US Restricts Biotech Investment into China

Licensing deals untouched for now, but proposed US investment rules and new Chinese export curbs may impact biotech expansion, analysts say

· US proposes investment restrictions: The US Treasury Department has proposed outbound investment screening rules covering biotechnology transactions involving countries of concern, including China.

· Direct investment and joint ventures affected: The proposed restrictions would make it harder for Chinese biotech firms to attract direct US investment or establish joint ventures. Restricted transactions include acquisitions of equity stakes and the formation of joint ventures.

· Objective of US restrictions: US Treasury Secretary Scott Bessent said the measures aim to prevent US investment from helping foreign adversaries develop critical technologies that threaten US national security.

· Drug licensing deals remain unaffected for now: The proposals do not restrict conventional drug licensing agreements, which have been a major driver of China's biotechnology expansion.

· China’s growing global biotech presence: The value of out-licensing deals involving innovative drugs developed in China reached US$130 billion in 2026, approaching the full-year total for 2025, according to China's National Development and Reform Commission.

· No immediate wholesale withdrawal expected: Analysts believe strong commercial incentives will continue to encourage US pharmaceutical companies to license promising drug candidates from Chinese firms.

· Deal structures likely to change: Chinese biotech companies may increasingly structure cross-border transactions to avoid direct equity investment. Potential approaches include co-development arrangements and broader platform partnerships.

· China proposes technology export restrictions: Earlier in October 2026, China's Ministry of Commerce and Ministry of Science and Technology proposed export bans covering 14 technologies across artificial intelligence, biotechnology and photovoltaics.

· Biotechnology technologies targeted: The proposed Chinese restrictions would prohibit exports of certain cell and gene therapy platforms and small interfering RNA (siRNA) technology platforms.

· Both countries seek to protect strategic technologies: Analysts see a parallel between Washington's efforts to restrict investments that could strengthen China's technological capabilities and Beijing's attempts to retain control over foundational Chinese technologies.

· Companies may face greater uncertainty: The proposed US and Chinese measures could prompt businesses to reassess cross-border capital flows, partnership structures and the protection of core intellectual property.

· US industry raises concerns: John F. Crowley, president and CEO of the Biotechnology Innovation Organisation, warned that excessively broad restrictions could create uncertainty for innovators and investors and weaken US biotechnology competitiveness.

· Final US rules remain uncertain: The proposals face opposition from parts of the industry, although bipartisan political pressure for tougher restrictions remains. Analysts expect some form of biotechnology investment restrictions to proceed, but the ultimate scope remains unclear.

Key Takeaway

Chinese biotech firms face tighter access to US capital and greater scrutiny of cross-border partnerships, while conventional drug licensing deals remain unaffected under the current proposal. Simultaneously, China's proposed export controls could restrict the international transfer of certain advanced biotechnology platforms, increasing uncertainty for global pharmaceutical companies and investors.

[ABS News Service/26.10.2026]

Chinese biotech firms face fresh headwinds in their global expansion as Washington’s proposed outbound investment restrictions threaten to disrupt deal structures, even though drug licensing agreements remain untouched for now, analysts say.

The US Treasury Department’s draft rules released last week would “make it much harder for Chinese biotech firms to attract direct US investment or enter joint ventures”, according to David Zhang, an analyst at policy research firm Trivium China.

US Treasury Secretary Scott Bessent added biotechnology to an outbound investment screening programme, placing a broad range of transactions involving “countries of concern”, including China, under greater scrutiny.

Restricted transactions included the acquisition of equity stakes and the formation of joint ventures, according to the Treasury Department.

The proposals come as Washington grows increasingly concerned about the rise of China’s biotech industry, with the measures intended to “prevent our adversaries from using US investment to develop critical technologies that threaten US national security”, Bessent said last week.

Chinese firms have assumed a growing role in the global biopharmaceutical industry in recent years. The value of out-licensing deals involving China-developed innovative drugs had reached US$130 billion this year, approaching the full-year total for 2025, according to China’s National Development and Reform Commission.

The Treasury Department, as widely anticipated, stopped short of restricting conventional drug licensing deals, which Zhang said had been “a major driver of China’s biotech expansion in recent years”.

With “commercial incentives remaining strong for US drug makers to rely on Chinese companies for promising new drug candidates”, the new rules were unlikely to lead to a “wholesale retreat from Chinese biotech”, he added.

Instead, companies were likely to devote more effort to structuring cross-border deals in ways that avoided direct equity investment, Zhang said.

Cross-border biotech deals had increasingly moved towards co-development arrangements and broader platform partnerships as Chinese firms’ resources and ambitions expanded, said Cui Cui, head of Asia healthcare research at Jefferies, in a note last month.

Companies also face new biotech export control measures proposed by Beijing.

Earlier this month, China’s Ministry of Commerce and the Ministry of Science and Technology proposed export bans covering 14 technologies across sectors including artificial intelligence, biotechnology and photovoltaics. The restrictions would prohibit exports of certain cell and gene therapy platforms as well as small interfering RNA technology platforms.

While both Chinese and US measures were “narrower than feared”, they would likely prompt companies in both countries to “recalibrate” and “protect” the flow of capital and core intellectual property, Cui said in a separate note on Friday.

Morgan Xu, a partner at law firm Foley Hoag in Washington, described the latest moves by the US and China as “a curious symmetry” in an article on Sunday in Tonacea, a Chinese biopharmaceutical-focused publication.

“Washington wants to restrict certain investments that could strengthen China’s technological capabilities; Beijing wants to retain control over certain foundational Chinese technologies,” Xu said.

The Treasury Department’s proposed restrictions still face uncertainty, however, amid opposition from parts of the industry.

“We cannot restrict our way to success … We need to ensure that we do not have an overly broad approach that would create uncertainty for innovators and investors, and that may unintentionally risk weakening US biotech competitiveness,” said John F. Crowley, president and CEO of the Biotechnology Innovation Organisation, in a statement last week after the Treasury Department unveiled the proposals.

“But there’s also bipartisan political pressure for tougher restrictions, including even on licensing deals,” Zhang said.

“I’d expect some version of the biotech restrictions to move forward. The bigger question is how far Treasury ultimately wants to go.”