Why U.S.–China Pharmaceutical Rivalry Stops Short of Full Decoupling

Intensifying geopolitical rivalry between the United States and China has failed to break apart the two countries’ pharmaceutical innovation systems, according to a qualitative study published in the Asian Review of Political Economy. The paper argues that the sector exhibits a condition the author calls competitive interdependence: the two nations compete fiercely for advantage while remaining structurally bound together through global value chains and deeply intertwined national innovation systems. Full decoupling, the analysis concludes, would carry prohibitive economic and technological costs for both sides.

The study, authored by Jiahui Chen and Meng Li, builds its argument on a co-evolutionary framework linking global value chains (GVC) and national innovation systems (NIS). Pharmaceutical innovation, the authors contend, is simultaneously embedded in transnational production networks and in domestic institutional arrangements. This dual embeddedness produces interdependence across two dimensions: a material dimension rooted in the cross-border circulation of intermediate goods, technology, and capital, and an institutional dimension arising from regulatory alignment and mutual influence in policy-making. Crucially, the interdependence is asymmetric, and it is precisely this asymmetry that converts mutual reliance into strategic competition.

The empirical backdrop is China’s rapid transformation from a peripheral producer of generic drugs into an emerging pharmaceutical innovator. Since 2022, the paper reports, China’s pharmaceutical sector has developed 639 first-in-class drug candidates, roughly 4.6 times the total produced between 2018 and 2021, with a growth rate exceeding that of firms in the United States, Europe, and Japan. China has risen to become the world’s second-largest drug developer, and its share of the global R&D pipeline grew from 2 percent in 2001 to 27 percent in 2024, according to data from Citeline cited in the study.

This ascent has unfolded against escalating policy friction. U.S. policymakers increasingly view China’s role in active pharmaceutical ingredient (API) production and large-scale biomedical data as national security concerns, prompting export controls, investment screening, and broader de-risking measures. A prominent example is the BIOSECURE Act, passed by the U.S. House of Representatives in 2024 and incorporated into the National Defense Authorization Act in December 2025. The Act seeks to discourage U.S. firms from engaging with China-based manufacturers such as WuXi AppTec and WuXi Biologics by imposing government-wide restrictions on designated biotechnology companies of concern in procurement and contracting.

Yet the material ties run deep and in both directions. The United States depends on China for scale and cost-efficient inputs, including basic APIs, selected intermediates, biomanufacturing capacity, and access to cost-efficient innovation pipelines and downstream markets. Many U.S. biopharma firms have historically relied on Chinese contract research and manufacturing organizations as integral parts of their value chains. The appeal extends beyond cost to speed: clinical trials in China can often be executed significantly faster than in the West, owing to large patient pools, efficient site networks, and streamlined regulatory interactions, giving U.S. partners earlier, de-risked validation of novel assets. A report by the investment bank Stifel found that approximately 31 percent of innovative pipeline assets in-licensed by major pharmaceutical firms in 2024 originated from Chinese innovative drug technology firms.

Licensing data underline the depth of this integration. According to GlobalData figures cited in the study, licensing agreements for Chinese drug candidates reached a record high in 2024, with large pharmaceutical companies in-licensing 28 percent of innovative drugs from Chinese biopharma firms. Total deal value rose 66 percent year-on-year, from 16.6 billion dollars in 2023 to 41.5 billion dollars, a five-year high. Over the past decade, Chinese firms signed 204 deals with U.S. firms, accounting for 49 percent of total deals and 55 percent of total deal value. Even amid trade tensions, U.S. pharmaceutical companies continued seeking Chinese partnerships to expand their R&D pipelines.

China’s dependencies, however, are equally structural. The study documents that China remains reliant on the United States for high-end scientific instruments such as chromatography, spectroscopy, and mass spectrometry systems, which are dominated by leading foreign firms; imports of these instruments from the U.S., China’s largest supplier, rose 12 percent year-on-year in 2023. China also depends on upstream research inputs such as advanced reagents and biological tools, on foundational capabilities in target discovery, and on U.S.-centered regulatory and commercialization systems. Talent shortages in new drug R&D, clinical development, chemistry, manufacturing and controls, and biomanufacturing are exacerbated by increasingly stringent U.S. restrictions on cross-border talent exchange.

The institutional dimension of interdependence is equally consequential. The study traces how U.S. regulatory influence was internationalized through the International Council for Harmonisation, launched in 1990 with the EU and Japan, and through the 1997 FDA Modernization Act, embedding American standards into global pharmaceutical governance. China’s post-2015 regulatory reforms, including conditional approvals, expedited pathways, the Marketing Authorization Holder system institutionalized in the 2019 Drug Administration Law, and the systematic adoption of ICH guidelines, are interpreted by the authors as adaptive responses to deepening participation in global value chains rather than mere domestic upgrading. Between 2016 and 2024, nearly 40 percent of new drug approvals in China were issued through accelerated review pathways, which shortened average review times by approximately 147 days.

The asymmetries persist nonetheless. The U.S. leads in pharmaceutical innovation supported by a centralized research system centered on the National Institutes of Health, whose annual research budget reached approximately 48 billion dollars in 2023, with around 80 percent directed toward frontier basic medical research. China’s pharmaceutical R&D, by contrast, is spread across multiple agencies and lacks a centralized equivalent, and the patent transfer rate of Chinese universities was only 3.1 percent in 2022, indicating persistent frictions between publicly funded research and commercialization. The study also notes potential self-inflicted costs of U.S. weaponization: heightened visa screenings and expanded academic investigations have prompted some Chinese scientists to relocate from the U.S. or curtail participation in federally funded research, with negative impacts on scientific output and talent retention.

The paper’s central conclusion is that these dynamics produce bounded competition rather than separation. Strategic rivalry accelerates institutional adaptation and industrial upgrading on both sides, with the U.S. pursuing reshoring, friend-shoring, export controls, and tighter oversight of technology transfer and talent mobility, while China expands domestic research funding, strengthens commercialization mechanisms, and increases participation in international regulatory institutions. Yet full decoupling would impose substantial economic and technological costs, disrupt the integrated operation of the global pharmaceutical value chain, and risk shortages given that alternative suppliers cannot emerge rapidly. The authors frame the outcome not as a binary choice between decoupling and cooperation but as a protracted renegotiation of the terms of engagement within an integrated yet contested global architecture, one that they expect to remain a persistent governance challenge for policymakers.

Subject of Research: The structural limits of U.S.–China decoupling in pharmaceutical innovation under geopolitical competition

Article Title: Competitive interdependence in pharmaceutical innovation: The co-evolution of global value chains and U.S.–China national innovation systems

Article References: Chen, J., & Li, M. (2026). Competitive interdependence in pharmaceutical innovation: The co-evolution of global value chains and U.S.–China national innovation systems. Asian Review of Political Economy, 5(1), Article 22. https://doi.org/10.1007/s44216-026-00084-w

Image Credits: AI Generated

DOI: 10.1007/s44216-026-00084-w

Keywords: pharmaceutical innovation, U.S.–China relations, global value chains, national innovation systems, competitive interdependence, decoupling, BIOSECURE Act, drug licensing, FDA regulation, active pharmaceutical ingredients, biomanufacturing, geopolitical rivalry