In the past three decades, the number of biotech companies in China more than tripled, while the country’s economic growth has turned it into the world’s second largest health market. In its quest to become a global leader in the biotech industry, the Chinese government is implementing regulatory reforms and offering tax incentives to attract greater investments and innovation. The three COVID-19 vaccines created by Chinese companies, one by the private biopharmaceutical Sinovac, and two by the state-owned Sinopharm, have highlighted the competitiveness of China’s biotech industry and the speed with which it is developing. The further expansion of the biotech sector, which applies biology to develop products, is an essential part of the country’s economic plans. The primary drivers of this industry have been China’s rapid economic growth, an enabling regulatory environment, massive inflows of capital, the return of western educated Chinese nationals with significant experience in the global biopharma industry and the opening up of the Hong Kong and Shanghai stock exchange to biotech IPOs. In 2016, China became the world’s second largest healthcare market, overtaking Japan. In 2018, drug sales in China reached US$137 billion, doubling in just six years. As sales continues to grow, it is projected that by 2030, drug sales in China will equal half of the US market in total sales. The Chinese government has also improved the registration process for innovative drugs and has harmonized the approval process with global standards. For example, in 2011 it took 31 months to get a clinical trial application approved, compared to just two months in 2018. In 1997 there were 200 biotech companies in China. In 2000, that number had tripled to 600. This year, biotech companies listed in Hong Kong and mainland China are growing at a record pace. Chinese healthcare companies raised a record US$23.3 billion in IPO financing last year, compared to US$7.9 billion in 2019, according to consulting firm ChinaBio. China’s rapidly ageing population contributed to a larger demand of health products, becoming the force behind the biopharmaceutical market’s fast growth. The biotech sector changed dramatically when the Chinese government instituted a series of regulatory reforms aimed at improving access to healthcare for its citizens, fostering innovation and competition, and streamlining their drug approval process. In 2015, the Chinese regulatory agency began to undergo reform, such as the updated Drug Administration Law, to reduce a backlog of over 20,000 pending drug registration applications. The China Food and Drug Administration (CFDA) — the predecessor to the National Medical Products Administration or NMPA) — has also focused its efforts on creating efficiency in the drug approval process and align its practices with global standards. These reforms have encouraged innovation. Advancements in the area, such as gene therapy and genome editing, have allowed the creation of new treatments. Further, the growing importance of the Chinese market has led to more R&D aimed at addressing illnesses that are more common in China than the West, such as HBV, and gastric, HCC, and esophageal cancers. However, many of China’s biopharma companies rely on producing cheap generics or leveraging their domestic positioning to quickly develop drugs like foreign ones not yet approved for use in the country. Chinese pharmaceuticals invest less than five percent in R&D, compared to an average of 20 percent in the United States. This is why foreign biopharma companies continue to be superior in terms of innovation than their Chinese counterparts. In the past decade, 141 biopharma companies were created in China, while only 79 were formed between 2000 to 2010. In contrast, the number of biotech companies in the US, EU, and Japan have declined over the last years. According to the Boston Consulting Group, in 2017, China began holding contract negotiations for high-priced innovative drugs. These products used to be largely excluded from the public insurance reimbursement system. Also in 2017, the two-invoice system was approved to streamline pharmaceutical distribution and reduce corruption in the sector. Because of distribution inefficiencies and corruption, China spends 40 percent of healthcare expenditures on drugs, which is double the average of OECD countries. Another sector within the biotech industry that is gaining more importance is biomaterials. Designed to interact with biological systems, usually for therapeutic purposes, biomaterials include products like dental implants, joint replacements, and drug delivery systems. A series of new applications are being developed with products deriving from cells, molecules, and skin. Beside healthcare applications, some companies are developing biomaterials for product design, fashion, construction, and other purposes, such as leather alternatives derived from plants, mushrooms, and cell cultures. According to analysts, the global biomaterials market will grow from US$120.8 billion in 2020 to US$315.9 billion by 2027. In order to encourage innovation, China offers an express approval process for new medical devices, which puts such products as a priority for approval ahead of standard medical products. To qualify, the applicant must have a domestic invention patent of core technologies granted within five years; a product that is novel within China and in a leading position worldwide, with significant practical clinical value; and a prototype of the product backed by research. It is important to take into consideration the Regulations on the Administration of Human Genetic Resources, which determines how scientists can use human genetic resources from Chinese participants. These regulations require organizations using such resources to collaborate with a Chinese partner, and to share the data and patents that emerge from the collaboration. Due to the government’s efforts to encourage innovation in China, investors have increased their activity in the country as they seek to fund the next generation of Chinese biotechs. Parallel to the increased investment, there has been a flood of Chinese nationals who have returned home to set up biotech companies and take advantage of the growing opportunities in the country. Biotech firms such as Junshi Biosciences, Hengrui, BeiGene, CStone, Hansoi and others are testament to this trend.