Are Chinese biotechnology players becoming the focal point of friction under the broken US-China ties? Recent events and data are stoking speculation that it will be the next flashpoint involving mainland Chinese drug producers and US government departments and regulatory authorities, some analysts suggested, as competition in the market for cures intensifies amid the pandemic. On February 7, the US added WuXi Biologics and 32 other Chinese firms to its “unverified list” in a move that entails export restrictions, hurting their access to US technology. In a February 11 statement, Innovent Biologics said an FDA advisory committee decided to ask the firm and its US partner Eli Lilly to broaden its clinical trials for a cancer drug before approval for use in the US. “Seeing US regulators take various actions targeting Chinese health care companies in the past few months, we expect [the] sector to become a new source of US-China tensions,” said Carol Dou and Sunny Chen, analysts at UOB Kay Hian. “China’s biotech sector has been developing rapidly”, with more spending on innovation and research collaborations globally, they wrote in a February 15 report. The US-China rivalry has deepened since former president Donald Trump started slapping punitive tariffs on Chinese goods in 2018, fuelling a still- unresolved trade war . Since then, both governments have traded barbs, tariffs, and sanctions over contentious issues ranging from human rights to forced labour, military technology, accounting and Hong Kong autonomy. WuXi Biologics slumped 22.4 per cent in Hong Kong while Innovent lost 0.3 per cent since the related decisions, wiping a combined HK$76.1 billion (US$9.8 billion) of market capitalisation from their stocks. The US has shown heightened concerns around foreign investments and export controls for sensitive technologies, said Helen Chen, Greater China managing partner in Shanghai at LEK Consulting. While biotechnology is technically on the list, health care should not fall into the category, she added. “Where there might be more sensitivities would be areas which impact public health or those science or technologies which might be considered more sensitive, such as those that cover human genetic materials,” she said by email. The industry is global in nature, “not a zero-sum game”, according to Bruce Liu, a China-based partner at consultancy Simon-Kucher & Partners. There are not many pure US companies as most of their businesses are global with China as an increasingly important part, he added. “There is nothing wrong with that and there isn’t really a conspiracy to dominate the global industry,” Liu said. China has been opening up its own market to innovations abroad while encouraging local industry players to move up the ladder, he added. China’s share of the global innovation pipeline for new drugs rose to 13.9 per cent as of February 2020, up from 4.1 per cent in 2015, according to a March 2021 report by the China Pharmaceutical Innovation and Research Development Association and the Pharmaceutical Association Committee. Still, the Asian nation only contributed 6 per cent to the number of new drugs launched worldwide, with the US and Japan topping the ranking with 67.6 per cent and 13.3 per cent share respectively, according to the report. The global pharmaceutical market was worth US$1.3 trillion in 2020, and was expected to reach US$1.71 trillion in 2025, according to Frost & Sullivan data cited by Chinese drug manufacturer Asymchem Laboratories in its stock prospectus in November. The US imported US$3.4 billion worth of Chinese pharmaceutical products last year, a 55 per cent increase from 2020, according to data published by the US International Trade Commission. They accounted for 2.2 per cent of all US purchases in that category. China’s biotech industry is still in the very early stages of development, and very few companies have highly innovative drugs as part of their core assets, said Jay Lee, a senior equity analyst at Morningstar. “Theoretically, US-China tensions may eventually rise to the point where even innovative drug development becomes a major point of contention, but that is beyond the control of any individual company,” said Lee. “The best strategy is to focus on innovation and meeting medical needs, as we think this is more politically defensible.” Additional reporting by Peggy Sito and Chad Bray