Could new US investment curbs complicate China’s biotech licensing surge?

The US Treasury Department is proposing tighter screening of investments involving Chinese biotechnology companies. The rules would cover transactions with countries of concern, including China. They aim to stop US capital from helping develop technologies Washington considers important to national security.

The main targets are direct equity stakes and joint ventures. A US company buying part of a Chinese biotech firm, or forming a jointly owned research business, could face greater scrutiny or restrictions. This would affect ownership, control, and long-term cooperation.

The proposal does not currently restrict conventional drug-licensing agreements. That distinction matters because licensing has helped drive China’s biotech expansion. The rules remain uncertain, and industry groups oppose an overly broad approach. However, David Zhang expects some biotech restrictions to move forward, with the final scope still unresolved.

China’s biotech licensing business has reached a remarkable scale. The National Development and Reform Commission reported US$130 billion in out-licensing deals involving China-developed innovative drugs this year. Out-licensing lets overseas companies obtain rights to develop or sell medicines created by Chinese firms.

The reported value is approaching the full-year total recorded for 2025. That comparison shows that deal activity has accelerated rather than merely stayed large. It also highlights China’s growing role in the global biopharmaceutical industry.

The figure explains why the proposed US rules matter beyond individual transactions. Licensing has become a major route for Chinese firms to reach international markets and for foreign drugmakers to access Chinese discoveries. Since conventional licensing is still allowed, analysts do not expect a wholesale retreat from Chinese biotech, although companies may redesign other deals.

Equity investments and joint ventures do more than transfer money. They can give a Chinese biotech company a committed foreign partner, shared research resources, and a structure for developing products together. Limiting these transactions makes international expansion more complicated and less predictable.

For example, a US drugmaker might want to buy a stake in a Chinese firm or establish a jointly owned research venture. Under the proposed rules, those arrangements could face scrutiny because they may strengthen China’s biotechnology capabilities. Companies would then need different ownership and financing structures.

The effect is likely to be pressure rather than a complete shutdown. Conventional licensing remains available, and US drugmakers still have commercial reasons to pursue promising Chinese drug candidates. Analysts expect firms to avoid direct equity investment where possible and devote more effort to structuring cross-border deals.

The Treasury Department stopped short of restricting conventional drug licensing. These agreements transfer rights to develop or commercialize a medicine, but they do not necessarily give the US company an ownership stake or create a joint venture. That keeps an important commercial channel open.

The article gives a practical reason for the exception. Chinese companies are producing promising new drug candidates, while US drugmakers have commercial incentives to access them. Licensing can therefore benefit both sides without requiring the deeper capital relationship targeted by the proposal.

This allowance reduces the chance of a wholesale retreat from Chinese biotech. Licensing has been a major driver of the sector’s expansion, and its reported value reached US$130 billion this year. Still, bipartisan pressure for tougher rules could eventually extend to licensing deals, so the current boundary may not be permanent.

Co-development agreements and platform partnerships offer alternatives to buying a stake in a Chinese biotech company. The partners can share research, development work, or access to technology without creating the same direct ownership relationship. This may reduce exposure to the proposed investment restrictions.

For example, a US and Chinese company could agree to develop a drug together while keeping their corporate ownership separate. A broader platform partnership could provide access to a company’s discovery capabilities or technology platform across several projects. The exact structure would depend on the transaction and the rules.

The shift is already visible as Chinese firms gain more resources and ambitions. Cui Cui said cross-border deals were increasingly moving toward co-development and broader platform partnerships. These arrangements may protect commercial cooperation, but companies will need to manage scrutiny over capital, control, and core intellectual property.

China’s proposed export controls would restrict technologies across artificial intelligence, biotechnology, and photovoltaics. In biotechnology, the measures would prohibit exports of certain cell and gene therapy platforms and small interfering RNA technology platforms. The proposal comes alongside Washington’s effort to limit investment into Chinese biotech.

These platforms are important because they represent technical capabilities that companies may use to develop medicines. Restricting their export could limit which partners receive access, or require firms to keep key tools and knowledge inside China. The article does not specify every affected transaction or the final enforcement process.

Cui Cui said the US and Chinese measures were narrower than feared but would still prompt companies to recalibrate and protect capital flows and core intellectual property. Morgan Xu called the moves a “curious symmetry”: Washington seeks to limit capability-building investment, while Beijing seeks control over foundational technologies.

Biotechnology is the use of living cells, organisms, or biological molecules to develop products, including medicines. The article does not provide a formal definition, but it identifies biotechnology as a strategic sector in the US and Chinese policy measures. Its importance comes from the ability to produce new treatments and drug candidates.

Cell and gene therapy platforms help researchers develop treatments that use cells or genetic material to address disease. Small interfering RNA, often called siRNA, uses short RNA molecules to reduce the activity of selected genes. These platforms can support the search for medicines with specific biological effects.

China proposed export controls covering certain cell and gene therapy platforms and siRNA technology platforms. The restrictions could affect how companies share foundational tools and intellectual property. The article says both governments’ measures may lead firms to protect core technology and reconsider cross-border partnerships.