May 2004

Biotechnology: The Next Boom Sector?

By Mark Godfrey

China is spending record sums on biotechnology research and development - and foreign firms are finally getting a slice of the action

I saw rice plants as tall as Chinese sorghum, each ear of rice as big as a broom and each grain of rice as huge as a peanut," Professor Yuan Longping said about the fruits of his labor. Dubbed the "Father of Rice", Professor Yuan pioneered China's agricultural biotechnology in the early 1970s when he developed the world's first strain of high-yield hybrid rice.

With a yield 30 percent higher than normal rice, Yuan's rice has since been adopted by other developing countries and the UN has come to see the export of Chinese know-how as vital to food security efforts in hungry regions of the world.

Biotechnology appears to be China's answer to food security, but that's only part of the sector's potential. A two-day conference with the theme "From Biotechnology to Biomedicine to Bioeconomy" in mid-May will see international biotechnology scientists converge on Beijing. The organizers have predicted a big turnout, reflecting biotechnology's potential here.

"China has an excellent set of competitive advantages compared to other countries," said a spokesperson for conference organizers, the National Development Center of Biotechnology of the Department of Science and Technology. "we have the talent, the resources and the research. Biotechnology has been developed for a thousand years already in China."

Foreign involvement

China spent RMB 180 million on research and development (R&D) in 2003 according to a spokesperson for the Science and Technology Ministry. That's 1.32 percent of China's GDP, and the figure will rise to 500 million a year by 2005. China's high-tech exports amounted to US$100 billion in 2003, making up a quarter of total exports, and high-tech exports are growing at 30 percent annually. But complex licensing procedures and customs regulations have up to now frustrated foreign involvement in the biotech sector.

In February, China's Department of Agriculture formally allowed foreign genetically modified (GM) food exports into China. Prior to that, imports - largely soybeans, maize and cotton - were only allowed under interim agreements. From March 2002 importers were required to apply for safety certification and five foreign biotechnology firms have since submitted 18 applications. US giant Monsanto has had five certificates issued for its Roundup products. Germany's Bayer and Switzerland's Syngenta are going through a 270-day testing period to get certificates for rapeseed and maize products. China had set an April 20 deadline for developers of genetically modified crops to attain safety certificates. "if they have not obtained the safety certificate, they won't be able to export GM products to China after April 21," said Shi Yanquan, head of China's GM office. Shi said developers of 17 GMO products submitted their applications on time, and five received the certificates. One soybean, two corn and two cotton varieties were approved.

Foreign investment remains limited. Monsanto, Delta and Pine Land have all planted cotton locally but stringent testing and certification rules have kept many other companies out. Once in China, the relative absence of strong environmental groups and less anti-GM regulations make it easier for GM crops to be grown and modified locally.

Where China's biotechnology club falls behind however is in the lack of capital. Venture capital has stayed shy of the biotechnology sector. Whatever its efforts at regulation, China still has a long way to go in biotech R&D, says Zhang Mu, chief of the medicine research department at the National Council for Biotechnology Development. (Source:

Very few licenses have been awarded for gene drugs worldwide but China's comparatively large government involvement and low clinical testing costs have given the country's scientists an edge. Some Chinese firms that have recently made the news include Beijing Sinovac, developer of a SARS vaccine, and Shenzhen Si Biono Gene Technologies, which developed Gendicine, an anti-cancer drug. China lags the US by seven years in biotech theoretical studies but the gap is even wider in laboratory technology - foreign expertise is thus essential, said Peng Zhaoshui, chairman of Si Biono, in the National Development Center of Biotechnology's newsletter.

The push for GM crops

Severely limited arable land from which to feed a huge population has obviously pushed China to maximize yields. Between 1997 and September last year the Ministry of Agriculture approved over 10 kinds of transgenic plants such as rice, corn, cotton, soybean, rape and potato to be planted on Chinese farms. Mixed gene cotton, tomato and pimiento have also been approved for commercial farms.

Over a hundred kinds of crop genes are under research in China, putting it at the top of the sector worldwide. China scores very well in research achievements in the fields of gene-mixed and insect-resistant cotton and rice. It's also doing well in gene engineering vaccines. In 2002, China joined the US, Canada, Brazil and Argentina as nations cultivating more than 2.1 million hectares of mixed-gene crops.

GM opponents and collaborators

Genetic engineering, a technology promoted vigorously by multinational pharmaceutical firms, has gotten many developing nations nervous about quality and safety issues. China was in attendance when Asian, African and Latin American countries gathered with their European counterparts in Kuala Lumpur earlier this year to draft a safety formula which requires detailed information on GM seed shipments from importers. The new rules have angered chief exporters like the US. The previous UN Cartagena Biosafety Protocol is the global safety standard in GM trade but the US and Australia, two major GM producers, both opted out of the protocol. US negotiators have been accused of championing the case of biotech firms like Monsanto while EU legislators have long questioned the safety of genetically modified foods.

Still, the EU has recently moved much faster to embrace and fund Chinese scientific research in fields including biotechnology. "we found that collaboration is a very efficient way to do research," says Jurgen Sanders, science and technology counselor EU Commission's delegation in Beijing. The EU's Framework Program is the world's largest scientific research co-operation program, primed with an 8 billion euro annual budget that's handed out in grants. China signed on to the Framework Program only in 2000, and Chinese scientists had access to only 3 percent of program funds and activities, but that is set to change.

Co-operation between China and the EU has been steady. "Equality is key - achievements should be accomplished, owned and shared by all," Yang Huanming, director of the Beijing Genomics Institute told the Global Biotechnology Forum in Beijing in March this year. Yang led the international Human Genome Project task force that decoded 1 percent of the human genome in April 2003.

China's open attitude to its discoveries helps: officially all its biotech findings are made public and the main player locally is the state, not private enterprise as elsewhere. Yang has been collaborating with Irish and Belgian scientists on the gene study program, European Action On Global Life Sciences, funded by the European Commission. Recruitment of biotechnology experts from Europe and other developed nations has become a priority at the state's Foreign Experts bureau.

Money in genes

Genomics is a lucrative sector and one where China can excel, says star bio-scientist Cheng Jing, a pioneer of China's commercialization of biotechnology. One of China's most successful companies in profit-making gene manipulation, Capital Biochip will become a "Biotech empire" as it rapidly expands, explains CEO Cheng. Capital Biochip was spawned from public funding, drawing in US expertise and financial know-how.

Its commitment to public ownership of research findings hasn't exempted China from criticism on the safety and environmental impact of its GM foods. And in recent years experts have questioned China's commitment to its stated goal of being the world leader in biotechnology exploration. Competition will be fierce: the EU is trying hard to revive its interest in R&D, committing its members to doubling the amount of GDP spent on R&D.

Chinese laboratories are currently working on more plant variants than any nation outside of North America, ranking fourth in global terms, behind the US, Argentina and Canada. But China easily outguns its rivals in the generosity of the public purse towards gene scientists: Beijing outspent developing world rivals India and Brazil in research by a record US$112 million and US$15 million respectively in a 1999 study published by the United Nations.

Multinational companies complain that red-tape protectionism is holding back foreign investment. "China has one foot on the accelerator and one foot on the regulatory brake," says John L Kilmer, spokesman for Monsanto China. Experts hope the government changes its mind when China is able to produce its own varieties of cotton, which has so far topped China's priority list and research efforts. But foreign expertise and technology could be crucial if neighbors such as India are not to get ahead of the field.

Co-operation with the EU may prove to be China's fastest way forward. Chinese scientists, predicts the EU Commission's Jurgen Sanders, will eventually be working much more closely with their EU counterparts. "we're happy that China is joining in big science projects. It's important that we increase co-operation," says Sanders.

The late 'supreme leader' Deng Xiaoping listed biotechnology as one of the seven technologies that held the key to China's economic growth. Today China has more than 40 publicly listed biotech companies. Professor Yuan Longping remains a hero in China with the country's food security looking more assured than ever. But the revolution he started will take some time to transit to commercial success. And that's where foreign enterprise and know-how might help.