The VC Who Told Washington to Back Off China Biotech
A top venture capitalist just went public against Washington's push to restrict biotech investment in China. With $136 billion in cross-border licensing deals at stake, the fight over where America's next drugs come from is getting very personal.
Imagine you've been buying the best ingredients from a particular farmer's market for twenty years. Your restaurant depends on it. Then the city council tells you they're thinking about banning you from shopping there, because the market is in the wrong neighborhood.
That's roughly how Julie Grant, a partner at venture capital firm Canaan, feels about Washington's latest push to restrict U.S. investment in China's booming drug industry. In a June 17 STAT News profile by reporter Allison DeAngelis, Grant went public with a message that plenty of biotech investors have been whispering behind closed doors: these proposed restrictions are shortsighted, and they'll hurt American patients more than they protect American interests.
It's a bold stance. And the timing couldn't be more charged.
The Bill That's Rattling the Industry
The centerpiece of the current debate is a piece of legislation called the Biotech Investment National Security Act, or BINSA, introduced on June 2, 2026. If passed, it would do something no U.S. law has done before: extend outbound investment screening to biotechnology.
Right now, the existing federal outbound investment rules (which took effect January 2, 2025) only cover three sectors: semiconductors, quantum computing, and artificial intelligence. Biotech has been conspicuously absent from the list, even though lawmakers have debated adding it for years.
BINSA would change that. It would amend the existing COINS Act so that the Treasury Department could review, and potentially block, U.S. investments that move pharmaceutical innovation, clinical know-how, or manufacturing expertise to Chinese-linked entities. And it goes further than equity deals; licensing agreements and joint ventures would also fall under the microscope. Treasury would consult with HHS, the Department of Defense, and the intelligence community before making calls.
Think of it as a CFIUS-style review process (the national security screening that already applies to foreign companies buying U.S. assets), but running in the opposite direction.
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Why Grant Says This Is a Mistake
Grant's core argument is straightforward: the U.S. and Chinese biotech ecosystems didn't become intertwined by accident. They became intertwined because it works. Trying to unwind decades of interdependence, she argues, won't make America safer. It'll make American drug development slower, more expensive, and less innovative.
She's not alone in thinking this. At least one partner at Atlas Venture has called the broader effort "misguided," arguing that policymakers should focus on helping the U.S. industry compete rather than restricting where it can shop for deals.
And when you look at the numbers, you can see why the industry is nervous. Cross-border out-licensing value from Greater China reached roughly $136 billion in 2025, according to U.S. congressional figures. That's not a trickle of deal flow. That's a river.
China now accounts for about one-third of global licensing value in early 2025, with particular strength in oncology, immunology, metabolic disease, and advanced therapies like cell and gene therapy. For big pharma companies staring down massive patent cliffs, Chinese biotech has become one of the most efficient places to find high-quality early-stage drug candidates.
The Other Side of the Argument
National security hawks aren't buying the "just let the market work" pitch. Their concern: that cross-border investment creates pathways for sensitive know-how to flow to China, deepens U.S. dependence on a geopolitical rival, and weakens domestic pharmaceutical manufacturing.
They also point to the BIOSECURE Act, already signed into law as part of the FY2026 defense spending bill. That law restricts federal agencies from contracting with certain Chinese "biotechnology companies of concern." It doesn't ban private investment, but it sends a signal, and boards and investors have noticed. Law firms report a growing "halo effect" where companies treat any China relationship as higher-risk, even when no legal restriction applies.
A separate White House draft executive order is also reportedly in the works, tightening review of China-linked drug deals and increasing scrutiny of clinical trial data collected in China.
The walls aren't closing in all at once, but the room is definitely getting smaller.
The Industry's Clever Workaround
What's fascinating is how the deal-making world has already started adapting. Rather than pouring equity directly into Chinese companies (which draws political attention), investors are increasingly using a structure you might call the "asset flip."
The playbook: acquire a promising Chinese drug asset, place it into a newly formed U.S.-based company, and develop it through Western regulatory pathways. Biotech dollars go east; assets come west. The innovation still flows, but the corporate wrapper is American.
Average upfront payments in these licensing deals have surged roughly 230%, from $52 million in 2022 to $172 million in 2026 so far. The number of China-to-US biotech licensing deals jumped 120% from 42 in 2022 to 93 in 2025. Chinese biotech assets aren't cheap anymore, but they're apparently worth it.
So What Happens Next?
BINSA still needs to pass Congress, and that's no sure thing. But even the threat of it is reshaping how deals get done. Legal and political risk assessment has become a core part of every investment committee memo. Diligence processes now front-load national security, data security, and supply chain questions before anyone talks valuation.
The biggest wildcard: Section 809 of the COINS Act gives Treasury the authority to designate additional technologies within existing sectors and expand transaction types subject to outbound screening without new legislation. But adding an entirely new sector like biotechnology would still require congressional action.
For now, deal volume hasn't actually dipped. Industry analysts tracking China-related cross-border out-licensing deals report roughly 186 transactions in 2025, about three times the 2021 level, with the pace holding steady into 2026. The market is betting that restrictions will arrive gradually, not as a sudden wall.
Julie Grant is making a calculated wager of her own: that speaking up now, while the policy is still being shaped, might actually change the outcome. In a town where most VCs prefer to lobby quietly, going on the record takes guts.
Whether Washington listens is another question. But the biotech industry's message is clear: cut off this relationship too fast, and the patient who loses isn't Chinese. The patient who loses is American.
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