Battlefield Biotech: The Rising Competition Between China and the U.S.

9 MINS READMar 26, 2018 | 09:00 GMT
A digital representation of the human genome.

A digital representation of the human genome. China is rapidly catching up with U.S. capabilities in biotechnology.

(MARIO TAMA/Getty Images)
  • Biotechnologies, especially gene-editing techniques, are evolving at a rapid pace. China's domestic sector is catching up with the West most rapidly in the area of health care.
  • China's compulsion to overcome environmental and demographic constraints will ensure it continues to give priority to developing its domestic biotechnology sector.
  • The West, in turn, will watch for shifts in Chinese policy that would allow for foreign participation in the country, while moving to protect its intellectual property there. 

Whether trade wars or tech wars, the future relationship between the United States and China is poised to be one of greater competition, if not greater contention. Trade deficits and potential trade wars and the race to supremacy in artificial intelligence have garnered the biggest headlines of late, but there's another contest waging with equal ferocity: biotechnology. The gene-editing technique CRISPR is by no means the only instrument in this contest, but it is indicative of the emerging battle in the biotechnology sector. By tracking the use of the technology in both agriculture and health care, we can see clear signs of where this trend is headed. In health care and agriculture, the United States can and will raise national security concerns, just as it recently has with high-technology investments. Similarly, Beijing and Washington will become technical competitors as China's demographic and resource constraints ensure it continues to support and prioritize biotechnology development in the interest of national security.

The Big Picture

Stratfor has highlighted the battle for technological prowess between the United States and a rising China in numerous pieces and in our 2018 Second-Quarter Forecast. Though artificial intelligence has garnered much of the attention and headlines of late, biotechnology (both in health care and agriculture) is another field in which China is rapidly catching up with U.S. capabilities.

Seeds of Deception

From mechanization to fertilizers, technology has long helped to improve crop yields. The advent of genetically modified crops by the 1990s began a new era in agriculture, more intimately linking farming with intellectual property rights and all the associated regulations, protections and competition that goes along with them. Acquiring the intellectual property of another business or country would be invaluable for companies or countries seeking to develop their own agricultural biotechnology. For China, a country long constrained by limited resources, the continued development of a domestic biotechnology sector both for agriculture and health care would help it address a looming demographic crunch, in which an aging population will reduce the number of available farmers while increasing the costs of caring for an ever-larger elderly population. The National People's Congress has identified improvements in biotechnology as a key area in many of its recent policy directives.

Chinese companies have acquired other entities (and their intellectual property) in the agricultural biotechnology fields to help shore up China's own biotechnology sector. The most notable example is Syngenta, a major agricultural biotechnology company with a research and development budget of more than $1 billion that focuses on seed development and chemicals that protect crops. Advances in these areas are important for China in terms of helping it cope with marginal or polluted land as well as limited water resources.

In addition to investments in biotechnology, there also have been instances of intellectual property theft. In 2013, seven Chinese nationals were accused of stealing genetically modified corn seeds owned by Monsanto. Another Chinese national was convicted of stealing genetically modified rice from Ventria Biosciences, his Kansas-based employer. Although it has a substantial research base in genetically modifying plants, China has rarely made the leap from research to commercial product. Obtaining access to developed technology can help China advance these fields domestically. In the future, however, China can be expected to focus more on new gene-editing technologies where they are more globally competitive.

Protecting the intellectual property associated with domestic technology, including genetically modified crops has long been a U.S. security concern. The Committee for Foreign Investment in the United States (CFIUS) evaluates whether foreign investments in U.S. companies poses a national security threat. CFIUS was in the news recently because it determined Singapore-based Broadcom's bid for Qualcomm potentially threatened national security, prompting U.S. President Donald Trump to block Broadcom's offer.

Altering Genes

In the biotech field, however, this review mechanism may be limited in its ability to address potential threats to national security and the intellectual property of U.S. companies. Cheaper and faster than previous methods, gene-editing techniques like CRISPR have taken the biotechnology sector by storm over the past five years, and there are numerous startup ventures in the United States pushing the technology's development. Because CFIUS doesn't track minority investments or investments in startups (although Congress is contemplating strengthening the committee's reach to allow it to do so in the future), it may not be equipped to monitor investments in the biotechnology sector — at least not over the next five to 10 years as the industry grows and matures. This gap in coverage could allow China and other nations to continue to invest in U.S. companies that are developing CRISPR and other gene-editing technologies. This limitation is not necessarily a detriment at the moment and could even benefit specific companies. However, should the potential dual-use nature of the technology emerge, then it would become more of a national security concern. In the opposite direction, China's investment controls for its own domestic sector have drawn objections from the United States as being unfairly restrictive.

Building the Foundation

Moving beyond intellectual property theft and even beyond the likelihood of continued investment in the U.S. sector, Chinese researchers are also making substantial progress domestically. Forty-two percent of all new, CRISPR-derived plants developed between 2014 and 2017 were created in China (as determined by a thorough review published in Emerging Topics in Life Sciences in 2017). Rice, a cultural staple of China, was far and away the most studied plant over the 2014-17 time period, according to the same academic review article.

Agricultural CRISPR Studies by Region, 2014-2017

Rice is not a surprising target, given its importance to Beijing's food security strategy. Gene editing is being used to develop more salt-resistant strains of rice, an important development should water quality in China decline. Cadmium-resistant rice is also in development. With the rise of an environmental movement in China over the past several years, as well as a very public issue with contaminated rice, the development of a cadmium-resistant strain of rice would be popular and necessary. Even with industry consolidation and stricter central government control, reversing the effects of decades of pollution will be slow. Perhaps more importantly for Beijing's biotechnology strategy, cadmium-resistant rice could help endear the use of genetically engineered crops to a broader population. Chinese researchers also have used CRISPR to target pork, another staple food, to successfully create leaner pigs.

Despite these leaps in the laboratory, China's agricultural biotechnology sector is still not producing crops on a commercial scale and approvals for new, imported genetically modified strains have been dropping over the last few years. China undoubtedly will remain a key player for agricultural biotechnology; its sheer size has the power to influence the global market. But where it appears China will first stand toe-to-toe with the United States from a technical standpoint is in health care.

Becoming a Worthy Opponent

When we look at CRISPR applications more broadly, China is second only to the United States in the number of CRISPR patents owned. The United States holds 19 percent (447) of the more than 2,000 CRISPR-related patents while China holds 17 percent (410), according to iRunway Analysis.

Perhaps it is more interesting to look at where patents are being filed compared to where the research is being done. Researchers based in the United States and Europe (be they academic or commercial) are far more likely to file patents in China than in the other direction. This illustrates the importance of China to the future global gene-editing market. The same underlying constraints that are compelling China to develop its domestic sector also present a potential import market for those exporting the new technology.

CRISPR Technology Patent Filing by Region, 2005-2016

China will soon be coping with an aging population on a scale it has never seen before. It also will be doing so before the majority of that population has achieved even moderate wealth. The need for improved health care and cures for diseases (ostensibly cheaper) instead of prolonged treatments (ostensibly expensive) would benefit the Chinese economy.

With a directive from the central government and a less restrictive regulatory environment, China has been at the forefront of using CRISPR for health care purposes. Chinese scientists were the first to edit the genome of a human embryo, and in the year that followed reportedly have used CRISPR techniques to treat 86 patients — far more than any other trials to date. The respective regulatory environments in the United States and Europe ensure that China is likely to keep up, if not lead, in research in this sector for the next several years.

But this debate also may come back to a question of national security and the relationship between the United States and China. To effectively use CRISPR technologies, knowledge of the human genome is paramount. The United States spearheaded the human genome initiative (with help from numerous countries, including China), but the ownership and security of this intellectual property may eventually be called into question. High-tech medical and health sectors have been targeted by the recently announced Trump administration tariffs in response to areas the U.S. government claims Beijing forced technology transfers. The Financial Times profiled FBI agent Ed You last July, examining his mission to increase awareness of a potential threat to U.S. data collection related to the human genome. His message goes far beyond CRISPR and touches on the commercial relationship between the United States and other countries as well as the potential for an eventual bioterrorism threat. While there may be rising suspicion in some circles regarding Chinese interest in the U.S. genomic sector, others argue that collaboration across borders remains necessary to the continued development of the technology.

U.S. national security concerns and how those concerns will affect trade and future technology development will remain prominent in the coming months and years. Much like the more prominent artificial intelligence "tech war," China's strategic imperative to develop a domestic biotechnology industry will see the sector compete with if not overtake the United States in key areas, namely health care. As the United States works to form a comprehensive strategy in other tech sectors to combat China's rising competitiveness, biotechnology marks another avenue that strategy can address.

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