On June 2, 2009, the State Council of the PRC issued Certain Policies for Promoting the Development of the Biotechnology Industry. China has targeted the domestic biotechnology industry as an important component of the country’s overall economic development in the 21st century. The Policies fill in the framework set out in the National Guidelines on the Medium- and Long-Term Development of Science and Technology and the Eleventh Five-Year Plan for the Development of the Biotechnology Industry.
Considering China’s competitive advantages and market potential, the Policies identify five specific areas for development:
- Bio-manufacturing, and
- Environmental technology.
The overall objectives of the Policies include fostering global biotech companies in China that have proprietary intellectual property by channeling capital and human resources to the industry, enhancing biotech business networks, encouraging investment in research and development, and strengthening protection for patents and biological resources.
The Policies include several measures to strengthen existing biotech companies. Through these measures, the government aims to foster China’s leading biotech companies while providing small- and medium-sized enterprises with additional support in the form of financing and property, and establishing support centers to promote entrepreneurship. In addition, the government intends to build national biotech parks in order to enhance awareness and cooperation among relevant enterprises and channel their expertise and capital. As mentioned in the Policies, the government is expecting that these biotech parks will stimulate the growth of the industry.
Recognizing that innovation is a driving force of the biotech industry, the Policies not only promote the establishment of advanced research centers but also encourage business investment on technological development. Additionally, the Policies reflect the government’s pledge to facilitate cooperation between educational organizations, research institutes and the biotech industry. At the same time, the Policies urge competent authorities to streamline their technology transfer and appraisal systems, and accelerate the industrialization of innovative technologies.
According to the Policies, biotech companies will receive favorable tax treatments. With respect to research and development (R&D) expenses incurred but not yet capitalized as intangible assets, for example, a biotech company may, in addition to deducting the actual expenses in accordance with existing rules, enjoy an additional tax deduction equal to 50 percent of the R&D expenses. If the R&D expenses have been capitalized, then the biotech company may amortize them based on 150 percent of the capitalized amount. In addition, if a biotech company is deemed by the government to be a “high and new technology enterprise,” then its enterprise income tax rate will drop to 15 percent. The Policies further direct competent government authorities to craft more favorable tax policies for the five key development areas of the biotech industry.
The Policies acknowledge that it is often difficult to drum up demand for new products, and therefore promise to assist biotech companies that have their own intellectual property in reaching sufficient sales. The Policies also require competent government authorities to prioritize original and innovative biotech products when disbursing fiscal funds and governmental procurements.
To augment the talent base for the biotech industry, the Policies encourage higher education institutions, research institutions, businesses and vocational schools to accommodate and cultivate different skill levels. The government also welcomes overseas Chinese and foreigners who have expertise in biotechnology to set up businesses and educational programs in China, and to undertake government-sponsored research projects. Moreover, the government will revise the rules for appraising technology as capital stock in order to attract more educated professionals and ambitious entrepreneurs.
With respect to financing, the Policies promote the establishment of biotech venture capital funds and urge financial institutions to provide credit guarantees for biotech companies. In addition, the Policies provide that the government will assist biotech companies in raising capital though initial public offerings in domestic and foreign stock markets. The government also encourages qualified biotech companies to issue various securities in order to raise funds.
Moreover, the Policies prescribe certain regulatory changes to make the biotech market more conducive to growth and innovation. Patent examination and approval will be expedited, for example, and enforcement against patent infringement will be tightened. The government also plans to improve the policies regarding the entry of bio-products into the marketplace. For bioproducts affecting national security, human health, animal or plant safety, or environmental risks, the relevant department under the State Council will control their market access.
Like previous legislation in the biotech industry, the Policies emphasize the importance of biological resources. Regulatory systems and databases for biological resources will be devised to enhance the reasonable use and sharing of data and materials. The Chinese government also vows to perform its obligations under international bio-safety conventions by toughening control of alien and dangerous organisms and the products derived from them. Relevant monitoring mechanisms will be established and enforced.