Key View
- Multinational drugmakers will continue to seek market expansion opportunities in Mainland China.
- The US-China tariff reduction agreement offers some relief for the pharmaceutical sector in both markets, however tariffs on the pharmaceutical sector still pose a looming threat.
- While China remains a hub for biopharmaceutical innovation, regulatory shifts will disrupt cross-border partnerships and US access to China-based drug candidates.
Multinational drugmakers will continue to seek market expansion opportunities in Mainland China. On May 9 2025, Switzerland-based drugmaker, Roche announced plans to invest CNY2.0bn (USD276mn) to build its second China-based biopharmaceutical production base in Shanghai, expanding its local innovative drug capacity. The facility will specialise in producing Vabysmo (faricimab-svoa), a bispecific antibody approved for treating eye diseases, in response to the growing demand for innovative medicines in China. The local facility will aim to mitigate the impact of global uncertainties, stabilise the supply chain, reduce costs and support market expansion. According to the drugmaker, the investment will strengthen its supply chain in China by enhancing its local manufacturing capacity.
The US-China tariff reduction agreement offers some relief for the pharmaceutical sector in both markets, however tariffs on the pharmaceutical sector still pose a looming threat. On May 12 2025, the US and China announced that they had agreed to roll back significant tariffs, temporarily suspending 115 percentage points of additional US tariffs on goods manufactured in China for 90 days, while maintaining a 30% base tariff. This deal is described as a first step rather than a permanent solution, with substantial risk of negotiation setbacks. While the tariff pause represents a larger initial concession than anticipated and establishes positive dialogue mechanisms, pharmaceutical companies will remain concerned due to uncertainty over the long-term tariff structure. As such, drugmakers will continue to establish independent supply chains for the US and China. Impending pharmaceutical tariffs indicate the US’ intention to encourage pharmaceutical companies to relocate supply chains away from China. Despite this, as the world’s second-largest pharmaceutical market, China will remain vital for drugmakers. We anticipate pharmaceutical companies will strategically expand their operations by developing local supply chains to fulfill domestic demand. For example, Roche’s investment is the latest example of the growing appeal of China as a strategic hub for global pharmaceutical manufacturing and innovation.
In fact, other multinational drugmakers are also ramping up their presence in China, signaling confidence in the evolving healthcare market and its pivotal role in the global supply chain. In March 2025, UK-based drugmaker AstraZeneca signed USD2.5bn agreement to invest in Beijing over the next five years. Also, in March 2025, US-based pharmaceutical company Eli Lilly launched Lilly Gateway Labs in Beijing, its first shared lab platform outside the US. More recently, on May 8 2025, AstraZeneca kicked off construction on a new small molecule drug manufacturing facility in Wuxi, marking a milestone in its efforts to expand in China.
While China remains a hub for biopharmaceutical innovation, regulatory shifts will disrupt cross-border partnerships and US access to China-based drug candidates. In the past two years alone, licensing agreements from multinational drugmakers to partner with China-based drugmakers has increased, driven by their growing R&D expertise. The influx of China-developed drugs into foreign markets signals a fundamental reshaping of the global biopharmaceutical landscape. Policy uncertainties will impact biopharmaceutical dealmaking in China as the Trump administration could target China licensing deals in an effort to encourage US biotech investment. In February 2025, Trump issued an executive order called the America First Investment Policy that lays out the administration’s position on inbound and outbound investments with China and other nations deemed adversaries. The order specifically mentions biotechnology, but it remains unclear how the industry will be affected. However, amid threats of a trade war, drugmakers headquartered in the US will come under pressure not to deal with China or to reduce activities in the region.
Amid escalating trade tensions, global drugmakers find themselves navigating a complex landscape as mainland China emerges as a significant force in pharmaceutical innovation. China’s commitment to strengthening its pharmaceutical sector, supported by substantial investments in research and development, has positioned it as a formidable player in the industry. However, geopolitical challenges and trade barriers have complicated the path forward for international pharmaceutical companies seeking to collaborate with Chinese firms.
China’s influence is not only shaping the development of new drugs but also affecting global supply chains. The country is focusing on biopharmaceuticals, seeking to advance its capabilities in biotechnology and personalized medicine. This shift offers opportunities and challenges for foreign companies, as they must balance the potential for collaboration with the risks posed by an uncertain trade environment. Navigating regulations, safeguarding intellectual property, and adapting to policy changes are critical concerns for drugmakers operating in this context.
Despite these challenges, the potential for innovation-driven collaboration between China and international pharmaceutical companies remains promising. As China continues to expand its innovation capacities, fostering cooperation could lead to significant advancements in drug development. The key will be for drugmakers to strategically manage trade tensions while leveraging China’s growing expertise and resources. This dynamic relationship could ultimately redefine the landscape of global pharmaceutical innovation.
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