China’s biotechnology sector has emerged as a formidable force, shaking off a four-year slump to become one of Asia’s hottest markets. The Hang Seng Biotech Index has surged by approximately 60% in 2025, a rally that has outstripped the 17% gain in China’s tech stocks, driven by the release of DeepSeek’s breakthrough artificial-intelligence model in January. This phenomenon, dubbed the “DeepSeek moment” for biotech, reflects China’s growing prowess in innovation, positioning the country as a global contender in drug development and biotechnology. The sector’s rise is underpinned by significant financial investments, strategic partnerships with global pharmaceutical giants, and a robust pipeline of innovative drugs, particularly in oncology.

The term “DeepSeek moment” draws from the success of DeepSeek’s R1 artificial-intelligence model, which propelled the Chinese AI startup to global prominence earlier this year. In biotech, this analogy captures the sector’s rapid ascent and its potential to disrupt global markets. “China biotech is no longer just an emerging story — unlike 10 years ago — it is now a disruptive force reshaping global drug innovation,” Yiqi Liu, senior investment analyst at Exome Asset Management LLC in New York told Bloomberg. This sentiment is echoed in the flurry of high-value licensing deals and initial public offerings (IPOs) that have invigorated investor confidence.

A notable example is the performance of companies like Akeso, a Chinese drug developer that has seen its shares climb 6.5 times their IPO price from five years ago, despite a temporary 11.8% drop following a second marketing IP for its lung cancer drug ivonescimab in April 2025. Ivonescimab, a bispecific antibody, has outperformed Merck’s blockbuster drug Keytruda in phase three trials, marking a significant milestone. “The development of the new antibody drug was hailed by the mainland media last month as the biotech industry’s ‘DeepSeek moment’,” reported the South China Morning Post, highlighting the drug’s potential to challenge global oncology standards. Akeso’s partnership with Summit Therapeutics in the US to advance ivonescimab’s clinical trials across 108 locations in 12 nations underscores China’s ambition to compete on the global stage.

The financial momentum is equally striking. In May 2025, eight licensing deals were reached in China’s biopharma sector, with five cross-border out-licensing agreements generating over £1 billion upfront and a potential £6.5 billion including milestones, according to posts on X. This represents a significant increase from April 2025, which saw six deals with £141 million upfront and £2.35 billion in total potential value. These figures reflect a growing appetite among global pharmaceutical companies for Chinese-developed drugs. For instance, Bristol-Myers Squibb agreed to pay Germany’s BioNTech SE up to £8.45 billion to license a cancer drug originally developed by China’s Biotheus Inc, which BioNTech had acquired for £590 million in 2023. Such deals highlight the economic allure of China’s biotech innovations.

Investor enthusiasm is further evidenced by the performance of recent IPOs. Shares of Duality Biotherapeutics Inc, a company focused on cancer treatments, more than doubled on their first day of trading in Hong Kong on 15 April 2025. Similarly, companies like 3SBio and RemeGen Co. have seen stratospheric gains, with 3SBio surging 283% and RemeGen climbing over 270% after announcing potential licensing deals with multinational firms. “Chinese biotech companies are having ‘their own DeepSeek moment’,” said Dong Chen, chief Asia strategist at Pictet Wealth Management in Hong Kong, pointing to the sector’s ability to attract significant capital and deliver promising pipelines.

The role of venture capital is pivotal in this transformation. Hong Kong-based ORI Capital is planning a £260 million fund to invest in Chinese healthcare startups, capitalising on the sector’s momentum. “Hong Kong-based venture capital firm ORI Capital plans to launch a new fund to invest in Chinese healthcare start-ups, as the domestic biotechnology industry experiences its own ‘DeepSeek moment’,” noted Simone Song, the firm’s founder, in an interview with the South China Morning Post. The fund aims to leverage artificial intelligence to enhance drug development, reflecting the integration of cutting-edge technologies in biotech innovation.

China’s biotech sector is not without challenges. The development of drugs like ivonescimab remains uncertain, with many candidates still in preclinical or early clinical stages, requiring years and hundreds of millions of dollars to reach market approval. Approximately 90% of compounds entering human trials fail, a reality that tempers optimism. Moreover, geopolitical tensions and US concerns about China’s biotech dominance add complexity. A US congressional report warned that “China is quickly ascending to biotechnology dominance,” urging Congress to invest £11 billion over five years to bolster US biotech, including £890 million through the Defence Department for applications like shelf-stable blood and advanced explosives. The report highlighted fears that China’s advances could have national security implications, potentially complicating cross-border collaborations.

Despite these hurdles, China’s biotech sector is capitalising on its domestic strengths. Companies like Innovent Biologics are accelerating clinical development, producing six to eight assets annually and maintaining a robust pipeline of clinical-stage drugs. “We are developing at a very fast speed and to demonstrate a clinical concept and derisking it,” a representative from Innovent told Bloomberg, emphasising the “China speed” in research and clinical trials. This efficiency, combined with substantial financial reserves (Akeso, for example, held 7.34 billion RMB in cash at the end of 2024) enables sustained innovation.

The global implications of China’s biotech rise are profound. The sector’s ability to produce cost-effective, innovative drugs is attracting Big Pharma, as seen in Merck & Co’s £82 million upfront deal with Hansoh Pharma to develop an obesity drug, with potential milestones up to £1.4 billion. Such partnerships signal a shift in the global pharmaceutical landscape, with China transitioning from a manufacturing hub to a centre of innovation. “The surge in China-listed biotech firms is further evidence that the mainland is becoming a centre for global innovation,” noted a Bloomberg report, underscoring the sector’s competitive edge.

The integration of artificial intelligence is another driver of this transformation. AI is being used to streamline drug discovery and optimise clinical trials, reducing costs and timelines. This technological synergy is particularly appealing to investors, as evidenced by ORI Capital’s AI-focused fund. The combination of biotech and AI is not only enhancing China’s domestic capabilities but also positioning its companies to compete with Western giants like Merck and Bristol-Myers Squibb.

The competitive landscape is also shaped by China’s regulatory environment, which has become more conducive to innovation. The approval of ivonescimab by China’s National Medical Products Administration (NMPA) in April 2025 for two indications demonstrates regulatory agility, contrasting with the longer timelines in markets like the US, where the drug remains in clinical trials. This regulatory efficiency, coupled with China’s large patient population for clinical studies, provides a strategic advantage.

As China’s biotech sector continues to mature, its global influence is undeniable. The success of companies like Akeso, Innovent, and Duality Biotherapeutics reflects a broader trend of Chinese firms moving beyond generic drug production to pioneering novel therapies. The financial backing from venture capital, coupled with strategic partnerships with global players, ensures that this momentum is likely to persist. However, the sector must navigate the complexities of global regulatory frameworks and geopolitical scrutiny to sustain its trajectory.

The “DeepSeek moment” for China’s biotech sector is more than a fleeting rally; it signals a structural shift in global innovation. With a combination of financial strength, technological integration, and strategic partnerships, China is redefining its role in the biotechnology landscape, challenging Western dominance and setting the stage for a new era of drug development.

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Indexes, including the benchmark CSI-300 blue-chip index, the Shanghai Composite Index, the Shenzhen Composite Index, and Hong Kong’s Hang Seng Index, rose between 3.3% and 11%, restoring US$1.8 trillion in value across the three cities’ exchanges during the rally. China’s Tech Index, alongside the stocks of Alibaba and real estate developers (which have been particularly beleaguered in recent years), saw notable gains.

Investors rushed to buy into the surging markets ahead of the week-long National Day holiday, which began on Tuesday, 1 October and halted trading. Interestingly, there was a spike in Gen Z and millennial investors who, driven by fear of missing out on the rally, rushed to open online accounts, overwhelming some online trading platforms.

The measure offering perhaps the biggest boost to the market was a swap programme allowing companies (funds, insurers, and brokers) to provide assets like shares or bonds as collateral to the central bank in exchange for credit or cash, enabling them to access liquidity more easily for stock purchases​.

The stock market surge was driven by the broad range of government stimulus measures introduced between 24 September and 29 September. These included cuts to bank lending rates, access to cheap funds for brokers to buy stocks, reduced mortgage rates, and eased restrictions on house purchases, with the latter two announced on Sunday.

Global investors, who have been reducing their exposure to China during the past three years of economic downturn, are now expected to rebalance their portfolios, which may boost the market rally further.

Beijing’s policy measures will take time to impact the real economy and stimulate a recovery in consumption, but analysts say the government has demonstrated a strong commitment to economic recovery. According to Deutsche Bank, Beijing has adopted a “whatever it takes” approach to restoring market confidence by supporting asset prices, with a clear willingness to take further action if necessary.

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On Monday, 5 February, China’s blue-chip CSI 300 Index fell by close to 5%, hitting its lowest level since 2019. Confidence in the market has waned amid an economic turndown, driven by issues such as a debt-ridden property industry.

The latest fall came on a day of highly negative news, which did little to help sentiment. Chinese billionaire banker Bao Fan, who vanished from public view last year, resigned from all roles at his firm, China Renaissance Holdings. Elsewhere, the former president of China Merchants Bank, Tian Huiyu, was handed a suspended death sentence for corruption and insider trading. The court said that he had used his position to accrue illegal gains of over RMB 290 million (£32.2 million).

The sliding markets prompted further action by the country’s regulator, the China Securities Regulatory Commission (CSRC).

On Sunday, 5 February, CSRC issued a statement promising more market stabilisation methods, a listening ear for investors, and a crackdown on misbehaviours such as market manipulation.

Then, on Tuesday, 6 February, CSRC announced more measures to prop up the market and curb short-selling, including:

• The suspension of brokerages borrowing shares from institutional investors for short sales
• A cap on the size of the so-called securities re-lending business
• A ban on securities lending to investors who sell stocks on the same day of purchase

The same day, Bloomberg reported that President Xi Jinping would be holding talks with CSRC, leading to a brief stock rally. As of the time of publication, no further news or confirmation has come out about these talks.

As a result, on Wednesday 7 February, trading activity in the CSI 300 and other indexes rose to the highest levels since August 2023. China’s so-called ‘National Team’ of state-backed financial institutions, including Central Huijin (a unit of the sovereign wealth fund China Investment Corp) have already stepped in to purchase exchange traded funds to help maintain the market.

In a further surprise move, on Wednesday 7 February, the Xinhua news service announced that CSRC would replace its head, Yi Huiman, with Wu Qing, a banking veteran who has led the Shanghai Stock Exchange and has a reputation for taking tough action. As SCMP points out, Wu will now face the daunting task of alleviating the concerns of China’s 220 million individual investors, the largest such group in the world.

Despite Wu’s appointment being seen as a broadly positive move, analysts have said that it will take concrete actions to reverse the currently-entrenched pessimism of investors, and that China’s continued crackdown on the finance sector will do little good to its ailing property sector, which is in need of credit from banks to finish housing projects.

As China goes into the week-long Lunar New Year and trading in China is suspended, the markets will have the opportunity to digest the announcements of the past week, with more changes expected in the weeks to come.

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