How Australia can make the most of China’s biotech boom

share_windows This article appeared in The Policymaker on September 4 2025.

Australia’s innovation ecosystem is renowned for its scientific excellence, yet it has long struggled to convert research breakthroughs into global commercial success. The reasons are familiar: a relatively small domestic market, limited access to risk-tolerant capital and the absence of homegrown multinationals with the marketing muscle and manufacturing scale to take discoveries global.

This commercialisation gap is especially consequential in biopharmaceuticals – a field where Australia has historically punched above its weight in early-stage science. From immunotherapy breakthroughs to the HPV vaccine, the track record is impressive. But those innovations were ultimately scaled by global firms such as Merck and GlaxoSmithKline. The lesson is clear: scientific brilliance alone is not enough.

Biopharma innovation is a high-risk, high-cost and high-latency endeavour. Out of 5,000 to 10,000 chemical compounds screened in early drug discovery, only one typically reaches market approval. The journey can take 10-15 years and requires up to US$2.6 billion in investment. With success rates in the single digits, national self-sufficiency in this field is an illusion. Survival – let alone success – demands global scale, cross-border capital, integrated supply chains and regulatory harmonisation.

Combining discoveries in the United States and Europe with China’s scale is fast becoming the new playbook for global drug pipelines. For Australia, this means rethinking its innovation model. Competing in this space requires both world-class research and strategic integration into global innovation networks. Australian biotech companies often face challenges in accessing the capital and manufacturing capabilities required for late-stage development and global commercialisation.

Australia-China collaboration in drug development is built upon a long history of scientific and academic exchange. Partnering with Chinese pharmaceutical companies can provide a clear pathway to one of the world’s largest healthcare markets and the necessary resources to scale up production.

Why China?

Once known primarily for generics and contract manufacturing, China is rapidly becoming a global powerhouse in pharmaceutical innovation. Over the past decade, China’s clinical trial ecosystem – including experienced hospitals, well-developed contract research organisations (CROs) and evolving regulatory frameworks – has become a global asset.

The contract development and manufacturing organisation (CDMO) sector in China has rapidly become a strategic pillar in global pharmaceuticals. Chinese CDMOs now account for approximately 10-12 percent of the worldwide market in both biologics and small molecule manufacturing. They offer production costs that are typically 30-40 percent lower than those in the US and Europe.

Coupled with substantial high-volume manufacturing capacity and ongoing facility expansion, China’s CDMO sector provides multinational pharmaceutical companies with a competitive edge in speed, scalability and cost-effectiveness that is difficult to match elsewhere. As a result, multinational pharmaceutical companies are increasingly investing in China to leverage its speed, scalability and cost-efficiency in clinical development.

China’s contribution also stems from its innovative drug development. In 2024, its outbound licensing transactions exceeded USD 57 billion, a dramatic leap from 2022. Chinese biotech start-ups and drug manufacturers are now not only developing competitive, first-in-class drug candidates, they are doing so at a fraction of the cost and in far less time than Western peers. For instance, in Phase III clinical trials, the average per-patient cost in China is approximately USD 25,000, which is around one-third of the cost in the US, where figures reach about USD 69,000 per patient for similar studies.

Patient recruitment in China is often two times faster than in the US, thanks to the country’s large treatment-eager population, centralised urban hospital systems and supportive healthcare infrastructure. This provides a new model of collaboration: China contributes discovery and reaches the global market through the western marketing and institutional infrastructure.

None of this happened by accident. Two decades ago, China declared biotechnology a national priority. Regulatory reforms launched in 2015, a surge in Western-trained returnee scientists and rising domestic healthcare demand have combined to create a virtuous cycle of innovation. China has become the world’s second-largest originator of novel drug candidates, just behind the US. China’s innovation model – combining industrial policy with entrepreneurial dynamism – is gaining traction not just in Asia, but in Europe and even the US.

What is missing in Australia?

The prevailing mood in some pockets of Australia’s research community remains cautious of deeper engagement with China, despite a shift in Canberra’s foreign policy toward pragmatic selective engagement. Based on my discussions with Australian biopharmaceutical leaders, many research institutions and firms still view collaboration with Chinese counterparts through the lens of fear, with concerns about intellectual property theft, data appropriation and geopolitical alignment dominating the conversation.

In addition, concerns around national security (including the application of the Foreign Arrangements Scheme), as well as human rights and modern slavery risks in supply chains, may also present barriers to scientific collaboration.

But disengagement carries its own dangers. If Australia sidelines China as a science and technology partner, it risks drifting further down the global innovation ladder. Talent will move to where projects scale. Capital will chase platforms that offer volume and velocity. And Australian discoveries may languish in the lab while others capture the market.

So, what is holding Australia back? It is partly institutional inertia and partly a lack of strategic alignment and ambition.

Long-standing mechanisms such as the Australia-China Science and Research Fund (ACSRF) have successfully fostered academic exchange for decades, particularly in areas including medical technology and pharmaceuticals. However, this legacy of collaboration now operates within a more complex geopolitical landscape. Australia’s broader international science strategy must evolve to dynamically navigate this relationship’s dual realities: managing strategic risks while aggressively capturing economic and scientific opportunities.

The creation of the $15 billion National Reconstruction Fund signals a commitment to building sovereign industrial capability, yet its connection to a proactive science diplomacy agenda remains unclear. As the Commonwealth’s Strategic Examination of Research and Development suggests, a ‘refreshed and renewed approach’ is needed to modernise Australia’s R&D system.

That must be the catalyst for change. Simply having separate funds and general strategies is no longer sufficient. Australia needs an integrated biotechnology agenda that weaves its growing industrial capability, proactive regulatory diplomacy and targeted international collaborations into a single, unified national mission.

Three priorities for a biotechnology strategy to engage China

First, embrace smart specialisation. Australia cannot outspend or out-scale China. But it can become indispensable in niche domains where it already has an edge: rare disease platforms, early-stage discovery, immunology and precision medicine, to name a few. China brings scale, capital and development speed. It is about comparative advantage: combining Australia’s upstream strengths with China’s downstream capabilities.

Second, close the translation gap through collaboration. Australia has world-class research but often struggles to commercialise it – this is the ‘translation gap’. Partnering with China can bridge this gap by creating more fluid lab-to-market pathways for Australian research. Forging deeper partnerships between Australian research institutes and China’s major biopharmaceutical ecosystems (e.g., Shanghai, Shenzhen and Suzhou) can provide the crucial capital and infrastructure for late-stage development.

Third, reset China engagement with pragmatic risk management. A successful strategy requires a clear-eyed approach, not naïve techno-globalism. Given the historical challenges of enforcing IP rights in China, the risks of commercial espionage and current geopolitical tensions, engagement must be deliberate and secure.

This could involve adopting joint venture structures, a model successfully used by US and European firms to safeguard assets and create operational firewalls. It must also involve harmonising regulatory standards to ensure Australian quality and safety protocols are upheld and require active supply chain risk management, diversifying where necessary to avoid over-reliance.

Of course, geopolitics remains a headwind. In September 2023, the US House of Representatives passed the BIOSECURE Act to restrict collaboration with Chinese biotech firms, though the final 2025 National Defense Authorization Act left it out, for now. This is a sign that cooler heads may yet prevail. Australia must avoid being swept into blanket techno-nationalism. The answer to China’s rise is not isolation. It is strategic positioning, selective engagement and active risk management.

In the decade ahead, governments and industry will not only decide what drugs get made – but also where, by whom and for whose strategic advantage. The US and Europe are already playing that game, at least on some biotechnology issues. The question is whether Australia is prepared to play its hand, or end up watching from the sidelines.