May 2025
Brief Introduction to the Evolution of Foreign Capital Access Policy Governing China's Human Stem Cell and Gene Therapy (CGT) and the Key Points of Enterprise Compliance Supervision
In recent years, China has gradually explored a balance between openness and regulation in the field of biomedicine, with human stem cells and gene therapy (CGT) being a cutting-edge area. The foreign investment access policy has undergone a significant shift from a "comprehensive ban" to a "pilot opening". This process not only reflects the country's balance between biosafety and technological innovation, but also profoundly affects the market layout and compliance path of foreign-funded enterprises. This article aims to review the evolution of foreign investment access policies in the industry and provide a brief analysis of compliance regulatory points that relevant enterprises should pay attention to.
I. Policy Evolution: From Strict Prohibition to Regional Pilot Opening
A. Comprehensive Prohibition Phase (2007-2019)
In 2007, the "Catalogue for the Guidance of Foreign Investment Industries" listed for the first time the development and application of human stem cells, gene diagnosis and treatment technologies as prohibited areas for foreign investment. In subsequent revisions, this entry remained on the negative list, becoming one of the strictest restrictions in the field of biomedicine. The formulation of policies mainly stems from concerns about biosafety, ethical risks, and technological sovereignty, especially the risk of the outflow of human genetic resources.
B. Local Pioneering Exploration (2019-2024)
In 2019, Shanghai Free Trade Zone took the lead in proposing to "strive for allowing foreign investment to enter the fields of stem cells and gene therapy", and since then, Beijing, Shenzhen and other places have attempted to break through local policies. For example, in the "Several Measures for the New Round of Service Industry Expansion and Opening up in Shanghai" released on August 13, 2019, it was clearly stated that "promoting project cooperation in the medical technology field and lifting foreign investment access restrictions, striving to allow foreign investment in the development and application of human stem cells, gene diagnosis and treatment technologies". The "Regulations on Promoting the Construction of Zhangjiang Biopharmaceutical Industry to Achieve New Heights in Pudong New Area, Shanghai", which came into effect on January 1, 2022, also proposed to "support eligible diversified investment entities to carry out research and development of human cell and gene technologies and promote industrialization processes under the premise of controllable risks". Although the "borderline" operation of local policies did not break through the negative list, it laid the foundation for subsequent pilot projects.
C. Pilot Open Stage (2024-present)
In September 2024, the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration jointly issued a notice on expanding the pilot work of opening up in the medical field, allowing foreign-invested enterprises in Beijing, Shanghai, Guangdong Free Trade Zones, and Hainan Free Trade Port to engage in the development and application of human stem cells and gene therapy technology for the first time. After registration with the National Medical Products Administration, related products can be sold nationwide. It should be noted that the notice requires foreign-invested enterprises planning to pilot projects to comply with relevant laws, administrative regulations and other provisions of China, meet the requirements of human genetic resource management, drug clinical trials (including international multicenter clinical trials), drug registration and marketing, drug production, ethical review and other regulations, and fulfill relevant management procedures. This policy marks a shift from a "principle ban" to a "conditional opening" for foreign investment access in China's CGT sector.
II. Key Points of Compliance Supervision
After the partial relaxation of foreign investment access in China's CGT field, CGT related enterprises still need to pay attention to compliance and regulatory points, including but not limited to the following:
A. Management of human genetic resources
The process of carrying out research on human stem cells and gene therapy technology will inevitably involve the adoption or transmission of human genetic resources, so it should comply with the provisions of relevant laws and regulations such as the Implementation Rules for the Administrative Regulation on Human Genetic Resources, the Administrative Regulations of the People's Republic of China on Human Genetic Resources (revised in 2024), and so on. According to Article 12 of the Implementation Rules for the Administrative Regulation on Human Genetic Resources, enterprises with foreign ownership exceeding 50% or actual control are recognized as "foreign units" and are prohibited from collecting or providing human genetic resources overseas. The Administrative Regulations of the People's Republic of China on Human Genetic Resources (revised in 2024) clearly stipulates that if foreign units need to use China's human genetic resources to carry out scientific research activities, they should abide by China's laws, administrative regulations and relevant national provisions, and cooperate with China's scientific research institutions, universities, medical institutions and enterprises.
B. Technology export control
The "Catalogue of Technologies Prohibited and Restricted from Export in China" (2023) lists gene editing technologies used for editing human reproductive cells (i.e. embryonic cells, egg cells, sperm cells) containing genetic material, which are ethically controversial and can cause significant harm, as prohibited for export.
According to Article 29 of the Administrative Regulations of the People's Republic of China on Technology Import and Export (revised in 2020), technologies that are prohibited from export shall not be exported. According to Article 43 of the same regulation, those who import or export technologies that are prohibited from import and export, or those who import or export technologies that are restricted from import and export without permission, shall be held criminally responsible in accordance with the provisions of the Criminal Law on smuggling, illegal business operations, leaking state secrets, or other crimes. For cases that are not yet sufficient for criminal punishment, punishment shall be imposed in accordance with the relevant provisions of the Customs Law depending on the circumstances, or a warning shall be given by the competent foreign trade department of the State Council, illegal gains shall be confiscated, and a fine of not less than one time and not more than five times shall be imposed. The competent foreign trade department of the State Council may also revoke its foreign trade operation license.
C. Data security and personal information protection
The research process of human stem cells and gene therapy technology will involve sensitive information such as personal genetic data. According to the Personal Information Protection Law of the People's Republic of China, processing sensitive information requires individual explicit consent. If multinational corporations need to transfer sensitive information across borders, they should conduct necessary security assessments and other procedures depending on the specific situation to comply with relevant laws and regulations such as the Data Security Law of the People's Republic of China and the Personal Information Protection Law.
With the changes in China's foreign investment access policies in the CGT field, it is believed that if the pilot region's experience is successful, the negative list may be further revised and ultimately achieve nationwide opening up. We also hope that the relevant laws, regulations, and implementation rules of CGT in China can be continuously improved. Through the improvement of the regulatory framework, China can become an important pole in the global CGT industry.
I. Policy Evolution: From Strict Prohibition to Regional Pilot Opening
A. Comprehensive Prohibition Phase (2007-2019)
In 2007, the "Catalogue for the Guidance of Foreign Investment Industries" listed for the first time the development and application of human stem cells, gene diagnosis and treatment technologies as prohibited areas for foreign investment. In subsequent revisions, this entry remained on the negative list, becoming one of the strictest restrictions in the field of biomedicine. The formulation of policies mainly stems from concerns about biosafety, ethical risks, and technological sovereignty, especially the risk of the outflow of human genetic resources.
B. Local Pioneering Exploration (2019-2024)
In 2019, Shanghai Free Trade Zone took the lead in proposing to "strive for allowing foreign investment to enter the fields of stem cells and gene therapy", and since then, Beijing, Shenzhen and other places have attempted to break through local policies. For example, in the "Several Measures for the New Round of Service Industry Expansion and Opening up in Shanghai" released on August 13, 2019, it was clearly stated that "promoting project cooperation in the medical technology field and lifting foreign investment access restrictions, striving to allow foreign investment in the development and application of human stem cells, gene diagnosis and treatment technologies". The "Regulations on Promoting the Construction of Zhangjiang Biopharmaceutical Industry to Achieve New Heights in Pudong New Area, Shanghai", which came into effect on January 1, 2022, also proposed to "support eligible diversified investment entities to carry out research and development of human cell and gene technologies and promote industrialization processes under the premise of controllable risks". Although the "borderline" operation of local policies did not break through the negative list, it laid the foundation for subsequent pilot projects.
C. Pilot Open Stage (2024-present)
In September 2024, the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration jointly issued a notice on expanding the pilot work of opening up in the medical field, allowing foreign-invested enterprises in Beijing, Shanghai, Guangdong Free Trade Zones, and Hainan Free Trade Port to engage in the development and application of human stem cells and gene therapy technology for the first time. After registration with the National Medical Products Administration, related products can be sold nationwide. It should be noted that the notice requires foreign-invested enterprises planning to pilot projects to comply with relevant laws, administrative regulations and other provisions of China, meet the requirements of human genetic resource management, drug clinical trials (including international multicenter clinical trials), drug registration and marketing, drug production, ethical review and other regulations, and fulfill relevant management procedures. This policy marks a shift from a "principle ban" to a "conditional opening" for foreign investment access in China's CGT sector.
II. Key Points of Compliance Supervision
After the partial relaxation of foreign investment access in China's CGT field, CGT related enterprises still need to pay attention to compliance and regulatory points, including but not limited to the following:
A. Management of human genetic resources
The process of carrying out research on human stem cells and gene therapy technology will inevitably involve the adoption or transmission of human genetic resources, so it should comply with the provisions of relevant laws and regulations such as the Implementation Rules for the Administrative Regulation on Human Genetic Resources, the Administrative Regulations of the People's Republic of China on Human Genetic Resources (revised in 2024), and so on. According to Article 12 of the Implementation Rules for the Administrative Regulation on Human Genetic Resources, enterprises with foreign ownership exceeding 50% or actual control are recognized as "foreign units" and are prohibited from collecting or providing human genetic resources overseas. The Administrative Regulations of the People's Republic of China on Human Genetic Resources (revised in 2024) clearly stipulates that if foreign units need to use China's human genetic resources to carry out scientific research activities, they should abide by China's laws, administrative regulations and relevant national provisions, and cooperate with China's scientific research institutions, universities, medical institutions and enterprises.
B. Technology export control
The "Catalogue of Technologies Prohibited and Restricted from Export in China" (2023) lists gene editing technologies used for editing human reproductive cells (i.e. embryonic cells, egg cells, sperm cells) containing genetic material, which are ethically controversial and can cause significant harm, as prohibited for export.
According to Article 29 of the Administrative Regulations of the People's Republic of China on Technology Import and Export (revised in 2020), technologies that are prohibited from export shall not be exported. According to Article 43 of the same regulation, those who import or export technologies that are prohibited from import and export, or those who import or export technologies that are restricted from import and export without permission, shall be held criminally responsible in accordance with the provisions of the Criminal Law on smuggling, illegal business operations, leaking state secrets, or other crimes. For cases that are not yet sufficient for criminal punishment, punishment shall be imposed in accordance with the relevant provisions of the Customs Law depending on the circumstances, or a warning shall be given by the competent foreign trade department of the State Council, illegal gains shall be confiscated, and a fine of not less than one time and not more than five times shall be imposed. The competent foreign trade department of the State Council may also revoke its foreign trade operation license.
C. Data security and personal information protection
The research process of human stem cells and gene therapy technology will involve sensitive information such as personal genetic data. According to the Personal Information Protection Law of the People's Republic of China, processing sensitive information requires individual explicit consent. If multinational corporations need to transfer sensitive information across borders, they should conduct necessary security assessments and other procedures depending on the specific situation to comply with relevant laws and regulations such as the Data Security Law of the People's Republic of China and the Personal Information Protection Law.
With the changes in China's foreign investment access policies in the CGT field, it is believed that if the pilot region's experience is successful, the negative list may be further revised and ultimately achieve nationwide opening up. We also hope that the relevant laws, regulations, and implementation rules of CGT in China can be continuously improved. Through the improvement of the regulatory framework, China can become an important pole in the global CGT industry.
The contents of all newsletters of Shanghai Lee, Tsai & Partners (Content) available on the webpage belong to and remain with Shanghai Lee, Tsai & Partners. All rights are reserved by Shanghai Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Shanghai Lee, Tsai & Partners.
The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case. The Content may not reflect the most current legal and regulatory developments. Shanghai Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors' opinions do not represent the position of Shanghai Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Shanghai Lee, Tsai & Partners.
