Overview
Innovation in cutting-edge technologies is redefining the foundations of national power, providing nations with the capacity to revolutionize systems and reshape geopolitical landscapes. The development of these technologies has become central to today’s strategic competition, given their economic significance and national security implications. Biotechnology, accelerated by its convergence with AI, is poised to drive the next revolutionary tech cycle, with applications spanning numerous industries. While the US currently holds a leading position in this rapidly evolving field, China is making significant advancements and narrowing the gap– a development that raises important questions about the future of global power dynamics.
What is Biotechnology
Biotechnology involves the design and engineering of biological systems, enabling scientists to manipulate living organisms and their components for specific applications. This vast field encompasses a diverse range of subfields, including genetic engineering, synthetic biology, and environmental biotechnology, each with its own transformative potential. Recent advancements in the field have been driven, in large part, by its seamless integration with AI, which has proven to be a game-changer in solving complex biological problems. The global integration of AI into the biotechnology market has grown exponentially, valued at $4.7 billion in 2024 and forecasted to reach $27.4 billion by 2034. By leveraging AI’s ability to process and analyze vast amounts of biological data, researchers have been able to significantly reduce the time and costs associated with drug discovery, optimization, and other processes that were previously considered technologically unfeasible – such as AlphaFold’s unprecedented AI system that can predict 3D protein structures to the atomic-level, progressing an issue that has challenged scientists for decades.
Advancements in biotechnology, particularly those driven by AI-enhanced approaches, have the potential to revolutionize stagnating industries and address a host of pressing global challenges. In defense, biotechnology is positioned to play a critical role, from innovations in biological and chemical weapons to gene-editing technologies aimed at enhancing human performance for soldiers. Meanwhile, biotechnology can upend supply chains and logistics through innovative breakthroughs, like enzymes that can extract minerals from deposits previously deemed too difficult to process. This could reduce US dependency on certain critical mineral imports. Biotechnology can rapidly improve precise interventions, ranging from resilient and sustainable agricultural yields to personalized medical treatments based on an individual’s genetic makeup.
US-China Rivalry in Biotechnology
The US-China rivalry is increasingly defined by each country’s relative dominance in critical and emerging technologies, with biotechnology being one of the most contested arenas. According to a recent report released by the Belfer Center for Science and International Affairs, among critical sectors currently led by the US (including AI, semiconductors, space, and quantum technologies) China has the strongest opportunity to surpass the US in biotechnology.
Biotechnology development in the US has been shaped by strategic concerns about its rivalry with China, particularly over dependency on China for critical aspects of lab research and drug manufacturing. The US retains leadership in areas like biotech security, genetic engineering, vaccine development, and agricultural technologies. However, two decades of US biotech firms offshoring manufacturing – a significant portion of which to China – has contributed to the US pharmaceutical trade deficit ballooning from $93 billion in 2020 to $139 billion in 2024.
China’s rise as a dominant force in pharmaceutical production and an overall leader in biotechnology stems from its coordinated, state-led efforts to promote the industry since the mid-2000s. Public investments and state-backed manufacturing have significantly boosted output, enabling the country to develop the infrastructure to compete globally. Over the past decade, China has made biotech a cornerstone of its modernization strategy, focusing on breakthroughs in medical frontier technologies, accelerating industrialization of novel drugs, expanding biotech applications across various fields, and incentivizing foreign investment and collaborations on clinical trial data. By 2016, China surpassed the US and the EU as the global leader in impactful biotechnology publications; by 2023, it became the top country for most-cited papers in subfields such as genetic engineering and biopharma research. One of China’s most significant advantages is its ability to innovate at lower costs and faster speeds than the US, allowing it to participate in an increasing number of clinical trials globally and develop large stockpiles of low-cost alternative drugs to existing treatments.
In the wake of China’s exponential rise in biotechnology, the US faces several challenges to maintaining its leadership. Federal funding for innovative projects in the US has significantly decreased in recent years, falling to just 0.6% of US GDP. Furthermore, the US lacks a comprehensive biotechnology strategy to rival China’s coordinated approach, despite bipartisan support for investments in the sector. Efforts to address this gap have included legislative and executive measures to reduce reliance on Chinese biotech supply chains – such as the BIOSECURE Act which ultimately failed to pass through Congress due to procedural roadblocks. The Act was poised to revolutionize the US pharmaceutical industry as it sought to significantly reduce US reliance on Chinese biotech supply chains.
While government measures have sought to decouple the US pharmaceutical supply chain from China, there remains a disconnect with how businesses arrange their logistics. US biotech firms remain deeply interconnected with their Chinese counterparts. A May 2024 survey found that 79% of US biotech firms were engaged with China-based contract manufacturers. And despite the ongoing US-China trade war and efforts to curb collaboration, engagement between the two nations in this sector has only accelerated. This month alone, US firms signed 14 new licensing deals worth $18.3 billion for drugs developed by Chinese companies, with two major agreements worth a combined $13 billion. This influx of licensing deals led to a surge in China’s biotechnology stocks, which rose more than 60% this month, outperforming the 17% gains in China’s broader tech sector following the release of DeepSeek.
Reshaping Global Power Dynamics
A shift in leadership from the US to China in biotechnology could signal a realignment of current global power dynamics, as this field increasingly intersects with economic strength and security preparedness. Given its growing influence in this domain, China has the potential to leverage control of the global biotech supply chain for strategic and geopolitical advantage. This possibility is underscored by China’s imposition of export controls on rare earth minerals in response to US tariffs. These export restrictions disrupted critical industries worldwide, prompting governments and corporations to seek alternative sources amid fears of supply chain instability. A similar dynamic could emerge in biotechnology, where China has already demonstrated its influence in agricultural technology by delaying approvals for US-developed seeds and imposing strict sampling requirements. However, despite its strides in biotechnology, China continues to lag behind the US in AI, which is a key factor in modernizing biotechnology competitiveness. China has limited access to foreign equipment, a less-developed private research ecosystem for early-stage innovation, and shallower capital markets compared to the US—giving the US some time to strengthen its biotechnological lead.
Biotechnology’s role as a catalyst for next-generation industries underscores its increasing geopolitical significance. With rapid advancements in this field, China is well-positioned to capture a larger share of high-value, future advanced markets, potentially reducing the economic competitiveness of other countries while shaping the trajectory of global innovations. China has already made significant progress, providing it with opportunities to influence regulatory standards and protocols for these emerging technologies, as well as tighten leverage of supply chains in next-generation technologies. Moreover, China’s potential leadership in biotechnology could further strain US-China relations, as well as China’s relations with Western countries more broadly.
Western countries may pursue heightened protectionist technology policies aimed at isolating themselves from Chinese advancements – a reaction driven by concerns over potential dual-use military applications and national security risks. Renewed US focus on biotechnology competition could create downside risks for US firms caught in the crosshairs of new protectionist policies, which would upend longstanding collaborations with their Chinese counterparts. Decades of interdependence may prove difficult to disentangle, but business-as-usual also poses downside risks down the line, given that the weaponization of supply chains may become a mainstay in US-China competition.
The US’ immediate next steps for managing this risk are unclear. Reintroduction of the BIOSECURE Act remains uncertain, with likely revisions to more narrowly focus on biotech-related issues without pursuing full decoupling from China and avoiding explicitly naming companies. US President Donald Trump has called for additional restrictions on outbound investment to China in sensitive technologies linked to its civil-military industry – including biotechnology. This step would complement Biden-era investment restrictions in place that prohibit US persons from investing in certain Chinese AI and semiconductors transactions and all Chinese quantum computing. In April, the US launched a Section 232 investigation into the impact of pharmaceutical products and ingredients on national security, which could progress swiftly to align with Trump’s desire to impose pharmaceutical tariffs in the next few months. Results of the investigation are likely to be released soon, signaled at the G7 meeting when Trump commented pharmaceutical tariffs are expected “very soon.” Despite his calls to reduce US dependence on foreign biotech and the heightened competition with China in this sector, details remain sparse on the progress of these initiatives. The industry remains on edge, anticipating imminent developments as the momentum behind these policies continues to build.
