The healthcare market in China is a substantial one that foreign companies actually don't want to miss out on.
People are rushing in to look at these companies and their soaring prices as well.
Aging, it has a lot of impacts on the people's living conditions.
That is also a very important area for the foreign companies to come here.
They're not just looking at the smaller and weaker Chinese companies compared with the global giants at this moment, but they are looking at the potential that it will have in the next few decades.
We are having so many advantages like the markets, like manufacturing bases, but we have to be patient.
Part of the main challenge, I think, is actually to ensure that China is able to attract and retain the best global talent.
And if you've got that, the rest will come.
The Chat Lounge. Chat Lounge.
Chat Lounge. The Chat Lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to The Chat Lounge.
I'm Tsiyun. With me to decode why foreign firms are betting big on China's biopharmaceutical sector, Dr. Jomi, the Deputy Director of the Institute of American and Oceania Study, Chinese Academy of International Trade and Economic Cooperation.
Dr. Warwick Powell, an adjunct professor at Queensland University of Technology in Australia.
And Chen Jiahe, a chief investment officer of Beijing -based Novimarket Technologies.
Thank you all for coming back to the show.
China's biopharmaceutical sector has grown rapidly in recent years, drawing heightened interest from domestic and international investors.
Some analysts are even calling 2025 the Chinese year of biopharma.
Jiahe, let's start with the stock market often seen as a bellwether for the real economy.
Based on your observations, do you think this optimism is justified?
Yeah, we have saw the stock market's related components or pharmaceutical components has been rising quite a lot in the past few months.
It became one of the most important parts of the stock market in recent trading months.
And many investors have got quite a lot of money.
And, you know, people are rushing in to look at these companies and their soaring prices as well.
There's been a lot of research going on.
I mean, there are quite a few reasons supporting this rally of the stocks of pharmaceutical companies in China.
First of all, the stock price of these companies have actually gone through quite a long bear market in the past few years.
So, their valuation is starting to get quite cheap.
And if you look at the quality of these companies, they are growing pretty fast. I mean, China is one of the world's most populated countries.
And we've got much higher income than most other countries who have got a similar amount of population.
And also, China is putting a lot of focus on the pharmaceutical industry.
We don't just import the medical service from other countries.
We try to create our own industry in order to improve the living standard of the people.
So this industry is actually quite strong and has a pretty large potential compared with many other industries, especially the traditional industries.
So that's why when their stocks are going to be a pretty low valuation in the past few years, they created an opportunity.
And with this years, really, this opportunity just started to appear and investors actually gained quite a lot of money from it.
Indeed, actually, we've seen some clear acceleration on the foreign investment front, especially in the past year or two since the pandemic, like Jack just said.
And a recent example is a Swiss pharmaceutical giant, Roche.
It's investing over 280 million U .S. dollars to build a new biopharmaceutical manufacturing base in Shanghai.
It's second in China, and the facility will focus on localized production of bispecific antibodies for treating eye diseases.
And before that, AstraZeneca announced a $2 .5 billion plan to establish a new R &D hub in Beijing following its acquisition of Chinese firm Gracell Biotechnologies last year.
And other big names like Novartis, Nuvation Bio have also announced acquisition deals in China.
So, Dr. Zhou, do these examples reflect what you see in the data from the Ministry of Commerce?
Yes. You know, in my understanding that the FDA's really are trying to have a better understanding about the markets in different countries like, you know, for the FDA come here to China in the first quarter of this year.
We have seen that the FDA has, you know, flood into China in a much quicker speed compared with last quarter.
So I think that it's not just a temporary decision because we know that for any investment, especially for the pharmaceutical They do need a lot of preparation before they can earn the profit.
So, for those companies who are trying to choose the destination or the place to invest, they have to consider several different factors, as Jiang He mentioned.
There are several attractiveness of China's market, but in my understanding, there are even more.
So, when we are looking at the cases you have mentioned, I think that is really a balance a balance between the risky and the profitabilities of those investments.
Shanghai is one of China's leading areas for the free trade zones.
It has put the pharmaceutical as one of its encouraging sectors.
And they have assembled these kinds of sectors with so many talents and also the research institutions.
And also, in China we have the outsourcing, the service outsourcing and one of these very good example is the knowledge outsourcing, things, including some of the testing before they can just put it into the market.
So, for many of these research and development abilities, I think cities are really good to provide them with better support.
So, as the FDA in China has played a very important role in understanding that when we're talking many manufacturing for example, I would say it's a kind of a very important pioneer in many frontier of the industries and also giving our many good ideas and you know support the development of china's local industry but on the country chinese manufacturing basis and china's talent spaces are providing those companies with more sustainabilities so i think that is you know based on the market demand but if you're looking at the policy level government of china i mean the central government and also the local
governments are really caring about what the FDA can play here in China.
They are using their advantages to attract the FDA in different sectors, agriculture, the pharmaceutical, manufacturing, or even services.
So I think that they really are very interested in trying to take the FDA from other countries and they provide a very important support to have an ecosystem to be better for those FDIs.
So pharmaceutical is one of the very interesting.
And I think that many governments are really taking it as a priority for attracting the FDIs from other countries.
And it's also our outcome after the COVID.
There are so many disruptions or some kind of disconnections of the supply chains in the other markets in the world.
But in China, we are very stable to provide those supply chains.
So that's some of the reasons.
Apart from local governments' policy support and a complete supply chain, Dr. Powell, from your perspective, a developed country's perspective, what do you think is driving such changes?
We know that Europe, traditionally, those big pharma companies traditionally favor the U .S. for biotech investment.
So why are we seeing this pivot to China now?
Look, I think that there's a handful of reasons for this change.
One is at a very broad macro level, there is a recognition that Chinese industry, generally speaking, is reaching levels of global excellence that perhaps one generation ago was not anticipated.
And we're seeing that across many, many different sectors.
And unsurprisingly, we're also seeing that play out in the biopharma space as well.
The second reason is that there is a substantial market.
There is no doubt that the size of the Chinese market for biopharmaceuticals is anticipated to continue growing strongly, in part because the population's ageing with growing demand for healthcare, we've of course got a significant growth in the middle class which is able to afford more advanced forms of healthcare services, and of course there is in such a large population the prevalence of many chronic diseases that require attention.
So broadly speaking, I think we can say that the healthcare market in China is a substantial one that foreign companies actually don't want to miss out on.
The government, of course, has provided significant support over the course of the last decade or so.
It starts off with the Healthy China 2030 strategy, which laid out, I think, a comprehensive roadmap for healthcare quality and accessibility for the Chinese population.
The strategy supports the development in stem cell research, gene therapy, genetic diagnostics, and a range of advanced scientific areas.
And I think one of the things that interests foreign investors is not only the depth of China's own Western scientific capability through its research and development and university training, but also its ability to think laterally.
and I mean by that its ability to draw on its own rich traditions in Chinese medicine which allows many Chinese researchers to approach problems with an innovative mindset.
So they're the sorts of things that I think are making China an attractive place for foreign pharmaceutical companies to invest in and to establish R &D in and also of course to develop manufacturing and distribution.
And I might just add one last thing, and that is China does have trade relationships with over 150 nations in the world to a point where China is the largest trading partner of over 140 nations.
And that in and of itself is a very attractive platform for global biopharmaceutical companies to use China as a research and development and a manufacturing and ultimately a global market access base.
Indeed, those are very positive factors favouring China's attractiveness in this regard. But there's also a big concern, which is the IP issue, right?
It has been a big concern for a lot of international pharmaceutical companies.
Dr. Powell, isn't that a big concern anymore?
Well, clearly, it's not as big a concern as perhaps it might have been half a generation or one generation ago.
If those issues around intellectual property protection were still of substantial concern, then it is unlikely that these global players would find China attractive.
It would represent too great a risk to them, particularly given that intellectual property really sits at the heart of their particular business model.
So I think it is fair to say that China has worked diligently over the course of the last five or six years in particular to update its patent laws and introduce specific patent extensions for pharmaceutical products or pharmaceutical intellectual property.
It has, of course, pledged to further strengthen protection of clinical trial data, which obviously is an important part of the overall research and development and intellectual property foundations of these businesses and of course I think we are seeing evidence that Chinese courts are willing to award punitive damages for willful infringements of intellectual property and that enforcement capability and punishment regime I think gives foreign investors greater confidence that should there be infringements then they will be acted upon firmly and that, in fact, these punitive damages at court
decisions of late actually acts as a very strong disincentive for others to infringe on intellectual property.
The Chat Lounge. The Chat Lounge unpacks views and opinions on hot issues in a more casual way.
Then, Dr. Zhao, is that the reason why, you know, an increasing number of foreign firms or establishing research and development centers or clinical trial bases in China?
Well, you know, I have discussed this problem with many friends from other countries.
I think that, you know, when they're talking about China's attitude towards intellectual property, they saw that China's government is just trying to do that because of the pressure from the United States, from other countries.
I told them it's not just like that because if you're looking at international trade, China is the number one exporter in the world.
We have to export so many products to other countries.
If we are not able to protect our intellectual property, I think that there will be so many damage to our trade and also the companies.
So it's naturally that Chinese government take it very serious about protecting the intellectual property.
But maybe there are some difference because when China developed from the planning economy to the market economy, we established the law system one by one.
So we learned a lot from other countries And we're also trying to adapt those laws and regulations according to China's own traditional or domestic characteristics.
So in this way, we have to have some time to prepare for the better mechanism to protect our intellectual property, and we are even going further.
So if you are looking at a free trade agreement between China and other RCEP countries, the Regional Comprehensive Economic Partnership, we included even more intellectual property in those trade agreements.
So it means that we want to, you know, have more obligations by all the related stakeholders that we respect the different kinds of intellectual property.
And even for the e -commerce, we have, you know, pushed those e -commerce platforms to do more to protect those products coming from so many where in these countries and also in other countries.
So I would say that the attitudes of Chinese government is very positive.
And because of that, I think that many companies want to do more to enjoy even some of the very easy and fast, quicker ways of dealing the IP related disputes in China.
Because we have the IP court especially just trying to manage those issues.
So I think that all these things are reminding us that the government has a very positive attitude.
From an even bigger scenario, the society of China is trying to pay more attention and respect the IT owners.
I think that is the reason why we're seeing that many multinational companies who are trying to put the research and development part in China, they believe that they can enjoy a better environment.
They don't have to wait for recovery or different kinds of disputes to be settled or even disrespect from the society.
Indeed, it's mutually beneficial.
And let's break down the entry strategies.
Are we seeing more joint ventures, acquisitions or licensing deals?
Jiahe, do you have any idea there?
Well, currently we can see that many foreign firms are actually coming into Chinese markets through various ways.
I mean, as you said, joint ventures, acquisitions, all these kind of things.
Because currently China's market is more and more developed.
Regarding the IP issues that we just discussed, China is having better and better protection of IP, especially when we look at the medical service industry, the inventing of new medicine, all these kind of things.
So actually this is a market that is becoming more and more matured.
So all these kind of ways, for example, joint ventures, acquisitions, licensing deals, or even buying the medical companies from the secondary market, that is the stock market, we see more and more actions like this.
But I would say there is perhaps an increasing when we look at the acquisitions.
Basically, that's because Chinese local companies are now at a much larger size compared with maybe, say, 10 or 20 years ago.
go. So maybe two decades ago, when global capital are coming into China, they don't have that many targets for acquisition.
What they can do is that they set up joint ventures with local companies, with local talents, with local capital.
So there were more chances for you to make joint ventures.
But now, because there are more and more local companies available and there are more mature companies available.
So in this market, you have more chances for making acquisitions.
But this This is not only one -way deal, that is to say foreign capital are coming into China to make acquisition of Chinese companies.
And that's also another way that is many Chinese capital and Chinese companies are also going abroad to seek opportunities to acquire global companies.
But most of them are smaller companies as they scale, but they are looking forward to make this acquisition as well.
So that's the thing that it will look at when the economy is becoming more and more matured and internationalized.
That is, you have more acquisitions over both in and out.
Right. Dr. Powell, what's your finding there?
Yeah, look, I think historically speaking, the dominant model has been joint ventures that certainly dominated the landscape for many, many years.
But we have seen increasingly in the last five or six years the growth in 100 percent foreign -owned enterprises, a lot more licensing deals, strategic partnerships.
And of course, as the previous guest mentioned, mergers and acquisitions.
In terms of wholly owned foreign enterprises, we've seen global majors such as Pfizer and Merck, AstraZeneca, even Novo Nordisk, they've all established wholly owned R &D centres and manufacturing plants.
And that, of course, enables firms like that to retain full control over intellectual property, full control over the way that they want to set up their operations, and of course, significant control over distributions of profits.
We've also seen licensing deals for a lot more co -development opportunities, you know, cross -border IP licenses, clinical development partnerships, et cetera, et cetera.
And in a lot of these cases, the main drive of this particular model is to achieve rapid market entry with limited fixed asset investments, share some risks, particularly in clinical development, and of course, access China's fast track approval schemes.
games. Merck has done this, for example, for immunotherapy development.
And Beijing's cancer therapies have also been licensed by Novartis and other multinationals.
So, they're great examples, I guess, of licensing deals and co -development partnerships.
Of course, joint ventures have historically been the dominant approach, and they remain an important part of the organisational configuration, if you will, where JVs can access local distribution networks, works they can benefit from streamlined regulatory approvals and of course where necessary gain access to public procurement channels so things like that are quite important and again it really depends on the kind of business activity what stage the companies are at what they're looking to develop how they want to manage risks develop opportunities as well as juggle the issues of fixed capital
investment versus rapid market access by leveraging existing infrastructure, both in a hard sense, but also in terms of the relationships with government regulators and access to distribution networks and research and development resources.
Indeed. And talking about therapies, Dr. Zhou, according to your study, which therapeutic areas are foreign firms most focused on?
And probably you can help us understand the regulatory evolutionary environment behind those choices?
I'm not quite sure about that data, but I think that there are several different directions.
The first one is that we know that there are many investments in some of the most widespread illness.
I would say that are very common illness like to control the blood pressures or trying to deal with a kind of health problems. For those Those investments, they are trying to gain the abilities to be registered in China.
That is very important, a very big market.
And the second direction is that they are trying to develop some very effective medicine.
These effective medicines are maybe not that popular, but widespread or very easy to be found.
So this is the kind of thing that they want to deal with, like certain kinds of cancers or problems that they want to heal.
Well, the third direction is that some companies are trying to look at rare illness, because for many kinds of real illness, it is not that easy for them to find enough patients in other countries.
But in China, you know, when we have such a large population, I would say that the probability may be not that big, but when you multiply that with the population, they still have enough samples.
They really need those medicines.
things. And for those development of those medicines, I think these are really very challenging, because that has to put a lot of money prepared to research and development, and they don't have enough outcome or profit after many years of development.
So in China, they really want to have some of these outcomes, and that is also what we want to encourage.
But there are still so many challenges.
I think that is not only for the areas of therapy, as you mentioned, to kill people.
But sometimes I think that foreign companies want to come here to help the people to recover from the operation, from the illness.
And they are still a very large market.
This market is not just trying to deal with the problem in the short term.
It helps the patients to recover for maybe one year or even longer.
And this is something that we're hoping that they can do more.
And compared with these kinds of demands, I will say there will be another one that is aging and it has a lot of impact on the people's living conditions.
And I think that is also a very important area for foreign companies to come here.
I noticed that there are several cases that foreign companies, to cooperate with Chinese companies to deal with the brain problems, and also some of this aging problems to support that with a better health status.
I think that's are some of these areas I think that are very important for the cooperation from the foreign companies and Chinese companies.
Jia He, do you have any findings there?
Basically, if you look at the growth of China's medical industry, you talk about what kind of growth spots is there for the whole medical industry as well as innovative medicines.
I think you talk about four areas where not only foreign firms are looking at, but Chinese local companies are also looking at.
that's basically this includes, first of all, that's a disease caused by aging, especially the tumor related sickness.
Because currently, if you look at China's society, we are an aging society, we've got more and more older people.
And if you look at the pension, the pension has been increasing every year at about 5%.
So that means the consumption power of China's aging people is also rising.
So this means that market that is becoming larger and larger.
And because, you know, many disease, especially the tumor related sickness, the percentage of these disease is actually rising when you become older and older.
So this is, I think, one of the largest markets in China's medical industry.
The second one comes to the chronic disease because when you look at the chronic disease, you talk about a pretty large amount of population.
And with the rising GDP, I mean, currently China's GDP is growing at about 5 to 6 % every year.
Well, recent data shows that the growth rate is about 5%.
But if you take into account of the fact that the property market is giving some pressure during this period, then the underlying growth rate is about six to maybe seven percent, somewhere around that.
So with this rising GDP, the people who are affected by the chronic disease, they look forward to get better and better treatment, better medical care, these kind of things.
So this is another area that is growing and it has actually got a large amount of pensions as its very base.
The third one goes to the rare rare disease that is with a large amount of China's population, that is 1 .4 billion people.
Then any kind of rare disease talks about thousands or tens of thousands of patients.
And this kind of investment in research, especially when we talk about innovative medicine, is very important for this rare disease.
And this is a market that is also growing.
And the last one goes to the medical equipment, using more and more medical equipment in this growing economy.
But when we look at the medical equipment, actually more market share is grabbed by the local companies compared with global companies.
This is basically because China is trying to, if you look at the major strengths of the Chinese economy, that's industry production and manufacturing.
So that's the sector that helps the medical equipment sector the most. So that means local companies actually having more advantage when we talk about this sector.
But it is again a sector that is growing very quick.
So a lot of foreign capital is also looking at this sector.
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Check out whether China is able to become a global biopharma innovation powerhouse by 2030 while we return.
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Welcome back to The Chat Lounge.
We continue our chat on foreign firms betting big on China's biopharma future.
Well, can I end one point?
Sure. I think that for the local equipment, it's a little bit, sometimes some people are confusing with that concept.
The local equipment doesn't mean that it has to be our equipment produced by Chinese domestic companies.
It's also our companies who are making the equipment here by the foreign companies if they have some factories here.
So according to the government procurement law that we open our market to any local produced equipment.
So it also includes the companies who are invested here in China and they can have a fair competition with the Chinese companies.
So you're saying probably comparatively lower labor costs is also something that those companies are chasing when they decide to set up a manufacturing base here.
Yes. Yeah, I think it's also about the other issues like the market.
So I want to explain that because there is some kind of allurge from the EU.
They said that the Chinese government is treating different companies differently.
Like the Chinese -owned companies, they can sell the medical equipment to the market while the foreign companies cannot.
But according to the law, any locally produced equipment can be treated fairly in this market.
So I just want to address this kind of idea because there is some leverage from the EU part.
Thanks for clarifying that.
And we've talked about those hotspots like Shanghai or the Greater Bay Area in southern China.
They've been favored by those biopharmaceutical companies.
And there are some biotech clusters already there.
Are we seeing any new investment hotspots in those?
other areas in China in recent years.
Dr. Zhou? Well, yeah, in my understanding, I've been to some cities like in Jiangsu.
I found that in one city, I forgot the name, but it's very famous for certain kinds of medicines, including the vitamins.
And they are really a big share of the market.
I think that is also helpful to understand that some of these materials of those medicines, and some are coming from the plants.
So if there are enough markets, I would say it is very important for the better integration.
And for the Chinese herbal medicine, I would say that Hebei is very strong in that respect, like Shijiazhuang, Zhengding and several cities.
They have a huge market to sell those products and also it has a very complete supply chain accordingly.
So as for the medicines, I think that another important part is in the Northeast China China, I visited Qiqi Har maybe several years ago, there were several medicines factories who are doing these kind of very traditional medicine producing, and according to some of these traditional medical books, they are producing certain very important products.
And another one province is in Yunnan, they also produce many very special medicines.
medicines. And I think that are really unique in China.
So, across China, I think that there are many regions who are trying to develop their own products, but for the JBA area like Guangdong, they have a little bit more modernised abilities to deal with not only the medicine producing parts, but also the, you know, some kind of research. And in Shanghai, they are very strong also in the research and development for the new medicines.
So, I would say there There are so many examples that we can try to find.
Right. Moving on to the opportunities and the challenges in this process.
Actually, we've touched upon some opportunities brought to the Chinese companies.
They can go overseas and reach foreign markets.
Dr. Powell, from your perspective, what kind of opportunities or maybe challenges you want to highlight when foreign capital is pouring into the Chinese market?
Yeah, look, the main issue always is when there is a large concentration of demand for resources that you need to be careful that you don't cause unwanted disruptions to your foundational resource base.
For example, you want to minimize the extent to which you cause disruptions in your labor force, such as trained research scientists and others.
You want to make sure that you are able to align with your downstream market capabilities for research and development, for testing, and ultimately for distribution and sales.
So I think it's important to recognise that whenever there is a large concentration of new activity in any industry, that the risk, if you will, is that there is a little bit of a bubble effect that causes distortions in the way that supply factor markets work.
I should add too that I think that there is another area of biopharmaceutical developments that is particularly strong from China's point of view, and that goes to traditional Chinese medicine and biotech convergence.
Obviously, there's a long tradition of Chinese medicinal knowledge together with compounds, and increasingly, there is evidence that there are many active ingredients in these traditional Chinese medicines that can be mobilized to tackle all sorts of things such as tackling issues around genomics and microbiome science in particular.
In that area, the gut microbiome, the stomach is one of those areas that is particularly interesting to look at.
We've, of course, got synthetic biology and a bunch of AI -assisted drug discovery as well that leverages off the traditional Chinese medicine capabilities and knowledge.
The other interesting thing, and I guess this is one that it is really worth, I think, thinking through and understanding is the growing interest in microbiome -based therapeutics.
And so I'm particularly focused on the gut microbiome.
And in large part, it's because there is an ability to target a range of diseases through microbiome -based therapeutics, whether it's a metabolic syndrome, liver fibrosis, Crohn's disease, as well as various forms of colitis.
The work that has been done over many years in China in gut microbiome is frankly globally leading.
It has largely been driven from historical knowledges but has now been integrated with the knowledge base and the methodologies of Western sciences and so we are starting to see dramatic growth in the development of projects around functional foods and probiotics, around microbiome -based diagnostics for various forms of cancer and metabolic disorders.
And of course, we are also starting to better understand the gut -brain relationship, which is exploring the relationship between neurodevelopmental and neurodegenerative diseases and gut health.
So this issue of the gut microbiome is one of the frontier areas that Western companies are beginning to take an interest in, in terms of Chinese capabilities.
But from a global point of view, there's been substantial funds raised by Western pharmaceuticals to begin research in these spaces.
But China, in fact, is probably at least 10 years ahead in terms of research and applications.
And I mean by that, the availability of therapeutic interventions based on gut microbiome knowledge.
That's quite professional.
And you've talked a lot about the positive or the pro side of this coin.
But on the other side, it reminds me of some concern of a lot of Chinese people, whether the traditional therapies could be bought out or monopolized by those wealthy Western pharmaceutical companies.
Would that be a legit concern?
Look, absolutely. I think that one of the things that Chinese civilization brings to the table, so to speak, in relation to health and therapeutic interventions is its long tradition in Chinese medicine.
And it is something that I think China can rightly be very, very proud of.
The interesting thing, I think, though, is that not only, in a sense, is there a risk that it could be appropriated by others, but perhaps we can look at it in a different way.
And that is that there is an opportunity for China and its leadership position in traditional therapeutics to to open up a new space globally for traditional therapeutics -based research that draws on the civilizational knowledges of the diverse civilisations of the world.
And we know that in Africa and Latin America and in other parts of the world, there has been long traditions in traditional medicines and in traditional therapeutic interventions that continue to be drawn upon by locals but has not yet been effectively harnessed at a global scale.
And so there is opportunities to not only create a space for those kinds of knowledges to proliferate and to benefit humanity at large, but for, in a sense, through that process of open collaboration for China to protect the integrity of its own contributions to the traditional medicine space, whilst at the same time aligning that or integrating that with more conventional Western biopharmaceutical scientific methods.
So whilst there are legitimate concerns about the loss of intellectual property around traditional medicines, I think a proactive approach is the best one to ensure that that doesn't happen and that, in fact, these knowledges and the technologies and products that will be developed on the back of these capabilities and knowledges, firstly for the benefit of all people around the world, but is not lost also on the Chinese civilization.
Indeed. And Dr. Zhou, do we have such regulations now?
I understand that the investment is now restricted or limited in investing hospitals or clinics focused on Chinese medicine.
But what about in this area?
Yeah. In my understanding, we have some requirement for the FDA who want to invest in the traditional herbal related medicines, industries, like to prepare, to make it into the medicines or a certain kind of process.
We have some requirement, but it doesn't mean that we forbid them to do that.
It means that when the foreign companies who want to invest in those areas, they have to apply for the permission before they make an investment.
So, I think that APEs still are a little bit different compared with, you know, western system of the medicine.
Chinese medicines are regulated by our special ministry of Uriel in China, so they are taking care of this Chinese traditional medicines and those prescriptions and receipt and or, you know, those kind of things very carefully.
So, I think that they are really active in promoting Chinese medicines to go abroad to to export or to be accepted by the foreign countries, like when we discussed about the China and Australia free trade agreements.
I talked with them, and they are very actively trying to encourage the bilateral cooperation in that region.
So in my understanding, it's not just something that we want to stop the touch from the foreign companies or other companies.
We want to keep it, but the most important goal is trying to make it better better to make these traditional treasuries even more valuable in the future.
So with this kind of concept, some scientists have done some research on trying to make some very effective parts out of the traditional medicines and put it into the Western style of producing medicines.
So the investment in the hospital is a little bit different because in China, we have started to open the market of foreigner owned hospitals in certain areas like we in Shanghai free trade zones or in Hainan Free Trade Court so we started to do that because you know the systems are still very different like you know for the foreign investors making the medicine medical care or you know the hospitals they require some permits and the qualification requirements are not the same as the Chinese doctors so there will be some problems about how can can we align those qualifications by different systems?
And I think that is also the reason why we want to do that.
Another challenge is coming from medical insurance problem or social welfare, you know, for those kinds of system, how can we just match the different requirements like for the prices, for the medicines, for the scales or even some time of the, how can we deal with accidents of the medical?
So there are still a lot of things that we have to do.
And we tried it from several parts.
I think that is some very carefully designed paths.
But the direction is very clear.
We want to open the market.
So if they want to come here to try their equipment, medicines, and even some of the skills, they can do it right now already in Hainan province in certain areas.
Like in Boao, there is an area where the companies can do this kind of experiment.
We hope that we can do more in the coming days after we have some more experiences.
The Chat Lounge. The Chat Lounge unpacks views and opinions on hot issues in a more casual way.
And another challenge may come from geopolitics.
Amid U .S.-China tech tensions, could Washington further clamp down on biotech collaborations with China, particularly over technology transfers and cross -border bio -deals?
Jia He, I know investors on the stock market are very sensitive to such kind of factors.
Do you have any concern there?
Yeah, that's definitely a very large concern.
I mean, this is not news to us.
It's been going on for quite a long time, ever since Trump got elected years ago as president in his first term.
So you've got all this kind of political pressure coming from the United States, regardless of whether you are doing businesses right or wrong, but because you're a Chinese company, you've got pressure.
So this is the kind of thing that investors like us have been considering over the past many years.
We kept on looking at different companies and asking them how much connection are you having with the United States?
How much are you relying on the markets or the investments or the technologies from the United States?
And you should be preparing for that.
And this is not a concern of only the investors, but businesses have got concerns as well.
well. So many Chinese medical companies have been preparing this for years.
I mean, that's basically concluding all the activities that we have been doing in the past many years is that we're trying to cut connection with the US market.
We don't want to lose the US market, but that's something that you have to do.
You have to reallocate your capital and investment and business connection to many countries.
You can't rely on US market as a single most important business partner to yourself.
I mean, if you do that and you you are putting your business in a very risky position.
And another thing is about the bargaining power is that if you have, for example, say 90 % of your business coming from the United States, then a U .S. sanction will be very important for you.
Then it is more possible that the U .S. government will put a sanction on you because they know that if they put a sanction on you, you have no other option.
So you have to yield to them.
But on the other hand is that if you have, for example, 20 or 30 % of your income coming from the United States, but 80 % coming from other countries and have very good connection with other countries, the US government will be able to find out that if they cut the cooperation with this company then that doesn't mean that this company will break out but it only means that the US will lose a strong business partner.
Then in that case it is more likely that you don't get the sanction.
So from our point of view is that many businesses and investors and capital we have been kept on thinking about trying to get less connection with the US market.
It's not to say that we abandon the u .s market we don't want to abandon the u .s market but we have to make sure that any political pressure coming from the u .s government does not bring the company into a status that we can't sustain our operation so this job has been done for many years i think almost a decade chinese companies have been doing this i mean look at what chinese automobile companies have been doing most of the exports of china's automobile companies are not going to united states they are They're going to Japan, they're going to Europe, they're going to ASEAN countries, they're
going to Russia, they're going to African countries.
But they're not specially designing models exporting to the United States.
So they're reducing the investment connected with the U .S. market.
So this also reduces the potential pressure that you can get from the political pressure that the U .S. government can generate.
So there are still pressures nowadays, but if you compare the current status with 10 years ago, the pressure is much more released.
All right. And Dr. Powell, according to your knowledge of the Trump administration, what kind of measures do you expect the U .S. to introduce?
And do you think China has the ability to handle such a challenge?
Look, I think the United States has shown that over particularly the last decade or so, a willingness and a desire to seek to clamp down on Chinese businesses, particularly in leading technical and scientific areas and biopharmaceutical is not immune to those sorts of initiatives from the American side.
The Americans will cite issues such as national security concerns, of course, in terms of genomic data, data on citizens' health.
And of course, there are issues.
So the claim would go that some of the research and development and product development has potential dual use, military and civilian dual use.
So we would expect increasing scrutiny on activities that might touch on those sorts of areas.
Increasingly, research in science and in technology is unfortunately being weaponized because the governments have introduced a national security lens onto everything, which makes it almost impossible to distinguish things that are of genuine national security risk and things that aren't.
So, for instance, genomics data is an issue that the United States sees as a dual -use data security and surveillance risk.
and biomanufacturing is seen as an area where there are potential dual use applications and of course contract research organisations as well you know where there may be data risks and dual use potential.
The implications of this are serious because it means that in areas such as human health we are no longer I mean in humanity broadly speaking is no longer benefiting from the collaboration of the best minds working together and the risk we run is that we are going to see the development and the consolidation of a fragmented global bioeconomy with distinct ecosystems. And that is, I think, quite a significant negative for human health globally.
It will mean that Chinese firms will pursue their own biopharma resilience, self -reliance, and there may be even third party locations that will emerge to be neutral places for collaborative research. Time will tell.
Actually, with so many challenges ahead, China actually, like Dr. Powell earlier mentioned, we got this 2030 strategy to become a global biopharma innovation powerhouse.
According to what we've already discussed, China's biopharma industry is not in its infant stage, but when compared with developed countries, is they're obviously less developed.
So is China's goal realistic over the next five years?
I want opinions from all of you.
Dr. Powell, we'll begin with you.
Sure. Look, I think what we've seen over the course of the last 40 years is that when China puts its mind to something, it has a very high probability of success in achieving it.
That comes from a shared commitment, I guess, across the entire social fabric from individuals through the government departments, through the enterprises, universities, finance sector regulators and others, that they need to coordinate their activities with shared goals in mind.
So I think in terms of historical experience, it's fair to say that there is a high probability of success.
No doubt, some of the challenges that are emerging as a result of global biostrategic decoupling, so to speak, will present themselves as barriers that need to be tackled.
And these are areas in health data management, data privacy, advanced biomanufacturing technologies and the ways in which dual use risks are effectively managed so that China's own development capabilities can continue to take forward steps, but at the same time also position Chinese enterprises and the entire ecosystem, I should add.
So it's not just enterprises, there's a whole ecosystem that makes this possible to enable that ecosystem to build tighter links with other networks around the world.
And I mean by that networks in the global south through the Belt and Road initiative network.
So at the end of the day, whilst the United States and Western Europe have historically led in this arena, the reality is that the world is bigger than the United States and the world is bigger than Western Europe.
And we've seen that play out already over the last few years.
So whilst there are challenges, I would expect that those challenges can be tackled successfully.
Then what would be the most urgent task to tackle, in your opinion, profitability of the company?
No, look, I think it's really about harnessing resources and that means consolidating the ecosystem to have access to some of the best brains.
At the end of the day, this industry does not work without the smartest people working in it.
And that is both the greatest challenge, but also the greatest opportunity China has invested over the last four to five decades in its education system.
Many of its graduates have also pursued global education and research experience, and all of that augurs well for the Chinese biopharmaceutical sector.
So part of the main challenge, I think, is actually to ensure that China is able to attract and retain the best global talent.
And if you've got that, the rest will come.
Right. And Dr. Zhou, please.
Well, I agree with Warwick's ideas about it's likely to have a better performance in the coming years.
But I want to say that we have to be patient about the speed, especially for this kind of sectors.
It do need some patience.
We have to do the experiment according to the standards to guarantee the safety of those medicines and trying to make it suitable for different kinds of people.
So, we are having so many advantages like the markets, like some of these manufacturing bases, but we have to be patient.
And the second I want to say is that it's not only about the big companies.
We have to take care of the small and medium -sized enterprises.
prices. We are not just trying to encourage just the several big apples in this basket.
We are trying to make a stronger feeling with different kinds of stakeholders.
So this is really important for us to have a better resilience in such as on social world.
And third one, I think that is not just from China's own attitudes or opinions.
We want to cooperate with our friends along the belt and road regions, if they are able or they have some demands, maybe we can do it together.
So it's an age of collaboration and artificial intelligence definitely will play a very important role in this process.
But how to define a biopharmaceutical powerhouse?
It's kind of a little bit vague, right?
Yeah, it's really a kind of new area.
I think that with better technology, it will replace some of the traditional ways of making the medicines that also are more effective i think that will help us to understand more about you know what we are facing from the not just the sympathy but also from you know the real reasons of those things from the some kind of things real reasons and we can deal with the reasons and it's not just helping people to recover it's also are trying to defeat those various or other kind of bad things directly all right and asthma elise general please yeah i think we have a lot of things to expect for china's
medical industry to grow in the next two decades that's basically because if you look at the process of economic growth and if you dig into the economic history well you can find that countries have different stages for developing different sectors and industries when their economy grows along the way first of all you have the export and import economy because these kind of businesses are the simplest that's something very similar to what china has been doing in the 1990s and later on you have your own industry built up your own factories your own automobiles your own ship building these kind
of things so this is the current status of the china's economy but the next stage then goes to the growth of more scientific areas for example the computer science the creating of better computer chips and programs and one of the very important thing is the growth of the pharmaceutical industry, especially the innovative medicines and medical caring procedures, these kind of things.
So currently, if you look at China's per capita GDP, we are staying at about 13 ,000 USD per capita.
So that's about one -fifth of the United States at this moment.
So we are just in the stage of developing the next level of industries.
And the pharmaceutical industry is definitely one of them.
So if you want to talk about what are the sectors that will have the largest growth potential in Chinese economy in the next one, two or even three decades, you talk about consumption, you talk about technology and you talk about the medical caring industry.
So that's why so many capital are looking at this.
They're not just looking at the smaller and weaker Chinese companies compared with the global giants at this moment, but they are looking at the potential that it will have in the next few decades.
I mean, this kind of potential comes from the continuous investment of human resource, of capital, of education, and supported by this large market.
So when you put all these things together into the economic growth, and you wait for ten or twenty years, you will see the outcomes.
And that's why foreign investors got huge potential to explore on this market.
And with that, we come to the end of our chat for this session.
Many thanks to Chen Jiahe, chief investment officer of Beijing -based Nova Market Technologies, Dr. Zhou Mi, the deputy director of the Institute of American Endocinia Study, Chinese Academy of International Trade and Economic Cooperation, and Dr. Wolwick Powell, adjunct professor, Queensland University of Technology in Australia, for sharing your insights.
The show is available on all major podcast platforms. Please email us your comments at radio at cgtn .com.
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