China has proposed new export controls on key biotechnology platforms as Beijing seeks to protect its most valuable medical research. The draft rules could block foreign buyers from acquiring certain cell and gene therapy, small interfering RNA and pathogen research technologies.
The proposal comes as the United States steps up efforts to review deals involving Chinese biotech assets. Both countries are seeking to protect sensitive technology while managing the growing role of Chinese firms in global drug development.
China’s commerce ministry published the draft on Friday as part of a wider update to its technology export catalogue. The plan covers 40 technologies across biotechnology, artificial intelligence and solar power.
Under the proposal, foreign companies would be barred from acquiring ownership of certain proprietary platforms used to develop multiple medicines. Other transfers, including some technologies used to identify and verify drug targets, would require government approval.
However, the draft does not seek to stop all cooperation with foreign drugmakers. Licensing agreements and outsourced research and manufacturing services would generally remain outside the proposed ban.
China Seeks to Protect Key Biotech Platforms
The proposed controls cover several important areas of drug research. These include cell and gene therapies, small interfering RNA, known as siRNA, and platforms related to pathogen gain-of-function research.
A platform is a set of reusable tools and methods that can help researchers develop more than one drug. Such systems can give biotech companies a major advantage because they may support many research projects over time.
Cell and gene therapies are designed to treat disease by changing cells or working with genetic material. SiRNA technology can silence selected genes and is used in the development of treatments for certain illnesses.
The draft would also restrict the full transfer of some proprietary technologies used to identify and confirm drug targets in cell and gene therapy and siRNA research. These transfers could proceed only with regulatory approval.
The government has linked the measures to the need for orderly international cooperation and the protection of national security. Officials have pointed to security concerns in the case of pathogen-related technologies.
China has become a major source of new drug research, attracting interest from international pharmaceutical companies and investors. The proposed rules could help Beijing keep ownership of important research tools within the country while allowing companies to earn money through partnerships.
Most Licensing Deals Could Continue
The draft may have a smaller effect on the market than some industry participants had feared.
Aaron Gu, a partner at Chinese law firm Han Kun who works on healthcare and life sciences matters, said the proposal focuses on regulating technology transfers while leaving licensing largely unconstrained.
China’s commerce ministry has said that out-licensing agreements and the use of technical know-how in outsourced research and manufacturing would not fall under the proposed ban. Licensing agreements for drug target identification and verification technologies would generally receive approval, according to a ministry response to media questions.
This distinction matters because most recent Western deals involving Chinese biotech firms have focused on licensing drug candidates or using research platforms to discover new medicines. Full ownership transfers have been less common.
Data from Chinese industry intelligence provider PharmCube showed that only five of 121 cross-border Chinese biotech out-licensing deals recorded by July 1 involved a transfer of ownership.
That suggests many existing deal structures could continue under the proposed rules. Chinese companies may still license drugs to foreign partners, receive upfront payments and earn royalties or milestone payments as medicines progress through development.
AstraZeneca Deal Shows Potential Impact
Some large acquisitions could face greater difficulty if the rules take effect.
One example is AstraZeneca’s $1 billion acquisition of Gracell Biotechnologies, announced at the end of 2023. Gracell developed the FasTCAR platform, which is used to make CAR-T cells for cancer treatment.
Under the proposed rules, a similar full acquisition involving a restricted technology platform could face a ban.
The proposal follows months of concern among Chinese biotech companies about possible limits on foreign purchases. Rumors circulated in May that Beijing was considering broad restrictions on platform acquisitions. An alleged draft list shared online at the time reportedly covered several other drug research methods.
A senior Chinese biotech executive said earlier that Chinese authorities had spent about two years studying the sector’s technology landscape. The review followed concerns that domestic companies might sell promising early-stage research or entire businesses before China could build stronger drug development capabilities.
The executive said partnerships could offer a different path. Chinese firms could keep ownership of their technology while foreign partners develop medicines for overseas markets. Such deals may also generate payments and royalties while preserving access to treatments in China.
Gu said the published draft was significantly better than market expectations because it excluded common licensing arrangements. Earlier rumors had led some in the industry to fear a much broader impact on cross-border deals.
US and China Review Biotech Investment
The proposed Chinese rules arrive as US lawmakers seek closer scrutiny of American investment in Chinese biotechnology.
Representative John Moolenaar, a Republican from Michigan, and Representative Debbie Dingell, a Democrat from Michigan, introduced the Biotech Investment National Security Act. The proposed legislation would subject certain deals involving Chinese biotech companies to additional review.
The bill has not advanced through Congress. Meanwhile, the US Treasury Department has been working on rules that could preserve the ability of American companies to license many Chinese drug candidates.
The two countries are therefore considering different ways to manage the risks linked to biotech technology and investment.
China is seeking public comments on its draft rules until November 15. Gu advised foreign buyers to carry out careful checks before entering deals involving affected technologies. Until the revised catalogue takes effect, transfers within the proposed regulated scope must be registered with the commerce ministry.
The final rules will determine how much they change global biotech partnerships. For now, Beijing appears to be seeking tighter control over ownership of sensitive platforms without closing the door on many licensing deals that connect Chinese research with international drug development.
