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

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.”