Healthier profits: Why China biotech is a prescription for growth
29 August 2025
After years of muted performance, China’s biotech sector is enjoying a sharp rebound.
The Hang Seng Biotech Index has returned nearly 80% so far in 2025, far outpacing the broader Hang Seng Index.[1] The rally, driven largely by mainland investors, signals renewed conviction after a downturn triggered by regulatory changes, market volatility, and geopolitical unease.
Behind the enthusiasm is the belief that China can bridge the gap between scientific excellence and global commercial dominance. While the country’s biotech sector is efficient at scaling and manufacturing, proponents argue there’s ample room for growth as firms combine low-cost R&D, growing patent portfolios, and greater fluency in global regulatory standards.
As Chinese firms build on the current momentum, investors can consider equity-backed financing to unlock liquidity and gain exposure to one of the most dynamic investment themes of the decade.
Necessity the mother of innovation
Over the past decade, China’s push to cut healthcare costs reshaped its pharmaceutical landscape. National bulk-buying programs and price controls slashed margins on generics, forcing drugmakers to pivot toward innovation. That shift redirected talent and capital into novel drug development, laying the foundation for today’s biotech boom.[2]
Now, policy is again accelerating progress. A recent 16-point plan supports insurance coverage for innovative treatments, while new draft rules would halve the clinical trial approval period — speeding the path to market.[3]
Meanwhile, US drugmakers are facing mounting challenges: a looming patent cliff, weaker R&D productivity, and political pressure to lower drug prices.[4] With pipelines under strain from expiring patents, many are turning to China for high-quality, lower-cost innovation. At this year’s American Society of Clinical Oncology (ASCO) meeting, one-third of all drug candidates presented involved Chinese companies — reflecting the country’s growing weight in global biotech.[5]
China’s appeal as a hub for next-generation drug development has also grown amid tightening government research funding and mounting regulatory pressures for US pharmaceutical companies. Public sector funding has long been key for breakthrough research in the US as new drug development is time-consuming and expensive.[6],[7] This has prompted many firms and medical talent to shift eastward, where R&D is faster and more affordable.
Chinese biotech firms have overtaken their US counterparts in the number of innovative drugs entering development. In a standout example, Akeso’s lung cancer immunotherapy outperformed Merck’s Keytruda — currently the world’s top-selling cancer drug — in a Phase III trial.[8],[9] While additional trials are needed for global approval, the result underscored China’s scientific potential and commercial ambitions.
China accounted for 18% of all global licensing deals with multinational drug companies in the first half of 2025 — its largest share on record.[10] Even more striking, one-third of total deal value in the period originated from Chinese firms. Earlier this year, Chinese firm 3SBio signed the largest licensing deal in China’s biotech history with US giant Pfizer.[11]
However, the opportunity is not without risk. Since the launch of Chapter 18A in 2018, Hong Kong’s relaxed listing rules allowing pre-revenue biotech firms to go public based on R&D potential, early investors have often been left disappointed. Of the 63 companies listed between 2018 and 2023, only nine traded above their IPO price by the end of that period.[12] Early-stage drug development is risky and it may take years before firms become profitable or capture a significant share of the global market.
Geopolitical risk also looms. The US has signaled potential pharmaceutical tariffs of up to 200%, and while these have yet to materialize, investor sentiment remains sensitive to geopolitical signals.[13]
What sets China apart, though, is not just policy momentum or capital access, but structural advantages. With the world’s largest patient pool, a vast cohort of medical researchers, and centralized hospital networks, Chinese firms can run trials faster and cheaper than in the West.
Access to capital through Hong Kong is also fueling the momentum. In the first half of 2025, a record US$90 billion was invested in Hong Kong stocks, with mainland Chinese companies benefiting from the surge.[14]
For global pharma, pairing their balance sheets with China’s innovation engine offers a path forward as blockbuster patents expire. For investors, it presents a long-term growth opportunity as ageing populations and rising affluence drive sustained global demand for innovative healthcare solutions.
Equity-backed financing can provide a flexible tool for investors looking to ride this evolving theme without sacrificing long-term gains on their existing holdings.
[1] https://www.ft.com/content/89285fd5-cd24-4772-a53d-0553cd37032d
[2] https://merics.org/en/report/lab-leader-market-ascender-chinas-rise-biotechnology
[3] https://www.scmp.com/opinion/china-opinion/article/3320580/biotech-successes-helping-chinese-intellectual-property-go-global
[4] https://www.nbcnews.com/health/health-news/trump-prescription-drug-prices-lower-medicaid-executive-order-rcna222308
[5] https://www.scmp.com/business/article/3318179/chinas-drug-prowess-show-global-event-drawing-industry-shoppers-jefferies
[6] https://www.bloomberg.com/news/features/2025-07-13/china-drugmakers-catching-up-to-us-big-pharma-with-new-medicine-innovation
[7] https://www.nytimes.com/2025/08/17/opinion/china-biotech.html
[8] https://www.fiercepharma.com/pharma/merck-cmo-akeso-summits-keytruda-head-head-win-maybe-another-option-issue
[9] https://www.scmp.com/business/article/3312706/chinese-biotech-firm-akeso-tumbles-us-partner-summits-setback-cancer-drug
[10] https://cepa.org/article/biotech-blues-the-west-struggles-to-stay-ahead/
[11] https://www.scmp.com/tech/big-tech/article/3311231/chinese-biotech-firm-secures-us6-billion-pfizer-deal-cancer-drug
[12] https://www.skadden.com/-/media/files/publications/2024/06/2024-report-on-hong-kong-listed-biotech-companies/hk-biotech-survey-en-june-2024.pdf
[13] https://flint-global.com/blog/trumps-poison-pill-whats-next-for-pharma-tariffs/
[14] https://www.reuters.com/markets/europe/mainland-china-capital-surge-fuelling-hong-kong-investment-boom-2025-07-23/
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