What a US-China biotech war would mean for Hong Kong and the world

Biotech is especially important given the ageing population and economic ambitions of Hong Kong – and China as a whole
For the world, biotech protectionism will lead to more expensive treatments and greater health insecurity

Colleen K. Howe

Published: 3:45pm, 18 Apr 2023

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With the global electronics industry still reeling from the latest volleys in the semiconductor trade war, biotechnology could become the latest strategic sector in the US-China technology competition. Yet if biotech is divided across geopolitical lines, it could have worrying implications for global health and biosecurity.

An executive order by US President Joe Biden in September last year to increase domestic manufacturing stoked speculation that biotechnology could go the way of semiconductors. Already in February that year, Chinese biotechnology companies were among those newly added to the Commerce Department’s unverified list, making it harder to export to those companies.

Meanwhile, China announced it was considering banning the export of cloning and gene-editing technologies.

A US report released last month laying out various federal agencies’ biotech goals offers some details on the Biden administration’s vision. Basically, Washington wants to reduce America’s reliance on China-made active pharmaceutical ingredients (APIs). But to do so, new and more cost-effective technologies are needed to reshore production.

Given the higher cost of domestic manufacturing, the pharmaceutical lobby last month asked the White House to consider support similar to the Chips and Science Act for semiconductors. This seems a real possibility.

But moving API production back to the US would come up against the environmental regulations that originally drove much of the offshoring. It could also set back efforts to decrease drug pricing, amid a growing outcry over new gene therapies priced at upwards of US$1 million.

India is another open question. The Indian pharmaceutical industry has been vocal about its heavy reliance on China and could be a potential collaborator. But a focus on moving production back to the US seems likely to sour Delhi on the plan when Washington is trying to nudge India into its orbit.

APIs are only one part of the plan, as laid out in the report, which sets out goals for biotechnology applications in climate change, supply chain resilience, health and basic research. Data security, biosecurity and food security will also be major focuses.

The world is on the cusp of an “industrial revolution” in the field, US officials say, that will change the way we make things, what we eat, and even how well and how long we live. It makes sense to focus on emerging industries, where supply chains are not yet too deeply intertwined. And a heightened focus on biosecurity is justified when it comes to technologies that have the potential to be weaponised.

Yet biotechnology as envisioned in the Washington strategy is wide-ranging. Applications run the gamut from using bacteria to make biodegradable plastics to producing sustainable plant-based fuels with specific characteristics. Notably, the White House also envisions that bioprocessing could be used to harvest critical minerals, like lithium and cobalt, where a few countries dominate global production.

A man watches a cobalt conveyor belt at a plant in Lubumbashi, Democratic Republic of Congo, on February 16, 2018, before the cobalt ore is exported, mainly to China, to be refined. Photo: AFP

On one hand, finding new ways to produce materials that will underpin the new-energy economy should have widespread benefits. But the ubiquity of biotechnology will make it even harder to tease out which areas present real national security risks.

It’s not clear yet just how decoupling would proceed. But Hong Kong’s biotech industry should be watching closely. Biotechnology has been a cornerstone of the city’s diversification plans for decades.

President Xi Jinping made a point of touring the Science Park during his visit to Hong Kong last year to learn about the research being carried out there, including tests for the early detection of Alzheimer’s disease and cancer.

The topics of study point to one reason for the keen government interest: demographics. China probably has the world’s largest population of Alzheimer’s patients, around 10 million. By 2035, some 30 per cent of the population will be 60 years or older, threatening the sustainability of the pension system.

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China tackles challenges posed by its ageing population

The Hong Kong government has estimated its proportion of over-60s will be even higher by then, at 36 per cent. Alzheimer’s, cancer and other diseases of ageing will further burden the respective social service systems.

Biotech is important to the city from a finance perspective too. Hong Kong’s stock market has banked on attracting biotech initial public offerings (IPOs) to be a source of both funding and innovation. In 2018, Hong Kong relaxed listing rules for biotech companies; the city has since become the world’s second-largest biotechnology funding hub.

Decoupling could dampen that IPO interest and put Hong Kong’s biotechnology ambitions in a tough spot. Restrictions on cross-border data transfer between Hong Kong and mainland China already make it hard for Hong Kong companies to access China’s massive market, though efforts are under way to smooth out the regulatory hurdles. International export restrictions could make accessing bigger markets even harder.

More importantly, biotech is an industry built on global collaboration. For example, Grail, the US liquid biopsy company, acquired technology through a 2017 merger with Hong Kong-based Cirina, which was founded by Chinese University of Hong Kong professors. With cancer the second leading cause of death globally, due in large part to late diagnoses, this type of global knowledge transfers can save lives and address the ageing burden.

With the Covax Facility programme to bring Covid-19 vaccines to lower-income countries possibly winding up this year, it’s a reminder that engagement from both the public and private sectors is needed to prevent biotechnology protectionism from leading to more life-saving treatments that only those in a club of rich countries can afford.

Colleen K. Howe is a programme associate at the Asia Business Council