Picture of health

China's growing contribution to pharmaceutical innovation heralds a new era for global industry

China's pharmaceutical industry, once primarily known for its role in producing affordable generics, has undergone a profound transformation, emerging as a leading force in global drug innovation. This evolution is not merely an industrial shift but a significant development poised to deliver new medicines to patients worldwide, presenting both opportunities and a call for enhanced international collaboration.

This pivotal moment was vividly illustrated at the 2024 World Conference on Lung Cancer, where Akeso, a biotech company from Zhongshan, Guangdong province, presented groundbreaking data. Its bispecific antibody, ivonescimab, demonstrated superior efficacy against Keytruda (pembrolizumab) in a head-to-head trial for non-small cell lung cancer. Keytruda, a cornerstone of global oncology, represents a multi-billion-dollar market. Akeso's achievement, often described as the industry's "DeepSeek moment", signals China's arrival as a frontrunner in developing novel therapies, challenging established paradigms and inspiring new possibilities for patient care.

This success is not an isolated incident but part of a broader trend. A decade ago, China accounted for less than 8 percent of global clinical trials. In 2020, it had surpassed both the United States and Europe in annual trial volume. In 2024, it initiated close to 5,000 trials. This growth is not just in quantity but in quality, with China's high-novelty trials growing significantly faster than the US benchmark. A Boston Consulting Group report earlier this year further notes that since 2021, China has outpaced the US in new molecular entities entering clinical development, contributing about 44 percent of the global total last year. Its share of potential first-in-class drugs rose from 16 percent in 2020 to 34 percent in 2025, nearing the US' 38 percent.

China's journey from a generics producer to an innovation leader is rooted in strategic policy reforms. The National Reimbursement Drug List reform, initiated around 2016, played a crucial role. By offering guaranteed, near-universal access in exchange for significant price reductions, the State effectively stimulated demand for innovative drugs. This policy led to a substantial increase in the utilization of covered drugs, with oncology volumes growing nearly tenfold, demonstrating that innovation flourishes where there is clear market demand and patient access. This approach has fostered a dynamic ecosystem where laboratories and research thrive.

This demand-driven innovation is supported by an efficient research and development ecosystem. The "decode, iterate, execute" flywheel, as described by the Boston Consulting Group, operates with remarkable cost-effectiveness. Drug discovery and preclinical work in China can be conducted at a fraction of the cost in the West. Contract research organizations, including WuXi AppTec, have built integrated platforms spanning drug discovery, preclinical testing and other stages of drug development, helping pharmaceutical companies reduce costs and accelerate development. This efficiency has allowed China to effectively counter "Eroom's law" — the observation that drug development costs double every nine years — by leveraging vast patient pools, rapid engineering iteration and streamlined regulatory processes. The result is a robust pipeline extending beyond oncology into respiratory, immunology and metabolic diseases, with Chinese companies now confidently designing Phase III trials head-to-head against global blockbusters.

The global pharmaceutical industry has recognized China's ascendance. Insiders such as Pfizer's CEO Albert Bourla have acknowledged China as a significant challenger to US strength in biotechnology. While some regions such as Europe have seen their share of global clinical trials decline, China's share has tripled, particularly in advanced fields such as cell and gene therapy. In 2024, China became the leading source of new active substances, contributing 35 percent globally.

Rather than viewing this as a zero-sum game, the industry is increasingly embracing collaboration. Facing patent expirations and seeking new growth avenues, Western pharmaceutical companies are actively investing in and partnering with Chinese biotechs. Cross-border out-licensing from China reached an estimated total potential value of $135.7 billion in 2025, with a significant surge in early 2026. Major deals, such as Pfizer's investment in 3SBio's bispecific and GSK's commitment to Hengrui, highlight a strategic "re-platforming" onto Chinese science. Beyond licensing, new strategies include "local for local" manufacturing, establishing R&D centers in China, and China-first drug launches, all aimed at fostering deeper integration and mutual benefit.

While geopolitical complexities, including the BIOSECURE Act and designations affecting companies such as WuXi AppTec, present challenges, the intertwined nature of the global pharmaceutical ecosystem underscores the importance of open scientific exchange and collaboration. Protectionist measures risk hindering global health progress. The optimal path forward involves fostering an environment where competition drives innovation, and partnerships accelerate the delivery of life-saving medicines.

China's innovation strength, characterized by its engineering brilliance and focus on optimizing known targets, continues to grow. While its R&D spending is still a fraction of the US', and its venture capital ecosystem is still maturing, the impact of its contributions is undeniable. The notion that smaller economies should merely be "free riders" importing innovations no longer holds true. China has not only become a significant innovator but is actively shaping the future of global health.

This new reality is a call on the traditional leaders of the industry to adapt and engage with a rapidly evolving landscape. Embracing this shift through competition, partnership and domestic reform, rather than restrictive policies, is the most effective approach. For patients everywhere, it would mean access to better medicines, developed faster and more affordably. Denial of this transformation would be a disservice to global health and scientific progress.

The author is an economist and the head of the Department of Economics at Kozminski University in Warsaw.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.