This article looks at recent developments in the biotechnology industry in China from a regulatory ad business perspective.
An Introduction to China?s Biotechnology Industry
By Sarah Xuan, Associate
12 November 2009
Background and Development of Chinese Biotech industry
China has just seen double-digit growth in its biotechnology industry and has gone
from being one of the slowest to one of the fastest nations in the adoption of new
biotechnologies. The biotech sector is seen in China and internationally as a core area
of national scientific and economic development, due to its potential to ease the food
crisis, combat disease and hereditary problems. The Chinese biotech industry grew
30% annually to $3 billion between 2000 and 2005. By 2010, the Chinese biotech
market is projected to reach US$9 billion.
While Chinese venture capital investment is currently limited, the Chinese
government does invest in quasi-venture capital companies and helps attract capital
from the private sector to support start-up and growth companies. In recent years,
domestic and Western venture capital investments have contributed significant
funding to China's biotech industry. In 2006, total VC investment in China grew by
22% over 2005. Multinational investment accounted for nearly 76% of this total.
The State Council, China?s cabinet, publicized measures to boost biological industry
in June of this year. The measures deal with policies for key fields for China?s
biotechnology industry, technology innovation, funding support and preferential tax
incentives (50% tax deductibility).
Biotech companies in China
The biotech industry in China has been developing since the early 1980?s. By 1997,
the number of Chinese companies with business licenses including biotechnology
activities, was around 200. Today, China boasts more than 580 biotech companies.
The majority of these companies have net assets of less than US$10 million.
Chinese biotech companies are highly dependent on governmental funding. The two
major state funding programs are The National High Technology Research and
Development Program (a.k.a. the 863 Program) and the National Basic Research
Program (a.k.a. the 973 plan). The former is geared more toward applied research and
commercialization, the latter toward early-stage research.
The following companies are the more well known biotech companies active in
Amoytop is a high-tech company devoted to discovering, developing and marketing
recombinant proteins such as Granulocyte Macrophage Colony Stimulating Factors,
and Granulocyte Colony stimulating Factors.
Beijing Pharma and Biotech Center (BPBC)
This is a consulting agency, which belongs to the Beijing Municipal Commission for
Science and Technology (BMCST). BPBC is a non-profit organization (NPO) which
is aimed at strengthening innovation in the pharmaceutical and biotechnology
Beijing SL pharmaceutical Co., Ltd.
SL PHARM is a biotechnology-pharmaceutical company, mainly engaged in
developing and marketing gene engineering drugs.
Shanghai ChemPartner Co., Ltd.
Shanghai ChemPartner is specialized in pre-clinical research in a number of life
threatening diseases such as cancer, diabetes and arthritis.
Novozymes Biotechnology Co., Ltd
Novozymes is the world leader in bio-innovations and is very active in China.
Beijing WBL Peking University Biotech Co., Ltd
This is a pharmaceutical joint venture invested by the Asiapharm Croup Ltd, Beijing
University and the Beijing Enterprise Holding Limited of Hong Kong. It is mainly
engaged in research, development manufacture and marketing of natural medicines
and modern Chinese medicines, in cooperation with biotechnology.
Relevant Laws and Regulations in China
The China National Center for Biotechnology Development (CNCBD) is the main
policy body behind the biotechnology industry in China. The CNCBD was established
on November 3, 1983 under the Ministry of Science and Technology with the
approval of the State Council. In addition to the CNCBD, the Ministry for Health, the
Ministry of Agriculture and the Chinese State Food and Drug Administration, are
involved in regulating the industry as need be.
The major regulations applying to the biotechnology as a whole in China are:
The Measures for Promoting the development of Biotech Industry effective from 15
The measures encourage companies to increase their research input and enhance
research infrastructure. It also urges firms to increase support for the industrialization
of research for which the Chinese hold intellectual property rights. In the past,
because of relatively low manufacturing costs and previous policies neglecting
research and development expenditure, China's biotech and other high-tech
companies often found they have to pay more tax because of the perceived higher
profits. Now, the new measures allow companies to add 50 percent of their research
spending to corporate costs so that they can pay less income tax..
Patent Law of the People's Republic of China (as Amended 2008) effective from 1985
This law has just been substantially amended. Some of the amendments specifically
impacting on the pharmaceutical and biotech industries, include those that allow
compulsory licensing of pharmaceuticals and provisions requiring the description of
sources ?genetic resources? in relevant patent specifications. In an effort to protect
ownership of China?s genetic resources, China has made it illegal to obtain a patent
covering a genetic resource if that resource was not legally obtained. Under the new
patent law, patent applications involving ?genetic resources? must identify the source
of the genetic material, be it of plant, animal, or microbial origin in the patent?s
specification. Alternatively, the applicant will have to provide the reason why the
source cannot be identified.
Other major laws relevant to the China biotechnology industry include special tax
incentive laws, plant variety rights, quarantine laws and policy encouragement
The future of the Chinese Biotechnology Industry
China?s biotechnology sector is still maturing. On the one hand, foreign investment
is encouraged, but on the other hand, intellectual property enforcement mechanisms
are still relatively unpredictable. Chinese academic institutions are at the forefront
of much of the research and development in this sector, and it seems that a better
system for encouraging cooperation between private enterprise and the universities
could be developed. The Australian Cooperative Research Centre system could well
be an excellent model for application in China.
On the regulatory side, it seems that the framework is in place for fostering a strong
biotechnology industry. Some conflict in regulatory powers continues to exist,
however that is not peculiar to China. It is hoped that these conflicts will be ironed out
in the near future, as investment continues to flow in to this sector.