Can China Sustain Its Rise as a Global Pharmaceutical Innovator?
China 2026: What to Watch
By Patrick Beyrer and Chang Liu
The Stakes: Leading on the World Stage
The year 2025 may very well be known as the tipping point when China’s leading-edge innovation in pharmaceuticals and biotechnology was finally recognized as such by global companies, investors, and observers. In February 2025, Phase III clinical trial results from ivonescimab — the novel cancer therapy from Chinese biomedical innovator Akeso — were widely shared and heralded as a “DeepSeek moment” for China’s biomedical industry, with ivonescimab outperforming established Western competitors. As several statistics confirmed later in the year, China (7,100) surpassed the United States (6,000) as the most popular destination for clinical trials in 2023–2024, an unthinkable milestone only a few years ago.
An increase in the quantity of trials was accompanied by a commensurate increase in quality, as Western companies and investors flocked to support Chinese biotechnology’s initial public offerings (IPOs) and strike licensing arrangements for promising Chinese drugs. Analysts projected that 37% of pharmaceutical licensing deals will be sourced from Chinese firms in 2025, compared to approximately 20% last year, while the Hang Seng’s Biotech Index had risen more than 100% by the third quarter of 2025. Morgan Stanley has suggested that annual revenue from drugs originating from China may exceed $34 billion by 2030.
President Xi Jinping has implicitly recognized the strategic opportunity that China’s growing capabilities in the biomedical sector may create on the global stage, as nearly a quarter of international CEOs who met with Xi in March 2025 were biomedical and pharmaceutical executives, the largest delegation from any industry. As biotechnology, biomanufacturing, and pharmaceutical development remain high strategic priorities for reaching China’s indigenous innovation objectives — made clear by Premier Li Qiang’s mention of the sectors alongside other strategic areas like artificial intelligence (AI) and 6G in the 2025 Government Work Report — 2026 will be a critical moment when China can solidify its global leadership in the biomedical industry for years to come. How China harnesses its momentum in biotechnology will shape domestic health, industrial policy, global medical supply chains, and even U.S.-China relations.
Core Dilemma: Stay Open for Collaboration or Close Up in the Name of Security
China’s “biotech boom” has emerged as Beijing continues to push pharmaceutical manufacturing up the country’s value chain and as the industry has been folded into the global geopolitical competition with the United States and the European Union (EU), which have both demonstrated increasing concern over Chinese domination of the pharmaceutical supply chain.
The United States is estimated to depend on China for 44% of all pharmaceutical imports by weight — 15% of active pharmaceutical ingredient (API) manufacturers for essential medicines are based in China, 100 APIs for generic medicines can only be sourced in China, and 12% of APIs in U.S. drugs rely solely on China-sourced key starting materials. Recognizing this, Washington is moving quickly under the second Donald Trump administration to reduce supply chain vulnerabilities vis-à-vis China through a carrot-and-stick approach. The Trump administration’s Section 232 national security investigation into pharmaceuticals has built a foundation for implementing a wide variety of trade remedies — including tariffs — to reduce dependence on Chinese and other foreign drug supplies while reattracting manufacturing investments to the United States.
Analysts agree that this policy mosaic is designed to pursue a comprehensive pharmaceutical de-risking strategy from China, which the EU has also signaled. In 2025, the EU initiated its own trade actions against Chinese chemical inputs used in pharmaceutical manufacturing as well as medical devices, to which China responded in kind. Several of these policies hinge on genuine trade concerns, but their possible escalation to a more aggressive form of supply-chain targeting would threaten China’s international biomedical partnerships, investment, and status as a global innovation leader.
Domestically, although the economic importance of the biomedical sector has been elevated to the strategic level by national leaders, health policy constraints — both political and regulatory — may prevent China from achieving its full potential as an innovator. Since the initiation of an anti-corruption crackdown in the healthcare sector during the summer of 2023, over 40,000 medical officials have been punished or removed from their posts, including more than 350 top figures. Several individuals are under investigation, including Bi Jingquan, former chief of the China Food and Drug Administration, who was once viewed as China’s foremost champion of reform for regulatory innovation and international cooperation. This year’s Central Commission for Discipline Inspection’s fourth plenary meeting communiqué, as well as recent National Health Commission reports on the crackdown, make clear that efforts to root out “mass corruption” in the health sector remain ongoing, with no signs of conclusion in the near term.
How China and foreign stakeholders reconcile these imperatives — preserving collaboration where it is strategically beneficial while managing security and governance concerns — will determine whether current gains pave the way for collaborative innovations or unravel into fragmented, rival innovation ecosystems.
Outlook for 2026
Despite ongoing geopolitical turbulence and domestic health policy uncertainties, China is likely in 2026 to consolidate its position as a major biomedical innovator, delivering “cheaper and faster (and sometimes better)” alternatives to therapies produced and research and development (R&D) conducted in the United States and elsewhere. Further, with the release of the 15th Five-Year Plan (FYP) and the rise of AI-enabled biotechnology applications, China will seize 2026 to chart out pharmaceutical and biomedical development as a cornerstone state priority, reaching new heights of national significance and producing favorable conditions for the scale-up of promising programs.
Yet growth will be constrained, as external decoupling, the healthcare anti-corruption crackdown, and uneven biotechnology deployment may cap the upper limit of China’s progress. Nevertheless, China will seek to capitalize on its year of biotechnology breakthroughs in 2025 to market itself to the world as not only a dependable supply chain partner but a leading-edge biomedical innovator to interested global stakeholders.
Conditions and Contingencies
Even as biomedical innovation becomes increasingly bifurcated in terms of government-to-government cooperation, China has three principal advantages that forecast its continued strengths in pharmaceutical and biotechnology innovation:
Foreign investments. Landmark investments, such as AstraZeneca’s $2.5 billion global strategic Beijing R&D base, Pfizer’s $1 billion “China 2030” R&D plan, Roche’s $300 million high-tech manufacturing facility, and Sanofi’s $1 billion Beijing insulin base and $275 million Innovation Fund, are among the headline investments that will keep Western pharmaceutical giants active in the Chinese market for years to come. In the first half of 2025, Chinese firms signed 144 deals with foreign pharmaceutical companies, and by October had reached 93 out-licensing agreements valued at $85 billion. Additionally, as China contributes over 30% of the global pipeline of innovative drugs, global pharmaceutical and biomedical companies have huge incentives to maintain a presence in the Chinese market, to monitor, collaborate, and compete with local players.
IPOs and regulatory access. Even in view of the anti-corruption crackdown, numerous Chinese pharmaceutical companies in 2025 completed Hong Kong IPOs, reflecting investor appetite in the sector. In the first half of 2025, 36 biotechnology companies filed for IPOs with the Hong Kong Stock Exchange (HKEX), 34 of which are headquartered in mainland China.19 The standout performance of national champion drugmakers such as Jiangsu Hengrui — which exceeded its IPO target of $1.27 billion, the largest pharmaceutical IPO on the HKEX in five years — combined with new regulatory pathways for biotechnology unveiled by the HKEX in May have spurred companies’ interest in Hong Kong listings, and therefore access to foreign innovation networks and capital.
Policy prioritization and regulatory predictability. Biotechnology and pharmaceutical innovation continue to top Beijing’s list of technology development priorities heading into 2026. A report presented to the State Council in June 2025 on “new quality productive forces” highlighted progress in the sector. Meanwhile, the August 2025 AI+ Implementation Plan ranks AI integration into medical services as a priority, pointing to new forms of state investment and support for China’s biomedical innovation ecosystem alongside major vehicles of support like the 15th FYP.
What to Watch
Beyond the advantages laid out earlier, several signposts through 2026 are poised to provide indicators of China’s progress in cementing — or challenging — its place as a global biomedical innovator.
On the domestic policy side, to create a viable road map for biomedical innovation, China will seek to buttress its overall 15th FYP with significant emphasis on drug development, biotechnology, and public health. The 15th FYP communiqué and Central Committee Proposal notionally point in this direction by underscoring China’s increasing scientific self-sufficiency and increasing support for the private sector. An early indicator of such heightened policy support from authorities will be distinct policy action, building on Premier Li Qiang’s August 2025 field visit to Beijing’s Changping Laboratory and several prominent Chinese biotech firms.
To fully realize such unburdened biomedical innovation objectives, Beijing may consider quietly slowing its anti-corruption campaign and continuing to provide favorable foreign investment regulations, such as those allowing full foreign ownership of private hospitals at a pilot level, or zero-tariff arrangements on drugs and medical devices modeled in special Hainan innovation zones. The implementation of the National Medical Products Administration’s new policy on clinical trial reviews would also support these goals by shrinking the approval period for innovative drug trials from 60 to 30 days. Further, a September 2025 symposium convened by the National Health Commission with Chinese and global pharmaceutical executives demonstrated Beijing’s attention to encouraging foreign-funded enterprise investment over the next year.
Internationally, continuing growth in out-licensing deals, R&D partnerships, and further biotechnology success on the HKEX would portend China’s ongoing rise in global biomedical leadership.
Conversely, a ramp-up of anti-corruption efforts and reduced Chinese pharmaceutical IPO listings could augur a biotechnology stagnation. Increasingly coordinated U.S.-EU economic security efforts targeting Chinese APIs, drug supply chains, and possibly out-licensing arrangements would risk cutting Chinese pharmaceutical partnerships out of global ecosystems, exacerbating the trend toward bifurcation. In this context, China could also weaponize its supply chain dominance as U.S.-China tensions escalate by imposing certain export controls and restrictions on both pharmaceuticals and their ingredients, which some analysts have called a “nuclear option.”
Alternative Scenarios
If current conditions hold, China will be poised to climb the global pharmaceutical value chain and continue apace with record-breaking out-licensing and research commitments from foreign pharmaceutical players in 2026. Increasingly stabilized U.S.-China relations, a reduction in security scrutiny of Chinese pharmaceutical supply chain dependencies, and a slowdown in healthcare anti-corruption efforts would support such a trend.
Alternatively, it is possible that China’s biomedical sector will experience setbacks in 2026. In the context of possible deteriorations in U.S.-China negotiations, foreign investors and developers may see the China market as an opportunity not worth its risks, especially as Washington courts new pharmaceutical supply chain arrangements with European and global partners. Moreover, if U.S. tariffs on Chinese pharmaceuticals make Chinese sourcing untenable, and if Washington finds viable alternatives in the EU and India (whose API ecosystem is, paradoxically, reliant on China), China may lose its status as a “must-have market,” all while domestic challenges could cause policymakers to reduce focus on innovation.
Strategic Implications
If biomedical R&D is executed to its potential as predicted in the forecast, then clinical trials, medical innovations, and life-saving therapies could be delivered to Chinese and global patients on a scale never seen before, thereby boosting economic development and bolstering Beijing’s political legitimacy. Externally, China’s biomedical development is set to deliver mixed results. As Washington responds to China’s biotechnology ascendance with de-risking, onshoring, and punitive measures, the certainty of Chinese biomedical innovation will not automatically be accompanied by investment success. Biomedical companies and investors will need to carefully consider how Chinese supply chains may be distorted and even ruptured by trade tensions and conflict scenarios. Although China’s global biomedical expansion will assuredly be sustained by foreign investment in the near term, stakeholders may have to choose sides in this new area of geopolitical contestation, resulting in a high-stakes, drawn-out competition.
Policy Shaping and Conclusion
As the space for direct government-to-government coordination on biomedical research and manufacturing has constricted over the past year, the bifurcating innovation systems of China and the United States are being held together by strong private-sector links. These links — including critical R&D partnerships, manufacturing arrangements, and venture investments — provide a window for companies to control and diffuse cutting-edge pharmaceuticals and R&D methods.
Despite the gradual inclusion of biomedical innovation in China’s great-power competition with the United States, opportunities for industry collaboration with China at the helm still exist, largely driven by the private sector. As China is incrementally recognized worldwide as not just a manufacturing powerhouse but a major biomedical agenda setter, companies will have few alternatives but to remain in the Chinese market, both for profit returns and for cutting-edge R&D functions. These companies can drive global partnerships that could weather the test of geopolitics — and even improve them — by creating jointly discovered therapies and building supply chain resiliency benefiting patients across the globe.