China Looks to Recharge Foreign Investment with Focus on Burgeoning Biopharma Business

Some gauges indicate that foreign investment in China has sunken to 25-year lows recently. Beijing sees development of the country’s biotechnology and pharmaceutical industries as one of the keys to digging its way out of this hole. Investors have dumped over $200 billion into Chinese biotech enterprises since it was named a high-priority sector in the Made in China 2025 initiative. This has boosted China’s position among global drug manufacturers, but has failed to deliver on the development of novel products. 

An anti-corruption crackdown, as well as general softness in the Chinese economy, has slammed shares of the country’s healthcare and biopharma firms and scuttled domestic IPO plans, but interest from western firms like Moderna and AstraZeneca appears to be picking up recently. Last week, China implemented a 24-point list of guidelines that are meant to facilitate a return of foreign investments by issuing business visas and offering tax incentives for international companies.

Related ETFs: KraneShares MSCI All China Health Care Index ETF (KURE), Global X China Biotech Innovation ETF (CHB)

Amid slumping foreign investment in the Chinese economy, the country may look to healthcare industries, like biotechnology and pharmaceuticals, to help revive interest from international companies. Per Bloomberg, direct investment liabilities — a gauge of foreign direct investment in China — slumped to just $4.9 billion in Q2, the smallest amount in any quarter in data back to 1998, and down -87.0% YoY.

In light of this collapse, China has implemented a 24-point list of guidelines that are meant to facilitate a return of investments by issuing business visas and offering tax incentives for international businesses. That list includes the specific backing of investments in the biotech industry, highlighting it as “an area of major focus”. China has become a hub for chemotherapy drugs, immunosuppressants and cardiovascular drugs bound for the US. Nikkei Asia notes that the US imported nearly $7.0 billion worth of pharmaceuticals from China in 2022, up more than eightfold from $820 million the year before. Until 2021, the county’s share of US pharmaceutical imports by value stood at around 1%; by 2022, that figure had exploded to 9.6%.

A focus on boosting biotech and pharmaceuticals is nothing new in China, as President Xi Jinping’s administration in 2015 made biopharmaceuticals one of the 10 high priority sectors under its Made in China 2025 state industrial strategy. Since then, Bloomberg data indicates venture capitalists, private equity funds, investors in initial public offerings and others have…