Taking Stock of U.S.-China Biotechnology Competition
Patrick Beyrer, Research Associate on Global Public Health at the Asia Society Policy Institute’s Center for China Analysis
May 15, 2024
- Introduction
- Biotech Competition between U.S. and China
- U.S. Response to China’s Biotech Ambitions
- The BIOSECURE Act and Pharmaceutical Firms
- Overseas Investment in Chinese Biotech
- Conclusion
- Acknowledgements
Introduction
Since the U.S.-China trade and technology relationship took center stage during the Trump administration’s trade war, observers have sought to identify specific industries that could exacerbate tensions between Washington and Beijing. The Chinese biotech sector might be that next, risky frontier. Although long heralded as the new “national security obsession” and “next battleground” for U.S.-China technology decoupling in Beijing and Washington alike, past U.S. policymaking and official enforcement actions on the sector were precise and limited. But this reality is quickly unfurling.
Starting in earnest in late 2022, U.S. officials have continued to ratchet up their rhetoric and actions in a campaign to ensure U.S. leadership in global biotech competition and rulemaking. This flurry of regulation has not limited itself to the water’s edge of diplomacy and statecraft, as entrepreneurs, scientists, and major commercial entities are starting to feel the results of this sea change in policy. The U.S. House Select Committee on Strategic Competition between the United States and the Chinese Communist Party (CCP Select Committee) has spearheaded efforts among U.S. lawmakers to draw up a new playbook for this challenge. Rep. Mike Gallagher, former CCP Select Committee chairman, described new enforcement efforts in biotech as a “moral and ethical battle” to establish technical standards.
Other lawmakers and experts have asserted that biotech competition holds equally critical stakes for innovation and statecraft. In the wrong hands, biotechnologies – which can be used to manipulate DNA, surveil and identify individuals, augment advanced materials and chemical manufacturing, improve energy efficiency, and enable agricultural resilience and abundance – can be used for nefarious and even weaponized ends.
Biotech Competition between U.S. and China
The United States is not the only one seeking to fortify its research and manufacturing base. China’s own internal rhetoric has at times inflamed biotech competition in similarly nationalistic and even existential terms. Since biotech’s identification as a critical emerging technology for independent innovation in the Made in China 2025 policy, CCP attitudes appear fixed; nearly every application of biotech is invaluable to China’s conception of itself as a rising world power.
In April 2022, President Xi Jinping encouraged Chinese scientists to break through “bottlenecks” in key technologies and aspire for major breakthroughs in life sciences research, including biological macromolecules and genetics. Around the same time, he declared food security—an application of agricultural biotech—“an issue of utmost national importance,” describing arable land as the “lifeblood” of the Chinese nation. At provincial, city, and company levels (both state-owned and private), officials have connected the concept of “red genes” in party-building activities to upskilling talent in the biomedical industry. Within the latest State Council work report, both biomanufacturing and life sciences are highlighted as industries primed under the “new productive forces” campaign for China to “build new growth engines” and “open new tracks” for development. These speeches and signals are not simply political theater. Beijing touts major Chinese biotech companies as instrumental to the construction of its civil-military governance model: the “party-army-state.” Biotech corporations’ cooperation with researchers from the People’s Liberation Army (PLA) only reifies this trend.
U.S. Response to China’s Biotech Ambitions
The Biden administration has recognized the challenges posed by China’s biotech ambitions. In September 2022, the White House issued a biotechnology executive order (EO), which accelerates a “whole-of-government approach” to respond to Chinese biotech competition. The administration has delegated various departments to enhance targeted enforcement measures while working with Congress to ratchet up pressure on industry stakeholders to avoid Chinese partnerships of concern.
The Bureau of Industry and Security (BIS) within the Department of Commerce (DOC) has played the largest role in these countermeasures. By scrutinizing the end uses of Chinese biotech companies’ products, especially those relating to unethical biometric surveillance and research ties with military programs, the BIS has steadily added Chinese biotech companies and institutions to its Entity List: 34 in December 2021, 33 in February 2022, and 28 in March 2023. These include both sister companies and affiliates of firms WuXi AppTec and BGI Group, who have both been singled out by lawmakers for their partnerships with the PLA, and in the case of WuXi AppTec, have allegedly transferred U.S. client data without consent, according to intelligence officials.
The Department of the Treasury (USDT) and the Department of Homeland Security (DHS) have followed the DOC’s lead to similar effect. In the same salvo as the 2021 BIS Entity List adjudication, the USDT concurrently instituted sanctions on Chinese biotech companies involved in the illicit drug trade and imposed a set of follow-up sanctions in October 2023. For its part, the DHS has brought enforcement actions against Chinese agricultural and chemical biotech companies under the Uyghur Forced Labor Prevention Act for their ties to forced labor, with the most recent sanctioned companies announced in August and October 2023.
Interagency efforts scrutinizing Chinese biotech across genetics, illicit pharmaceuticals, chemical manufacturing, and biometric technologies have further consolidated departmental efforts with even more significant implications. In a first-ever directive defining additional national security factors for the Committee on Foreign Investment in the United States (CFIUS), a September 2022 EO listed “biotechnology, biomanufacturing and elements of the agricultural industrial base” as areas of fundamental interest for CFIUS review. An additional February 2024 EO proposed measures that would block the high-volume export of U.S. genomic data, health data, and biometric data to China, with Biden administration officials going as far as identifying genomic data export as the most acute threat of the data categories to U.S. national security and commercial interests.
If the administration has orchestrated forceful efforts, then Congress has taken even more direct steps. Although the CCP Select Committee lacks a legislative mandate, its leadership and senior members have found common cause with fellow lawmakers to fast-track legislation that promotes the decoupling of the U.S.-China biotech sectors in sensitive areas. In the Senate, Sen. Marco Rubio reintroduced the GENE Act in June 2023 to require CFIUS reviews of genetic transfers and increase corresponding congressional oversight—a set of measures former chairman Gallagher previously signaled interest in. In July 2023, Gallagher partnered with Rep. Dan Newhouse to propose expanding CFIUS jurisdiction to assess Chinese land purchases near U.S. military sites and consider food security via biotech acquisition as a factor in national security reviews.
These efforts also take on a bipartisan sheen. In February, Rubio teamed up with Senate Intelligence Committee chair Mark Warner to urge the DOC and the USDT to develop a more “robust export control regime” that blunts Chinese biotech influence in the United States. Gallagher and CCP Select Committee ranking member Raja Krishnamoorthi proposed the BIOSECURE Act, which would ensure that “foreign adversary biotech companies,” including BGI Group and WuXi AppTec, are blocked from future U.S. federal contracting and government technology procurement. Gallagher and Krishnamoorthi have also forcefully written to the USDT, the DOC, and the Department of Defense to suggest the addition of BGI, WuXi AppTec, and its sister company, WuXi Biologics, to various entity and sanction lists.
Congressional interest in Chinese biotech’s national security implications has taken other notable forms. Announced in March 2022, the National Security Commission on Emerging Biotechnology (NSCEB) has supported the policy behind the BIOSECURE Act by recommending a federal procurement ban of BGI Group products. Additionally, NCSEB vice chair Michelle Rozo offered testimony at a February hearing of the U.S.-China Economic and Security Review Commission that reaffirmed China’s commitment to achieving food security, securing military advantages, and maintaining genetic resources access through biotech research and applications.
The CCP Select Committee has been equally active in publicly spreading this message. In a field visit to Boston, Gallagher and Krishnamoorthi led a group of lawmakers to meet with U.S. biotech executives to discuss challenges posed by China’s biotech sector, including pharmaceutical dependencies. In the months prior, the CCP Select Committee’s policy recommendations described U.S. dependence on Chinese pharmaceutical supply chains as a “distinct national security risk” and recommended the establishment of corresponding controls on Chinese biotech, including investment restrictions. Another CCP Select Committee report investigated U.S. venture capital firms’ investments in emerging Chinese technology and their ties to biometric surveillance, among other biotech advancements, enabling state control.
Although most of the legislation focused on Chinese biotech has yet to be approved, a combination of public pressure and congressional actions have both directly caused and coincided with major impacts across the Chinese biotech sector. WuXi AppTec’s and WuXi Biologics’ share values have declined nearly 40% and 50%, respectively, in the first several months of 2024, largely due to the announcement of the BIOSECURE Act and the CCP Select Committee’s letters to various federal executive departments and the Pentagon. BGI has since been dumped as a client by major Washington lobbying firms that previously advocated for the company’s U.S. market access. The Biotechnology Innovation Organization similarly cut ties with WuXi AppTec and affirmed biotech as a “national security imperative” after being called out by Gallagher for lobbying against the BIOSECURE Act on behalf of WuXi.
The BIOSECURE Act and Pharmaceutical Firms
Pharmaceutical firms are already responding to the BIOSECURE Act and related tensions through potential supply chain adjustments and contingency plans with an eye on the long term. According to the Financial Times, 23 different U.S. biotech companies have warned of their dependency on the WuXi companies in annual reports since March, with at least five such companies informing investors they will seek alternative manufacturing partners. Analysts additionally expect U.S. firms’ drug development costs to skyrocket in the absence of WuXi and BGI, as WuXi AppTec has been described as a “research superstore” for its U.S. partners and WuXi Biologics stands as the second largest biologic outsourcer in the world. In one recent survey of pharma executives, over 90% of respondents indicated that the BIOSECURE Act’s passage would set back their drug pipelines, with 53% stating it would be extremely difficult to replace Chinese contract development and manufacturing organizations like WuXi.
Overseas Investment in Chinese Biotech
U.S. investors in Chinese biotech have been similarly affected. Last September, the Wall Street Journal reported that the value of Chinese biotech venture deals including U.S. investors in 2022 was $102.6 million—a far cry from the $1.01 billion recorded a year earlier. Firms mentioned in the CCP Select Committee’s venture capital funding report have since attempted to sell off their stakes in different Chinese tech startups.
Downward pressure over the last year on Chinese biotech partnerships and investments has precipitated divestments at the corporate and academic levels, too. In February, German agri-tech giant BASF revealed it would exit from two of its joint venture chemical plants in Xinjiang, while U.S. biotech giant Thermo Fisher Scientific announced it would halt sales of DNA collection kits in Tibet. Notably, both regions are where Chinese biometric surveillance is purportedly used en masse, sometimes via American equipment.
On the academic side, in March 2023, France’s Pasteur Institute ended a partnership with the Chinese Academy of Sciences in Beijing and ceased another research operation in Shanghai. In February 2024, reports emerged that the academic journal Molecular Genetics and Genomic Medicine would retract eighteen genetics papers from China due to concerns over data “inconsistencies” on how human genetic samples were collected from vulnerable populations. Finally, as the long-term renewal of the U.S.-China Science and Technology Agreement continues to hang in the balance, state-to-state-level partnerships on crop gene sequencing and infectious diseases, in addition to other biotech-enabled projects, are liable to cancellation.
To this end, experts have suggested that the large financial impacts stemming from recent enforcement actions show that academics, investors, and corporates are not prepared for an expedited biotech decoupling. During the CCP Select Committee’s biotech hearing, NCSEB chair and Gingko Bioworks CEO Jason Kelly stated that industry conversations on national security have been “surprising” for many biotech entrepreneurs, who must avoid “putting our heads in the sand” on strategic biotech competition with China in the future. As one China biotech scholar has remarked, “the geopolitics and trade and investment parts of the U.S.-China relationship are on totally different planes.” This dynamic could not be more apparent as several key pharma executives traveled to Beijing in March, praising China’s biopharma innovation while announcing a series of expansion initiatives.
Looking forward, renewed congressional focus and public pressure campaigns are poised to further tighten the screws on the Chinese biotech sector, as CCP Select Committee leadership hopes to bring a “big China bill” to the House floor this year and human rights groups raise awareness of Chinese biotech’s more draconian applications. Krishnamoorthi has expressed his dedication to moving the BIOSECURE Act forward for a spring markup session in the House of Representatives, even in the absence of Gallagher.
Conclusion
Regardless of whether pending legislation passes through Congress, U.S.-China biotech decoupling is likely to continue, especially in areas of sensitive research and investment. As studies show that China leads the United States in four of seven major emerging biotech categories, the scramble between Washington and Beijing to lead, apply, and control emerging technology within the biotech sector appears to have only just begun. Speaking to the stakes of this new arena of U.S.-China tensions, Rep. Krishnamoorthi remarked during the CCP Select Committee’s hearing in March that “the competition with the CCP in biotech is make or break… so we must, and we will, win.”
In entering this competitive phase of potential U.S.-China biotech decoupling, Americans outside of the industry or the scientific community are not adequately prepared for its consequences in their daily lives. In addition to China representing the largest and most cost-effective exporter of active pharmaceutical ingredients to the U.S. market, jointly developed drugs, agricultural technologies, and other biotech-enabled solutions have improved countless American lives. As the New York Times has reported, the elimination of companies like WuXi from U.S. supply chains would impact developments in treatments for critical medical conditions, including hearing loss, cystic fibrosis, and leukemia. U.S.-China gene editing research collaborations have created disease-resistant crops while improving their yields. Research published in the Harvard Business Review has shown that China’s integration into a full U.S.-led international regulatory harmonization of cancer clinical trials could save 1 to 2 million lives annually through expediting critical reviews of breakthrough medicines. The collapse of U.S.-China biotech partnerships would spell the end of such jointly developed innovations that harbor the potential to deliver sorely needed global public goods, including saving American lives suffering from diseases such as cancer.
Corporations and academia are not ready for a full U.S.-China biotech decoupling, nor do they seek it. As enforcement from Washington grows broader and more restrictive, U.S. biotech firms, institutions, and researchers will face difficult choices when evaluating relationships with Chinese partners. Although changes are certainly necessary within the United States’ posture toward biotech cooperation with China, if decoupling is pursued to its fullest extent, the impacts on the U.S. economy and innovation ecosystem may prove severe. With U.S.-China competition likely to persist, remaining avenues for scientific cooperation, including in biotech, will likely have far-reaching consequences for the rest of the world.
Acknowledgements
The author would like to acknowledge the members of the Cure4Cancer team, as well as other contributors from the Center for China Analysis (CCA), Asia Society Policy Institute (ASPI), for their review and input on the article.
