The Chinese life science industry is characterized by a strong drive towards innovation, increasing global engagement, and significant market potential fueled by demographic shifts and government support. Mainland China now ranks second only to the US in terms of innovative drug contributions to the global pipeline, accounting for approximately 23% of new drugs, a Clarivate report from late 2024 stated.

In terms of regulatory approvals in the country, 48 first-in-class innovative drugs were approved in 2024 and in total, 110 new drugs gained approval last year, according to China’s National Medical Products Administration (NMPA). This is the result of a strategic effort from the Chinese government to boost the life science and other key sectors. Government initiatives such as the ‘Made in China 2025’ plan, which lists biopharmaceuticals as one of ten prioritized sectors, and the ‘Healthy China 2030’ initiative, which seeks to increase the value of the health service industry to 16 trillion CNY by 2030, has brought extra attention and resources to life sciences.

Increased R&D expenditure

Previously, Mainland China was long considered a low-cost biomanufacturer but is now evolving into an R&D powerhouse. In 2024, China’s total expenditure on R&D exceeded CNY 3.6 trillion, an increase of 8.3% over the previous year, according to the country’s National Bureau of Statistics.

Per Portén, China Country Manager, Business Sweden

“We see that China is increasingly becoming a leader in innovation in different sectors – and Swedish companies notice it as well. More and more international companies are strengthening their local efforts in terms of R&D,” says Per Portén, who is China Country Manager at Business Sweden, and based in Beijing. 

One example of this is Astra Zeneca’s recent announcement to invest USD 2.5 billion to establish a strategic R&D center together with major research and manufacturing agreements in Beijing.

The US and China are now the world’s two largest R&D performers.

A comparison of a selection of economies carried out by the OECD in 2023, showed clearly that China’s investments in domestic R&D surpassed those of the EU and quickly approached the levels of the US. The US and China are now the world’s two largest R&D performers. The gap between them in terms of gross domestic expenditure on R&D (GERD) narrowed significantly in 2023, with China’s R&D spending reaching 96% of that of the US.

In 2023, China caught up with the US, and surpassed the EU, Japan and Korea in terms of Gross Domestic Expenditure on R&D. Source: oecd.org

International licensing deals

International licensing activity involving Chinese companies is surging as well, according to the 2024 Clarivate report. They are actively in-licensing innovative drugs from abroad and out-licensing their own, leading to a significant increase in both the quantity and value of these deals. The value of overseas out-licensing deals by Chinese companies saw a sharp increase from barely USD 1 billion in 2019 to a total transaction amount exceeding USD 35 billion in 2023. 

One example of a high-value licensing deal between China and the Nordics was Novo Nordisk’s acquisition of the Chinese company KBP Biosciences’ ocedurenone in 2023. The potential value of the deal is USD 1.3 billion. 

China’s total expenditure on R&D exceeded CNY 3.6 trillion in 2024, an increase of 8.3% over the previous year. The R&D investment intensity reached 2.68%. Source: National Bureau of Statistics China

Hurdles to overcome

Nordic companies’ interest in China is well motivated. It is the world’s second largest market and an important trade partner, and the country’s production capacity is astounding. To further boost its life sciences sector, the government launched the ’14th Five-Year Plan for Pharmaceutical Industry Development’ in late 2021, aiming to create biopharma innovation hubs in ten cities to enhance regional capabilities and collaboration.

However, in the last few years it’s become more challenging for international companies, as unofficial ‘by local’ rules give preferential treatment to local companies.

“There’s a reason why China is called ‘the factory of the world’ – they can manage things very efficiently, and it’s easy to find subcontractors in the same city or province where your factory is located. Their hubs make it very efficient – you can produce at a low cost and with good quality,” Portén says.

“We do have the biggest Swedish medtech and life science companies here on the ground. It’s an industry that has moved quickly and it’s a promising market for many. However, in the last few years it’s become more challenging for international companies, as unofficial ‘by local’ rules give preferential treatment to local companies,” he adds. 

While the government says that any company that has production in China should be considered equal to a Chinese company, reality hasn’t quite caught up yet. According to Portén, 40% of the Swedish companies that Business Sweden has talked to indicate that they’ve been negatively affected by the unwritten rule.

5 x Tips for doing business in China

Business Sweden offers business advice both within life sciences as well as China-specific services. Per Portén shares some tips for how to successfully enter China.

  • If you’re looking to enter the Chinese market, make sure you’ve done your homework. You need to understand the business landscape, who the key players are, and whether your product is at all relevant on the market. If the competition is already too strong, it might not be worth it.
  • Decide how you want to enter the market – on your own or with a local partner? Regardless of how you do it, it is extremely important that you have legal protection for your intellectual property rights and your brand, before entering the market. 
  • Choosing the right partner is key, and you should research your potential partner and their past business activities carefully. A good rule of thumb is that you choose your partner rather than be chosen. If you already have a good connection in China that might be a promising partner, you should still investigate them and consider all options.
  • Build relationships to build trust. You need to interact with your potential partner several times to build trust, that’s why it’s common to arrange several dinners or lunches – in short socialize with each other – to get to know each other. A shortcut around that is to get an introduction from someone else, but that also requires that you’ve established a previous trusted business relationship. 
  • Culturally, China and the Nordics are polar opposites – we do things in very different ways. A bit of humility will get you a long way, but don’t be naive: make sure to take references, double check and ask follow-up questions when you do business in China.