The U.S. Treasury Department proposed new rules to curb American investment in Chinese biotechnology, setting up a fresh economic battleground as domestic drugmakers increasingly rely on the sector for innovative treatments. The proposal marks the first time foreign investment restrictions would apply directly to the pharmaceutical industry.
Under the draft rules, transactions covering specific bio-derived compounds, materials, biomanufacturing equipment, and facilities would be prohibited. The restrictions also extend to technologies related to biological design and sequencing, software or equipment designed for automated scientific discovery or experimentation, brain-computer interfaces, and bioinformatics tools. Lawmakers and China hawks had pressed the administration to limit the flow of American capital eastward, pointing to Beijing’s stated objective of dominating global biotechnology by 2030. Approximately one-third of all new drugs under development globally currently originate in China.
The initiative follows a months-long lobbying effort by pharmaceutical industry representatives who argued against stringent financial barriers. Major pharmaceutical firms and biotech investors have increasingly turned to Chinese developers to replenish product pipelines and finance early-stage molecules. Companies including Pfizer, Bristol Myers Squibb, and Roche struck multibillion-dollar licensing agreements with Chinese firms this year. While the proposed rule targets direct investment, a Treasury official told reporters that licensing deals are not addressed, though the official declined to clarify how co-development and co-marketing agreements would be affected.
PhRMA, the lobbying group representing major drugmakers, has actively opposed limits on investment and dealmaking, arguing such measures will fail to slow Beijing’s biotech advancement. Jocelyn Ulrich, vice president for policy and research at PhRMA, emphasized that American patients seek rapid access to cutting-edge treatments currently emerging from Chinese scientific ecosystems. Ulrich noted that most transactions to date remain licensing arrangements where American companies control the molecule while Chinese partners retain regional development rights, asserting that national security concerns do not arise when U.S. firms oversee clinical trials and FDA processes.
Industry leaders have instead encouraged the administration to bolster domestic competitiveness by accelerating early-stage clinical trial launches in the United States, pointing to a Department of Health and Human Services initiative announced in June dubbed Operation Trialblazer. John Crowley, CEO of the Biotechnology Innovation Organization, criticized capital restrictions as overly simplistic and cautioned against blocking access to breakthrough medical treatments developed abroad.
Simultaneously, Beijing has advanced its own export regulatory framework for biopharma technologies to maintain a competitive edge. China’s Ministry of Commerce proposed a ban on foreign sales of domestic cell-and-gene therapy technologies, limiting foreign access primarily to licensing agreements. A U.S. drug industry lobbyist suggested the Chinese proposal establishes potential retaliation levers should Washington tighten restrictions on biotech deals.
The concurrent regulatory actions by Washington and Beijing highlight mutual concerns over supply chain stability for essential medical products. The U.S. aims to avoid dependencies similar to China’s dominance in critical minerals, while Beijing pursues technological self-reliance under a campaign launched by leader Xi Jinping in 2022 to eliminate vulnerabilities in trade disputes. Beijing’s proposed export curbs accompanied new restrictions on artificial intelligence and photovoltaic technologies, aligning with a five-year pharmaceutical industry plan designating biopharma as a national pillar industry alongside semiconductors, electrical batteries, and robotics.
Yanzhong Huang, an expert on Chinese health politics at the Council on Foreign Relations, described the measures as part of a broader pattern of tightening controls over technology exports, outbound investment, data, and talent under the umbrella of technological security. Huang noted that the strategy relies on retaining core capabilities and preventing foundational intellectual property transfers while permitting firms to monetize assets.
Legislation passed in December expanded limits on U.S. investment in sensitive industries located in countries of concern, granting Treasury the discretion to designate additional sectors. Bipartisan lawmakers, including House select committee on China chair John Moolenaar, urged Treasury Secretary Scott Bessent to classify biotech as a prohibited technology and scrutinize commercialization deals. The Treasury Department will accept public comments on the proposed rules through December 7, with final regulations required by law to be issued by March.
