% returns through mid-December.

ChiNext led A-share IPO activity with 20 new listings in H1 2025. In a significant policy shift, ChiNext activated its "Third Set" listing standards in June 2025, accepting its first unprofitable applicant (DapuStor) on June 27 – though no pre-profit biotech has yet successfully listed on ChiNext.

STAR Market Revived Pre-Revenue Biotech IPOs

The STAR 50 Index gained approximately +30-42% YTD (the KraneShares KSTR ETF showed +42.29% through December 12), rising from around 1,007 in late 2024 to 1,308.59 by December 19, 2025. STAR Market's 52-week range of 877-1,588 reflects significant volatility driven primarily by AI and semiconductor stocks.

The critical development for biotech came on June 18, 2025, when the CSRC announced at the Lujiazui Forum that the "Fifth Listing Standard" for unprofitable biotech companies would be revived after a nearly two-year freeze. The first approval under the reinstated rules came on July 1, 2025 for Healthgen Biotechnology, followed by Wuhan Heyuan Biotechnology's planned RMB 3.5 billion (~$488 million) IPO – the largest biotech offering under the fifth standard. Biocytogen made history as the first "H+A" dual-listed global drug innovator, opening at RMB 58 (~$8.10) versus its IPO price of RMB 26.68 (~$3.72), a +117% first-day pop.

STAR Market currently hosts 113 biotech/biopharma companies among its 586 total listings. Healthcare comprises 11.74% of the STAR 50 Index weight (versus 74% for technology). Only 22 companies have listed under the fifth standard for unprofitable biotechs – all in biopharmaceuticals – down from a peak of 54 unprofitable listings as some companies achieved profitability.

The newly created "Science and Technology Innovation Growth Tier" within STAR Market now houses 32 companies with the "U" (unprofitable) designation, signaling continued policy support for pre-revenue innovation.

Beijing Stock Exchange Remains Irrelevant for Life Sciences

The Beijing Stock Exchange, China's newest exchange established in September 2021, showed strong headline gains in 2025. The BSE 50 Index rallied from a record low of 654 in August 2024 to over 1,331 by April 2025 – representing roughly 100%+ gains from lows. The CSI Beijing 50 Index reached approximately 1,639 by December 2025.

However, BSE is not relevant for biotech companies. The exchange focuses on innovative SMEs in high-end manufacturing, new energy, and software – not capital-intensive life sciences. Of its approximately 123+ listed companies, 49 are designated "little giant" enterprises specializing in niche manufacturing technologies. There is no dedicated biotech or healthcare index on BSE, and the exchange functions primarily as a stepping stone – biotech SMEs may list on BSE initially before "upgrading" to STAR Market for larger capital raises.

Hong Kong's Dominance

Hong Kong's biotech outperformance stems from several factors. Chapter 18A listings reached 73 companies by June 2025 (up from 67 in late 2024), with a minimum market cap threshold of just HK$1.5 billion (~$191 million) versus RMB 4 billion (~$560 million) for STAR Market's fifth standard. The new Technology Enterprises Channel (TECH) launched May 6, 2025 further streamlined biotech listings with confidential filing options.

IPO activity tells the story decisively: through August 2025, 14 Chinese biopharma/device companies listed in Hong Kong raising HK$18.2 billion (~$2.33 billion) – approximately 4x 2024's entire total. Another 36+ companies remain in the queue. By contrast, STAR Market saw only 3-5 biotech IPOs under the fifth standard in 2025, with the pathway frozen until mid-year.

Q4 2025 saw continued momentum: Xuanzhu Biopharmaceutical (a Chapter 18A spin-off from Sihuan Pharma) raised HKD 781 million (~$100 million) in October 2025 with its retail portion 4,900x oversubscribed. Ming Yu Pharmaceutical filed for listing in December 2025 with Morgan Stanley, BofA, and CITIC as sponsors, bringing 13 drug candidates to market. By late September alone, 10+ companies filed for Hong Kong listings, suggesting total 2025 HK biotech fundraising likely exceeded HK$20 billion (~$2.6 billion). Post-IPO valuations have moderated from 2018 peaks of tens of billions of RMB (~$1-3 billion+) to more realistic $420-700 million for many 2025 Hong Kong IPOs – reflecting maturation of the market.

The Hong Kong Exchange also announced Hang Seng Biotech Index Futures, which commenced trading on November 28, 2025, providing additional hedging and investment tools for the sector.

Record southbound capital flows reinforced Hong Kong's dominance. YTD cumulative Stock Connect trading volume reached RMB 27.8 trillion (~$3.9 trillion) – nearly 2.5x 2024's full-year total of RMB 11.23 trillion (~$1.6 trillion). Average daily southbound turnover hit HK$46 billion (~$5.9 billion, +40% YoY). Hong Kong biotech ETFs attracted HK$1.3 billion (~$167 million) in net inflows, with combined AUM of HK$3.4 billion (~$436 million, +123% YoY).

A+H dual listings surged in 2025, with 83 A-share companies seeking Hong Kong secondary listings YTD – more than the entire previous decade combined. Healthcare companies were prominent among filers, reflecting the value biotechs place on Hong Kong market access even when already mainland-listed.

Industry sentiment strongly favors Hong Kong's predictability. As one investor noted: "Hong Kong should still be the main IPO destination for innovative drug companies, because certainty is most important." The two-year mainland IPO freeze (June 2023-July 2025) pushed biotechs decisively toward Hong Kong, and that momentum has continued even after STAR Market reopened.

The License-Out Boom: China as a Source of Innovation

Paradoxically, even as venture funding tightened, deal-making between Chinese biotechs and foreign pharma surged to record levels. Strapped for cash at home, Chinese drug developers have increasingly turned to "license-out" deals – trading away rights to their drug candidates in overseas markets in return for upfront payments and milestones. This trend went into overdrive in 2024–2025. By one analysis, outbound licensing deals from Chinese biopharma firms reached $51.9 billion in 2024, up 27% year-on-year, accounting for nearly one-third of the global biotech licensing value.

And 2025 is on track to dwarf even that: in the first half of 2025 alone, China-origin deals totaled approximately $48.5 billion (61 deals announced), exceeding 2024's full-year total. This represented roughly 32–45% of worldwide biotech licensing value in H1 2025 – an astonishing leap from ~21% in 2023. In other words, Chinese innovators have quickly become a huge contributor to pharma pipelines globally.

Outbound Licensing Deal Value Trend (2018-2025):

What's driving this license-out boom? The primary factor is the funding squeeze at home. As one venture advisor put it, "Scientific progress has not translated into ease of fundraising… This forces many firms to leverage license-out agreements as an alternative financing channel." Lacking sufficient local capital to advance expensive late-stage trials, Chinese biotechs are effectively monetizing their IP globally. By signing partnerships with Big Pharma, they receive hundreds of millions in non-dilutive funding (upfront cash and near-term milestones) that can keep the lights on and trials running. Cui Cui, head of Asia healthcare research at Jefferies, noted that by early 2025 roughly one-third of global innovative drug licensing value was coming from China – directly attributing this to companies "leveraging license-outs" to compensate for venture shortfalls. In short, licensing has become a vital lifeline, practically substituting for what late-stage VC or IPO proceeds used to provide.

Another driver is Western pharma's hunger for innovation. Big Pharma companies face their own "patent cliffs" – blockbuster drugs losing exclusivity – and are scouring the world for fresh drug candidates. Increasingly, they find them in China. Over the past decade, China invested heavily in life sciences R&D and reformed its drug regulations, producing a pipeline of competitive therapies (especially in oncology and immunology). Many Chinese biotechs now boast "first-in-class" or "best-in-class" drug candidates, often at 40–50% lower cost in deal value (and ~60–70% lower upfront payments) compared to similar deals for Western biotechs. This cost-effectiveness makes Chinese assets very attractive to multinationals. As FierceBiotech reported, a Chinese bispecific antibody deal might come at half the price of a comparable U.S. deal, yet with equally strong data. It's the classic bargain: high-quality science on sale.

For Chinese companies, these partnerships aren't just about money – they also confer credibility and global validation. Teaming up with a Pfizer or Novartis lends gravitas, provides access to worldwide development expertise, and opens a share of international markets. This has become especially crucial as China's domestic market growth slows and pricing pressures mount. Beijing's volume-based procurement (VBP) program has aggressively cut prices for many drugs in China, squeezing profit margins on older therapies. So, Chinese biotechs have all the more incentive to seek revenues abroad, where novel drugs can command premium prices. Cross-border alliances thus are win-win: Chinese firms get cash and a global stage for their innovations, Western pharmas get promising products to fill their pipelines.

Major 2025 Licensing Deals

The scale and pace of recent deals are unprecedented. Virtually every week in 2024–25 saw a headline-grabbing alliance:

Takeda – Innovent (October 2025): Japan's Takeda licensed two oncology antibodies from China's Innovent Biologics for $1.2 billion upfront (including $100M equity) – a record upfront for a China-developed drug – plus up to $10.2 billion in milestone payments, totaling up to $11.4 billion. Assets include IBI363 (PD-1/IL-2α-bias bispecific), IBI343 (CLDN18.2 ADC), and an IBI3001 option. The deal closed December 4, 2025. This is one of the largest biotech licensing deals ever, and notably involves co-developing a drug in the U.S., showing how Chinese biologics are advancing to pivotal trials on U.S. soil.

GSK – Jiangsu Hengrui (July 2025): UK-based GSK partnered with Hengrui, one of China's top pharma companies, on a broad alliance covering up to 12 drug programs (spanning COPD, oncology, etc.). Hengrui received $500 million upfront and could earn a total of $12.5 billion in milestones if all programs succeed. The primary asset is HRS-9821 (PDE3/4 inhibitor for COPD). This "platform deal" gives GSK an entire portfolio of drug candidates in one go – a testament to the depth of Hengrui's pipeline and Western firms' confidence in Chinese R&D.

Pfizer – 3SBio (May 2025): Pfizer struck a deal for global rights to 3SBio's novel PD-1/VEGF bispecific antibody (SSGJ-707, a cancer immunotherapy). The upfront payment was $1.25 billion (closed July 24, 2025), with a $100 million equity investment in 3SBio, up to $4.8 billion in milestones, and a $150 million China option – totaling approximately $6.3 billion in potential value. Indications include NSCLC, metastatic CRC, and gynecological tumors. That Pfizer negotiated an option to extend the license to include China is striking – an American pharma paying to secure China rights from a Chinese company – a reversal of the old norm where Chinese firms only licensed into China. It shows foreign companies now want full global access to top Chinese drugs, including in China's own market.

BMS – Harbour BioMed (December 2025): Bristol-Myers Squibb partnered with Harbour BioMed for a multi-specific antibody discovery collaboration worth up to $1.125 billion, with $90 million upfront.

BMS – Bio-Thera Solutions: BMS acquired rights to BL-B01D1 (EGFR/HER3 bispecific ADC) in a deal valued at approximately $8.4 billion.

AstraZeneca – CSPC Pharmaceutical: A $5 billion+ deal covering an AI platform and preclinical cancer assets.

Eli Lilly – SanegeneBio (November 2025): A deal valued at up to $1.2 billion with undisclosed upfront payment.

These are just a few highlights. There were dozens more deals across oncology, immunology, rare diseases, and beyond. Even outright acquisitions appeared: in late 2024, AstraZeneca acquired China's Gracell (a CAR-T startup) for ~$1.2 billion, and in early 2025 BioNTech bought Beijing-based Biotheus for $800 million. These takeovers illustrate that some Western pharmas aren't just licensing but outright buying Chinese biotechs – another avenue for founders and investors to realize value.

Additional notable 2025 M&A activity:

• Sino Biopharmaceutical acquired LaNova Medicines for up to $951 million (July 2025)
• AstraZeneca acquired FibroGen China for $220 million (August 2025)

ADC Dominance and AI Drug Discovery

Two therapeutic areas deserve special attention for China's leadership position:

Antibody-Drug Conjugates (ADCs): China accounts for 60% of all newly registered global ADC clinical trials. ADCs represented 56% of total China oncology licensing deal value in 2024 (~$19 billion of $34 billion). Over half of ADC deals involve bispecific ADCs, reflecting China's technical sophistication in this modality.

AI Drug Discovery: Listed as a formal priority in China's Five-Year Plan for 2025. Major deals include the AstraZeneca-CSPC partnership ($5B), Pfizer-XtalPi expansion, and Sanofi-Earendil Labs ($1.7B).

It's worth highlighting that Chinese authorities have not impeded this licensing boom – in fact, they tacitly encourage it. Unlike certain sensitive tech sectors, Beijing hasn't cracked down on biotech deals with foreigners. There are no export licenses required to out-license a cancer drug. On the contrary, officials see these deals as validating China's innovation and bringing in capital. The government did tighten rules on human genetic materials (HGR) in recent years – for example, foreign firms must get permission to use Chinese patient samples or genetic data, per 2019 regulations – but those are aimed at safeguarding data, not preventing drug partnerships. Thus far, U.S. and Chinese regulators have not opposed pharma collaborations or data-sharing needed for drug trials. This relative freedom has been a crucial enabler of the cross-border dealflow.

Regulatory and Political Crosswinds

It would be naïve to assume biotech is completely immune to geopolitical tensions. There are subtle and not-so-subtle crosswinds that companies must navigate.

The BIOSECURE Act: Now Law

On the U.S. side, while no direct sanctions target biotech, policymakers have sharpened their oversight. Washington is increasingly wary of sensitive biological data and China's biotech ties to its military. The BIOSECURE Act, included in the FY2026 National Defense Authorization Act, was signed into law by President Trump on December 18, 2025. The law will bar U.S. federal agencies from procuring biotech equipment or services from "companies of concern" in China.

Legislative Timeline:

• December 7, 2025: Final NDAA compromise text released
• December 10, 2025: House passed (312-112)
• December 17, 2025: Senate passed (77-20)
• December 18, 2025: President Trump signed into law

Key Provisions:

• Located in Section 851, titled "Prohibition on Contracting with Certain Biotechnology Providers"
• The definition of covered biotech gear is broad – instruments, software, data services related to biological analysis are included
• The law will rely on a list of designated companies (to be drawn up by 2026) focusing on those linked to the Chinese military or involved in collecting U.S. genetic data
• Medical countermeasures exception added for declared public health emergencies
• Due process provision allows designated companies to request removal

Company Designation Mechanism: Notably, the enacted law does NOT explicitly name any companies – a significant change from the original 2024 bill which named five companies (BGI, MGI, Complete Genomics, WuXi AppTec, WuXi Biologics). Instead, the new designation mechanism relies on the DoD Section 1260H List (Chinese Military Companies) and an OMB administrative designation process.

As of the January 7, 2025 DoD 1260H List update:

• BGI Group (BGI Genomics): On the list
• MGI Tech: On the list (as BGI subsidiary)
• Complete Genomics: Not on the list
• WuXi AppTec: Not on the list
• WuXi Biologics: Not on the list

This means WuXi AppTec and WuXi Biologics are not currently subject to automatic BIOSECURE restrictions unless added to the 1260H list or designated through the OMB process. The Pentagon has reportedly recommended adding WuXi to the 1260H list, but no action has been taken as of December 2025.

Implementation Timeline:

• OMB publishes "biotechnology companies of concern" list: Within 1 year (~December 2026)
• OMB guidance: 180 days after list (~June 2027)
• FAR revision: 1 year after guidance (~June 2028)
• Existing contract grandfathering: 5 years from FAR revision (~2033)

Prohibitions are unlikely to take effect until Q3-Q4 2028 for companies on the 1260H list and early 2029 for others. Importantly, while the law doesn't directly impede private-sector licensing deals, it's a sign of the times – trust is eroding. If a Chinese company is deemed a security risk, it could find itself cut off from U.S. government collaborations or contracts.

Outbound Investment Screening

Another U.S. move has been the introduction of an outbound investment screening program. In 2024, the Biden administration finalized rules requiring U.S. investors to notify (or in some cases prohibit) investments in certain Chinese tech sectors. Biotechnology was notably not included in the initial scope, which instead targeted semiconductors, AI, and quantum tech. This exclusion underscores that, as of 2025, Washington doesn't view mainstream biotech investment as an imminent national security threat on par with advanced computing.

However, some voices in Congress argue that certain biotechnologies (like gene editing or biomanufacturing capacity) should be monitored. The Senate's own report on biosecurity recommended ensuring U.S. capital doesn't fund Chinese biotechs that could aid the Chinese military or controversial bio-programs. So far, no law explicitly restricts such private investments, but the climate is one of heightened scrutiny.

The FIGHT China Act (included in FY2026 NDAA) authorizes the Treasury Secretary to expand restrictions. Trump's February 2025 "America First Investment Policy" memorandum directs review to potentially include "biotechnology, hypersonics, aerospace, advanced manufacturing." A Treasury review was due April 1, 2025 but has not been publicly released.

Chinese Regulatory Developments

On the Chinese side, policies remain double-edged – promoting global cooperation in biotech on one hand, but pushing for self-reliance on the other. Beijing's rhetoric in 2025 emphasizes building an indigenous, resilient biopharma supply chain (part of "Healthy China 2030" goals and five-year plans). China wants the capability to discover, test, and manufacture critical drugs at home without needing Western inputs.

Regulations on Network Data Security Management (No. 790) took effect January 1, 2025. Cross-border genomic data transfers require security review by the Ministry of Science and Technology. Human genetic resources are classified as "strategic national assets," and security review is required for exome/genome sequencing data of 500+ individuals.

The National Medical Products Administration (NMPA), China's FDA equivalent, remains generally aligned with global standards and even accelerated approvals for innovative drugs. In recent years, NMPA joined the ICH (International Council for Harmonisation), meaning it abides by global clinical and quality guidelines – a boon for companies doing multi-country trials.

A bigger internal headwind in China has been the medical anti-corruption campaign and pricing reforms. In 2023, Beijing launched a sweeping crackdown on bribery in hospitals and pharma, which, while positive for ethics, unsettled domestic drug sales for a time. Combined with an economic slowdown, pharma sales growth in China dipped in late 2023. Meanwhile, the ongoing VBP (Volume-Based Procurement) program drastically cut prices of many drugs (some cancer drug prices dropped 70%+ after centralized bidding). This policy, great for public healthcare savings, means drugmakers can't count on high margins in China. Consequently, Chinese biotechs feel pressure to go global early – they know a home-run success at home might get value-slashed by VBP, so better to have Western markets where prices are higher. This dynamic indirectly fuels more license-out deals and overseas trials.

AstraZeneca China Investigation

In a significant development, AstraZeneca's China president Leon Wang was detained by Chinese authorities in November 2025 over allegations of illegal drug imports and improper patient data collection. This high-profile case serves as a reminder that multinationals operating in China face their own compliance challenges and regulatory risks.

Key Players and Their Strategies

Amid this complex landscape, different actors in China's biotech scene have adopted strategies to survive and thrive.

Chinese Biotechs: Think Globally

The most successful Chinese biotechs are pursuing dual strategies: catering to the domestic market and designing their pipelines for global appeal. A classic example is BeiGene (recently rebranded to BeOne Medicines), founded in Beijing but very much globally oriented – it runs clinical trials worldwide, listed on NASDAQ as well as Hong Kong, and partnered with American and European pharmas. BeiGene's BTK inhibitor became the first Chinese-discovered cancer drug to win FDA approval (in 2019), showing the model works.

BeiGene 2025 Highlights:

• March 2025: FDA approved Tevimbra (tislelizumab) + chemo for advanced ESCC
• March 2025: FDA accelerated approval for Brukinsa (5th US indication)
• Brukinsa sales exceeded $828M in Q4 2024, surpassing AstraZeneca's Calquence
• BGB-16673 BTK degrader advancing to Phase III – potential first-to-market

Similarly, Legend Biotech, though it moved its HQ to New Jersey, built on China-origin science (CAR-T cells from a lab in Nanjing) to co-develop a therapy with Johnson & Johnson – resulting in Carvykti, approved by the FDA in 2022 as a cutting-edge myeloma treatment.

Legend Biotech 2025 Highlights:

• 5-year CARTITUDE-1 data: 33% of patients progression-free for ≥5 years (ASCO 2025)
• Median PFS of 50.4 months for triple-class exposed patients (ASH 2025)
• CARVYKTI net trade sales ~$439M in Q2 2025 (record quarterly CAR-T)
• Over 6,500 patients treated to date
• New Philadelphia R&D facility opened November 2025

These cases illustrate the "East-West co-development" approach: leverage China's research strengths and patient pool, pair with Western partners for development and regulatory, and achieve global impact. Many up-and-coming Chinese biotechs explicitly plan for FDA or EMA (Europe) approvals from the get-go, not just China's NMPA. By doing so, they make themselves attractive to partners and investors globally.

NewCo Structures: In 2025, we saw deals where instead of a straight license, Chinese firms and Western investors created a new overseas company to house the drug, with both sides owning shares. This way, the Chinese innovator retains equity upside and avoids transferring the asset outright. For example, Shanghai's Mabwell formed Kalexo Bio with U.S. partner Aditum to develop an RNA therapy (a $1B deal). Such inventive deal structures show Chinese biotechs are learning to negotiate terms that keep them in the game long-term.

Multinational Pharmas: Invest With China

Western and Japanese pharma companies have by no means abandoned China – if anything, their strategy has evolved to "invest with China rather than just in China." Big Pharma still covets the large Chinese patient market, so they maintain sizable China operations. But beyond selling drugs there, they are now actively sourcing innovation from Chinese partners. Companies like Novartis, Pfizer, Merck, and AstraZeneca have scouts and incubator programs in China to spot promising startups. Some have corporate venture capital arms (e.g., Lilly Asia Ventures, which operates semi-independently and invests in Chinese biotechs). These pharma VCs have participated in many Chinese funding rounds, providing a bridge when traditional VC was scarce.

AstraZeneca has opened R&D hubs in Shanghai, collaborating with local scientists on AI drug discovery. Novartis set up accelerator programs to mentor Chinese biotechs. Such initiatives signal that foreign pharmas still view China as a vital innovation base, not just a sales territory.

It's noteworthy that no major multinational has pulled out of China's biotech scene, despite political pressure in other sectors. In 2025, Pfizer's CEO even visited China, signing MOUs on health cooperation. The pharma industry's lobbying power might be one reason biotech has been spared from severe sanctions. Practically, Western pharmas know that shunning China means missing out on a trove of drug candidates and a huge patient market for trials (China contributes >15% of global clinical trial patients now).

Investors and Venture Capitalists

The VC landscape shifted to local players. Leading Chinese funds like Qiming, Hillhouse, Legend Capital, and HongShan (Sequoia China) became the anchor investors for most biotech rounds. These funds have deepened their expertise – hiring PhDs and MDs as partners to better vet science.

A few global investors remain active at the margins. OrbiMed (U.S.-based) has an Asia team and continues to invest in select late-stage Chinese biotechs. Eight Roads (F-Prime), tied to Fidelity, is another Western player with a China presence, as is Novo Holdings (the Danish fund of Novo Nordisk). Their continued involvement is important symbolically – it signals that China's biotech isn't "radioactive" to everyone. In fact, as soon as valuation expectations in China became more reasonable post-2022, some contrarian foreign investors saw it as a buying opportunity.

FDA Approvals of China-Origin Drugs

The FDA has shown no bias against approving Chinese-origin drugs purely due to origin – safety and efficacy remain the criteria. Several Chinese-developed treatments have reached U.S. shores largely unimpeded by politics.

2025 Approval:

• Penpulimab-kcqx (April 23, 2025): PD-1 antibody for nasopharyngeal carcinoma, developed by Akeso Inc. – the second FDA-approved drug from Akeso

Prior Chinese-developed Drugs:

• Brukinsa (zanubrutinib) – BeiGene, approved 2019 for lymphoma
• Carvykti (ciltacabtagene autoleucel) – Legend/J&J, approved 2022 for multiple myeloma
• Loqtorzi (toripalimab) – approved 2023
• Fruzaqla (fruquintinib) – approved 2023
• Ryzneuta (efbemalenograstim) – approved 2023

Major Stock Gainers 2025

For comparison, U.S. biotech indices gained XBI +28-37% YTD and IBB +27-28% YTD. China biotech (~60%) significantly outperformed U.S. indices.

Case Study: Science Overcomes Politics

To illustrate the potential of collaboration even amid decoupling pressures, consider Legend Biotech and its drug Carvykti. Legend started as a small Chinese startup (as a subsidiary of GenScript) working on CAR-T cell therapy for cancer. In 2017, they struck a partnership with Janssen (J&J) to co-develop their CAR-T treatment. Over several years, Chinese and American scientists worked together on clinical trials spanning both countries, sharing data and expertise. Remarkably, despite the U.S.–China trade war heating up in 2018–19, their trial continued unimpeded. In 2022, Carvykti was approved by the U.S. FDA for multiple myeloma – one of the first China-origin cell therapies to reach the world market. It has since extended lives of patients who had no other options.

What's instructive is how both sides benefited. Legend, a Chinese company, gained a global validation and a stake in worldwide revenues (the drug could make blockbuster sales). J&J gained a cutting-edge therapy it might not have developed alone, bolstering its oncology portfolio. Regulators cooperated: the FDA accepted data from Chinese trial sites because they met quality standards, and China's NMPA approved the drug domestically. Even manufacturing was done on both continents to supply each market. This co-development model meant that when Carvykti launched, it was simultaneously a triumph for China's biotech and a win for a U.S. pharma.

Such win-win outcomes fly in the face of zero-sum decoupling logic. BeiGene partnering with Amgen in 2020 is another example – Amgen invested $2.7B for a minority stake, and they co-developed several cancer drugs. BeiGene got capital and expertise, Amgen got pipeline assets and a stronger China presence. Despite the geopolitical noise, that partnership thrived.

These cases underscore a fundamental point: science is border-agnostic. T-cells, DNA sequences, protein folds – they don't carry passports. The success of Carvykti and others suggests that when the incentive is strong (curing deadly diseases), companies and regulators find ways to bridge political divides.

Forward-Looking: 2026 and Beyond

As 2026 approaches, China's biotech industry stands at a crossroads of opportunity and uncertainty. The experiences of 2025 suggest a few possible trajectories, contingent largely on the geopolitical climate and policy choices on both sides.

Scenario 1: Continued Partial Engagement

One scenario is continued partial engagement – essentially, a new normal where cross-border collaboration persists but under tighter guardrails. In this scenario, we'd see ongoing robust deal-making (licensing, co-development) because the scientific and commercial logic remains compelling. However, both countries might impose "soft barriers" to manage risk. For instance, China could enforce stricter data localization – requiring that clinical trial data generated in China stay on domestic servers and only aggregated results go abroad. The U.S., with its Biosecure Act rules coming into effect by 2028, will blacklist some Chinese biotech companies from U.S. government ecosystems.

Another facet of partial engagement may be an increased role of allied cooperation. Western nations, concerned about dependence on China, are already investing in diversifying their supply chains for critical medicines. The U.S. and EU might incentivize more biotech manufacturing at home. China, for its part, might deepen ties with "friendly" countries – for instance, partnering more with European or Asian firms if the U.S. becomes harder to work with. In 2025, we already saw Japan's Takeda and UK's GSK eagerly doing Chinese deals, indicating it's not just a U.S.-China dynamic but a global one. Europe has generally been less hawkish than the U.S. on Chinese biotech, so Chinese companies might focus collaboration efforts there if U.S. regulatory risk rises.

Scenario 2: Drift Toward Greater Decoupling

A more pessimistic scenario is a drift toward greater decoupling in biotech. This could happen if U.S.-China relations deteriorate sharply (imagine a major geopolitical crisis) or if a biosecurity incident triggers mistrust. In that case, we could see harsher measures: the U.S. could expand its outbound investment bans to biotech, or ban certain collaborations. China could retaliate by withholding some cooperation – maybe limiting exports of certain raw materials (China is a huge supplier of antibiotic ingredients and vitamin C, for instance). A true decoupling would hurt both sides: drug development would slow, costs would rise, and patients would wait longer for cures. It's a lose-lose, which is why it hasn't happened yet.

A specific flashpoint could be genomic data and AI in biotech. As AI-driven drug discovery grows, concerns about training AI on sensitive genetic data might emerge. The U.S. could say "we don't want our biomedical AI models trained on Chinese patient data" or vice versa, citing privacy/national security.

Scenario 3: Re-Globalization

On the brighter side, a scenario of re-globalization in biotech is also possible, driven by necessity. A stark reminder like a pandemic could refocus minds on cooperation. COVID-19, despite U.S.-China tensions, saw a lot of collaboration. If a new health crisis emerges, it might underscore that pathogens don't respect borders, and siloing off R&D is self-defeating. We could then see an easing of restrictions, fast-track of mutual drug approvals, and pooling of resources.

Actionable Insights for Industry

For industry players plotting their 2026–2028 strategies, a few actionable insights emerge:

Don't ignore China's innovation: For global pharma and investors, completely avoiding China means forgoing a growing source of novel drugs. In 2025, roughly 32-45% of global licensing value came from Chinese-origin assets. Dismissing Chinese biotechs could mean missing the next blockbuster or paying a lot more later to acquire it.

Secure your IP and data: Companies collaborating across borders should implement stringent IP protection and data compartmentalization. For a Western firm partnering with a Chinese biotech, ensure clear agreements on data sharing that comply with Chinese law.

Be deal-flexible: Embrace creative deal structures like the NewCo model or risk-sharing partnerships. If you're a U.S. biotech low on cash, consider licensing your drug to a Chinese company for China rights – many are cashed up from those huge deals and will pay handsomely for assets to sell in China.

Scenario planning: Both Western and Chinese firms should have a Plan B (and C) for various decoupling scenarios. If the U.S. suddenly required approval for American personnel to work on China trials, do you have capable local teams? If Chinese regulators mandated all raw data stay in-country, can your foreign partner work with aggregated summaries?

Engage policymakers constructively: Industry voices matter. Biotech companies and associations can advocate to their governments about the importance of cross-border research. Keeping lines of communication open and highlighting success stories may help prevent knee-jerk policies.

Conclusion: Bridging the Biotech Gulf

China's biotech rise amid an era of geopolitical tension presents a nuanced picture that defies simple narratives. The sector has not decoupled in any absolute sense; rather, it's recalibrating the connections. As of end-2025, we see a biotech industry that remains globally entangled even as other industries disentangle. Chinese biotechs are licensing out molecules to Western firms at record pace, becoming an integral part of the global R&D engine. Simultaneously, Western investors and companies have grown more cautious and selective in their China engagements. It's a relationship being reshaped, not severed.

The current equilibrium – Chinese innovation flowing out, foreign capital and expertise flowing in – has proven resilient so far. It suggests that economic and scientific incentives can prevail over political discord, at least in this domain. That said, risks loom on the horizon. Washington's increased scrutiny could yet throw sand in the gears. Beijing's push for indigenous capability could, if taken to extremes, lead to less openness. There is a narrow line to walk: encouraging domestic strength without isolating from the global system.

For stakeholders in biotech, the takeaway is to expect neither full coupling nor full decoupling, but a complicated middle path. Engaging with China's biotech scene is still possible and often profitable, but it requires more homework and perhaps a thicker skin for volatility. Ignoring China is not really an option for serious pharma players – the market's too big and the science coming out of China too significant to pass up.

On the policy front, one hopes that leaders see the mutual gains at stake. Decoupling in biotech isn't like in semiconductors; there's no winner in a biological arms race where each side denies the other life-saving cures. The more likely future is a selective decoupling: critical, defense-related biotech might get compartmentalized, but the vast majority of biomedical collaboration will continue because it's simply too valuable to halt.

In closing, the "decoupling dilemmas" in China biotech boil down to managing interdependence thoughtfully. It's not a clean cut separation, but a careful unwinding of some threads and strengthening of others. As we head into 2026, the challenge for the industry is to weave a tapestry that connects East and West in ways that benefit all, even as the two governments tug at the fabric from opposite ends. If they succeed, the next decade could bring astonishing medical breakthroughs with a Chinese imprint on them, accessible to patients worldwide.

For now, the evidence suggests a cautious optimism: science finds a way. The language of DNA remains universal, spoken in labs from Boston to Beijing. And as long as that remains true, there is hope that cooperation can trump confrontation in the realm of biotechnology. In the words of a Chinese saying, "同舟共济" – we're in the same boat, we cross the river together. Whether it's defeating cancer or the next pandemic, the world will be better off rowing in unison.

Disclaimer: I am not a lawyer or financial adviser, and the contents of this article are not investment or legal advice. The information presented here is for educational and informational purposes only. Readers should consult with qualified professionals before making any investment or legal decisions.