The US Treasury Department is developing a sector-specific framework that is expected to enable most US pharmaceutical companies to move forward with licensing agreements and investments in China, according to reports from Reuters. This represents a significant shift from the Trump administration's broader restrictions on business ties with China in other sectors under new national security laws. The unfinalized plan could unlock billions in deals and would represent a departure from the Trump government's policy of hardening trade relations with China in other sectors under new national security legislation. As per Reuters, the rules are being drafted by the Treasury Department and are likely to allow US pharmaceutical companies to invest in promising new drugs being developed by Chinese companies as long as they are not related to pathogens or biotechnology that could be weaponized.
Instead of applying a broad ban across the entire industry, the proposed regulations seek to apply restrictions in high-risk areas, including pathogens and biotechnology that could be used for weaponisation purposes, as reported by Reuters. The Treasury Department is drafting rules likely to permit most US pharmaceutical licensing deals with Chinese companies, excluding only investments tied to pathogens or weaponizable biotechnology. This targeted approach would allow pharmaceutical companies to continue their operations while addressing specific national security concerns. The rules have not been finalized and are subject to change, particularly should President Donald Trump weigh in on the matter. Treasury and the White House declined to comment on the proposed rules, with the deliberations coming ahead of Chinese President Xi Jinping's expected meeting with Trump in the U.S. next week.
The proposed framework would enable most US pharmaceutical companies to move forward with licensing agreements and investments in China, according to Reuters sources. Outside licensing deals in Chinese biotech were worth $115 billion last year, highlighting the significant market value at stake. As per research firm GlobalData, almost half of US deals to license drugs from overseas in 2025 involved Chinese companies, with the trend continuing this year. This development represents a notable exception to the broader Trump administration policy of restricting business ties with China across multiple sectors under new national security laws. Recent major deals include Bristol Myers Squibb signing a partnership worth up to $15.2 billion with Chinese company Jiangsu Hengrui Pharma, while Pfizer announced an up to $10.5 billion collaboration with Innovent Biologics covering 12 oncology programs. However, some lawmakers and smaller drugmakers are not on board with the approach, seeing such investment as a national-security risk that would undercut America's lead role in developing medicines.
China has released a comprehensive 15th Five-Year Plan for Pharmaceutical Industry Development covering 2026-2030, setting ambitious targets to cement its position at the forefront of biomedical innovation. The plan, jointly issued by the Ministry of Industry and Information Technology and nine other authorities, calls for first-in-class drugs developed in China to account for no less than 25% of the global total, with the innovative drug sector expected to grow at an average annual rate of over 20%. China expects the combined revenue of pharmaceutical enterprises above a designated scale threshold of 20 million yuan to reach at least 3.5 trillion yuan by 2030, with the number of companies with annual revenue exceeding 10 billion yuan growing to 50. The plan also specifies that listed pharmaceutical companies must maintain an average annual R&D intensity of at least 10%, achieve at least five drug products with global annual sales exceeding $1 billion, and rank among the world's leaders in both the number of new drug pipelines entering clinical trials for the first time and the number of innovative drugs approved for market. The plan also targets cumulative market approvals for innovative medical devices reaching 200 or more and calls for 20 pharmaceutical industrial parks at the 100-billion-yuan scale.
A battle is unfolding behind closed doors over whether access to Chinese drug innovation outweighs concerns about strategic dependence, according to Reuters. Representatives of mid-sized and small biotechnology companies, which often depend on licensing agreements with large US pharmaceutical groups, support the opposite approach. They believe deals with Chinese manufacturers should be made more difficult. Jason Kelly, CEO of Ginkgo Bioworks, has met with US Treasury officials, warning that the US and European pharmaceutical industries could suffer in the long term if investment in China continues to grow at its current pace. Kelly chaired a congressional advisory committee on competition in biotechnology in 2023-2024 and stated, "Are we prepared for strategic dependence on China when it comes to innovative medicines?" Republican John Moolenaar, who chairs the House Select Committee on the Chinese Communist Party, and Democrat Debbie Dingell take similar positions, both representing Michigan. Moolenaar has urged the Treasury Department to apply the COINS Act – a national security law passed in 2025 to limit outbound investment – arguing it should cover pharmaceutical deals even though the industry was not explicitly mentioned in it.
