Comments to USITC Regarding State Support and Pricing Practices by Chinese Biotechnology Firms

Contents

Introduction and Summary 1

Subsidies 2

Intellectual Property Theft 2

Underpricing APIs 4

Forced Genomic Sequencing. 5

Conclusion. 6

Endnotes 6

Introduction and Summary

The Information Technology and Innovation Foundation (ITIF) is pleased to submit the following comments in response to the U.S. International Trade Commission's (USITC's) investigation into state support and pricing practices by Chinese biotechnology firms. ITIF is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy.

The biotechnology industry, a single branch of the broader biopharmaceutical sector, is one of the most critical advanced industries in the world, supporting the development of biologics used to treat and prevent illness.[1] The United States is the world leader in the biotechnology industry, with the highest level of new drug development, the largest share of global output, and the most clinical trials of the most innovative drugs. But, as ITIF has written extensively, the People's Republic of China (PRC) is rapidly closing the gap, with the goal of becoming the world leader in biopharmaceutical innovation.[2] As of 2025, China conducted 30 percent of global clinical trials in the most innovative drugs, just 3 percentage points behind the United States (33 to 30 percent), while, in 2024, Chinese firms developed more than 1,250 new drugs, just slightly less than the United States' 1,440.[3]

China has utilized every policy lever conceivable in its attempt to wrest global biopharmaceutical leadership from the United States, including legitimate practices such as research and development (R&D) investments, tax incentives, and talent development programs; but it has also utilized a number of illegitimate or illegal tools, according to international trade law, all of which have aided in China's goal of becoming a true competitor in the industry.

These comments will examine the ways in which China has utilized illegitimate practices such excessive subsidization, infringement of intellectual property (IP) rights, state-supported predatory pricing practices, and forced collection of genomic data to advance the innovative capacity and competitiveness of its biotechnology industry.

Subsidies

China devotes billions of dollars in state subsidies to prop up companies that would not withstand normal market forces.[4] 42F In an analysis conducted by Stanford University's Center on China's Economy and Institutions, researchers found that among the firms that accounted for 82 percent of China's R&D investment, 99 percent had received subsidies from the government.[5] It's therefore unsurprising that Chinese subsidies account for about one-fifth of all R&D expenditures in the country.

Many of the subsidies provided to biotechnology firms come from state and local governments. For example, Shanghai's regional government introduced a series of incentives specifically for biopharmaceutical companies. These include financial support for eligible R&D projects involving innovative drugs, with a maximum award value of RMB 30 million ($4.2 million), a 50 percent subsidy on low-interest loans for firms investing in technological transformation or production expansion, and a subsidy of 20 percent of investment value for firms starting major projects in emerging industries in the city.[6]

Junshi Biosciences, a leading biopharmaceutical firm headquartered in Shanghai, is one of many firms in the industry to benefit from extensive subsidies. In 2025, Junshi received over RMB 16 million ($2.2 million) for "government grants related to property, plant, and equipment" and an additional RMB 39 million ($5.4 million) in subsidies from the People's Republic of China (PRC) for R&D activities. This also doesn't include the RMB 167 million ($23.2 million) the company reported in deferred subsidies, meaning the subsidies had been received by Junshi but not yet fully recognized as income.[7]

Intellectual Property Theft

A critically important policy tool for China to advance its biopharmaceutical industry is IP theft.[8] There have been numerous reports of Chinese biomedical researchers working at American universities, often on National Institutes of Health (NIH) grants, taking the IP their labs develop to China.[9] NIH Director Francis Collins, in a letter to grant institutions, wrote, "NIH is aware that some foreign entities have mounted systematic programs to influence NIH researchers and peer reviewers and to take advantage of the long tradition of trust, fairness, and excellence of NIH-supported research activities."[10]

China's 1,000 Talents Program also supports this effort, as the Chinese government offers incentives to scientists to come back to China after capturing foreign IP.[11] For example, in 2020 the U.S. Justice Department (DOJ) charged Harvard University's Charles Lieber with "one count of making a materially false, fictitious and fraudulent statement" regarding his work with Chinese-based organizations, including the 1,000 Talents Plan, while he applied and received NIH funding.[12] Elsewhere, DOJ investigated an individual who was "[k]nowingly and willfully working in the United States on behalf of government-controlled and government-directed entities … for the purpose of recruiting high-level molecular geneticists and stem cell researchers to work at state-controlled universities and laboratories in [China], and for the purpose of acquiring and transferring to those state-controlled universities and laboratories, cutting-edge molecular genetics and stem-cell research and technology developed at leading academic and private sector research platforms in the United States.[13]

Moreover, given the longstanding and widespread Chinese hacking of valuable U.S. company technology secrets, it's no surprise the Chinese have hacked into systems at U.S. biopharma companies, including Abbott Laboratories and Wyeth (now part of Pfizer).[14] And, as in most technology fields, Chinese state-sponsored actors also target biopharma firms for theft of IP, including through cybertheft and rogue employees.[15] That theft is sometimes through direct means whereby scientists working at biopharma companies in the United States engage in IP theft and the transfer of that IP to China. In 2002, a Chinese national was charged with stealing biological materials from Cornell University to bring to China.[16] In 2013, two Chinese nationals who had been employed as scientists at Eli Lilly were charged with stealing and providing trade secrets to a Chinese pharmaceutical firm.[17] In 2018, Yu Xue, a leading biochemist working at a GlaxoSmithKline research facility in Philadelphia, admitted to stealing company secrets and funneling them to a rival firm, Renopharma, a Chinese biotech firm funded in part by the Chinese government.[18] In 2019, a second scientist pled guilty as well.[19] In 2019, MD Anderson and Emory University both dismissed Chinese-born scientists for theft of IP.[20] A report to the U.S. China Economic and Security Review Commission notes, "Ventria Bioscience, GlaxoSmithKline, Dow AgroSciences LLC, Cargill Inc, Roche Diagnostics, and Amgen have all experienced theft of trade secrets or biological materials perpetrated by a current or former employees with the intent to sell it to a Chinese competitor. In the academic sector, researchers have stolen information or samples from their employers at Cornell University, Harvard University, and UC Davis."[21] This information was then sold to Chinese companies. In another case, a former Genentech employee was charged with trade-secret theft and passing on critical information to a Chinese competitor.[22] A former Chinese employee of a leading medical device firm was convicted of stealing IP and then traveling to China to obtain financing from the Chinese government to open a rival company using the stolen IP-even though the government knew the technology was stolen.[23] Also, in 2020, Ohio citizen Yu Zhou was sentenced to prison for conspiring to steal trade secrets concerning the research and treatment of different medical conditions, including cancer, from Nationwide Children's Hospital's Research Institute to sell to China.38F[24]

More recently, in July 2025, Li Yunhai, a postdoctoral fellow at the University of Texas, was charged with trade secret theft.[25] Yunhai was hired by the university's MD Anderson Cancer Center to work on breast cancer treatments while simultaneously receiving grant money from China's National Natural Science Foundation and conducting research for a Chinese hospital.[26] Li uploaded information to his Baidu account with the intention of preventing U.S. government officials from discovering that he possessed the data when he made a return trip to China.[27]

Chinese biopharma IP theft is a global problem. Intelligence chiefs from the Five Eyes countries-Australia, Canada, Great Britain, New Zealand, and the United States-have accused China of IP theft in several sectors, including biotechnology.[28]

Underpricing APIs

China dominates the production of the essential building blocks of pharmaceutical production: key starting materials (KSMs) and active pharmaceutical ingredients (APIs). These two sets of chemical compounds are used in a wide range of products, making them critical in the pharmaceutical supply chains. Production of KSMs and APIs has increasingly shifted away from the United States and to Asia, specifically China.

It wasn't always that way, however. In the early 1980s, most API production took place in Europe and the United States. Data compiled by the U.S. Pharmacopeia from the U.S. Food and Drug Administration's (FDA's) active API Drug Master Files (DMFs) show that, in 1981, Europe held 63 percent of the overall share of DMFs, while the United States held 25 percent. India and China held virtually none.[29] By 2024, that picture had reversed. Europe's share had dropped to 6 percent, while the U.S. share had fallen to just 3 percent. Meanwhile, China and India accounted for 45 and 43 percent of active API DMFs, respectively.[30]

Over the past decade, the number of U.S. facilities able to produce APIs has declined by 61 percent, by nearly 2,000 facilities. Meanwhile, the number in China has grown by 55 percent. Moreover, approximately 90 percent of APIs used in antibiotics globally are of Chinese origin, while China-produced APIs are used in a large share of widely used small-molecule generics.[31]

The supply chain for KSMs, which are inputs to APIs, is even more concentrated than that of APIs. For example, China is the sole source supplier of at least one KSM in over 700 different APIs.[32] Nearly 41 percent of KSMs used in APIs approved in the United States are sole-sourced from China, a rate two times larger than India, the next leading source supplier.[33] Overall, the Brookings Institution estimates that Chinese-produced APIs are involved in at least one-quarter of the drug volume sold within the United States, however estimates of U.S. reliance on Chinese-made APIs reach to as high as 47 percent, when factoring indirect impacts from India's reliance on China for inputs such as KSMs to the APIs India produces.[34] Furthermore, there is relatively limited information about the KSM supply chain due to the common confidentiality practices used by suppliers of APIs and KSMs.[35]

The extent of China's dominance in KSM and API manufacturing is not simply the result of greater investment in R&D or a deep, skilled workforce. Rather, the Chinese government has taken concerted steps to gain an advantage in API and KSM manufacturing by artificially lowering prices. Though labor costs are naturally lower in China than in the United States, there is evidence that Chinese firms also utilize forced labor to artificially drive down costs. According to a report from Exiger, a supply chain and risk management firm, several major state-owned Chinese suppliers of APIs have connections to Uyghur forced labor in the Xinjiang Uyghur Autonomous Region of China. One such supplier, Sinopharma, is the largest Chinese state-owned pharmaceutical company and, as a U.S. Food and Drug Administration (FDA)-registered pharmaceutical importer, has access to the U.S. market.[36]

Even companies that may not directly engage with forced labor still have ties to the practice. Exiger found that at least 12 manufacturers of APIs linked to 17 different drugs may be exposed to forced labor in their supply chains. There is also evidence that two FDA-registered pharmaceutical suppliers based in Xinjiang may be linked to Uyghur forced labor.[37]

The Chinese government has also taken more direct steps to increase the cost competitiveness of its pharmaceutical products. In September 2025, India's The Tribune reported that China would be cutting the prices of 41 APIs by 40 to 50 percent, with the goal to "cripple the API plants in India."[38] These rate cuts bring costs for Chinese APIs below production costs in India, the world's lowest-cost producer of generic drugs.[39]

In summary, China's ability to underprice global competitors in sales of KSMs and APIs isn't simply a result of efficiency gains-it is enabled by direct Chinese state support. Overall, Chinese API producers benefit from a combination of direct production subsidies, below-market land and energy costs, preferential financing from state-owned banks, and more permissive environmental regulations.[40] State support extends to infrastructure and industrial clustering: government policy has subsidized the creation of dedicated pharmaceutical manufacturing zones, including API "super factories" and explicitly included biomedical technology on the list of high-tech fields supported by key financial subsidies.[41] This support allows Chinese producers to sustain prices that would be commercially unviable without government backing. The strategic objective appears to be consistent with market consolidation: By pricing competitors out, Chinese API producers can secure dominant positions in key upstream segments, reducing other producers' ability to compete and increasing global dependence on Chinese supply.

Forced Genomic Sequencing

The PRC views bulk personal data, including healthcare and genomic data, as a strategic commodity to be collected and used for its economic and national security priorities.[42] The Chinese government has invested heavily in gene and cell banks, also known as "biobanks," to bolster its domestic biopharmaceutical industry. Biobanks represent massive repositories of genes, cells, and other biomedical samples and data used in drug development-and they are critical in drug R&D, particularly for more complex diseases and therapeutic modalities, including personalized medicine, gene therapy, and cancer.[43]

The United States has long been a leader in biobanking, creating and maintaining some of the world's largest repositories, including through the NIH's All of Us research program. However, China has made rapid strides to close this gap. As it stands, China's National Biobank, which was launched just a decade ago in 2016, is already one of the world's largest biobanks, containing 10 million blood and cell samples from humans, animals, and other living organisms. Similarly, the National Genomics Data Center, based in Beijing, has doubled in size and integrated eight major databases over just two years.[44]

These banks have been able to rapidly obtain large amounts of data due to China's large population of 1.4 billion people. Since 2017, the Chinese government has been known to forcibly collect and store the DNA and genetic information from the Uyghur population in Xinjiang, with the Human Rights Watch reporting that residents between the ages of 12 and 65 have been compelled to provide DNA samples, fingerprints, iris scans, and blood types to government authorities.[45]

The Chinese government has also taken steps to collect the genetic information of non-Chinese individuals. According to reporting by the New York Times, Beijing Genomics Institute (BGI), a Chinese pharmaceutical company, in collaboration with the Chinese military, developed a neonatal genetic test, enabling the firm to collect genetic information from users, amounting to millions of individuals globally. After purchasing U.S. firm Complete Genomics in 2013, BGI initiated operations in the United States, contracting with health institutions across the country. As such, it has gained access to Americans' genomic data, and given the Chinese Communist Party (CCP's) national security laws requiring all Chinese firms to share any requested data with the CCP, there is a strong potential for American data to be transferred to and used by the Chinese government in national biobanks.[46]

The Chinese government has also accessed American genomic data through theft of research and IP, as explained previously, and through cyberattacks. For instance, in 2015, two China-based individuals were charged with hacking Anthem, a U.S.-based health insurer, and stealing the data of 78.8 million individuals. This data included health identification numbers, names, social security numbers, income data, and other sensitive information.[47]

Conclusion

The Chinese government has utilized numerous illegitimate tools in its pursuit of becoming the world leader in biopharmaceutical manufacturing, including IP theft, utilizing forced labor to lower costs, and stealing the genetic information of millions of individuals globally. China has emerged as a true competitor to the United States, and its newfound competitiveness must be met with a swift and forceful response from U.S. policymakers in order to reinforce U.S. leadership in the biotechnology industry.

Thank you for your consideration.

Endnotes