CHINA: low-cost labor is not enough – the need for innovation and higher standards. Can Hong Kong serve as a gateway to mainland China?

Grace H.W. Wong, PhD, Chief Scientific Officer, ActoKine Therapeutics

For many years, Chinese students and scholars have come to the United States for their education. Very often they found employment and chose to pursue their careers in the US. Talented, quick to learn, and highly skilled, many of these students have become successful scientists excelling in almost every field of scientific research, either in universities or biotech and pharmaceutical companies. Their success in overcoming language barriers and cultural differences testifies to their dedication and ability.

At the Sino-US Drug Development Forum in Washington, DC (organized by the Chinese Biopharmaceutical Association USA) on November 9, 2005, Dr. William Haseltine, founder and former CEO of Human Genome Sciences and a pioneer in gene sciences, presented a keynote speech on "Opportunities for Collaboration between US and Chinese Biotech/Pharmaceutical Companies". Dr. Haseltine has worked with many Chinese scientists in academia and in industry. His work in biotechnology has taken him to China on numerous occasions, as research and development-based industries rapidly proliferate there.

Dr. Haseltine praised the technical abilities and work ethic of his Chinese colleagues, and likened the returning Chinese scientists training abroad to “sea turtles”. Instead of leaving China to study and remaining as expatriates in various countries around the world, he foresees that in the future they will be returning to the land of their birth to live and work. These scientists will bring back knowledge, skills, and know-how, all of which will greatly benefit the growing scientific and biotechnology efforts in China. Scott Wadsworth, research fellow at Johnson & Johnson Pharmaceutical Research & Development, says "I am hearing more stories about people returning to China to pursue their careers than ever before. It seems like their knowledge of the language and culture allows them to obtain higher positions faster than in the US and the pay scale affords them a higher standard of living as well."

China has taken a very pro-active stance in the development of biotechnology-based industry. China is aware of the need to become a world leader not just in low-cost production, but in research and innovation as well. Dr. Haseltine's advice is to raise the standard or level of quality control and regulatory oversight in the young Chinese industry to international global standards, particularly in biotechnology. China has already taken important steps to promote biotechnology-based industries that provide opportunities for foreign-educated scientists to return to China. Undoubtedly, the quality of Chinese biotech services and research will be further improved with the help of the strong entrepreneurial spirit of these Chinese “sea turtles” from abroad.

Chinese scientists who are currently active in Western countries represent a vast and valuable resource for a huge country like China that is rapidly becoming a major player in the international industrial market. The best way for China to tap into this resource is to provide an environment where bright and capable scientists can do innovative research and enjoy at least the same success that they had in the West, or even more. The knowledge base, skills, experience, expertise and contacts these returning scientists will bring back are of vital importance to the growth of biotechnology in China and to its success in meeting international standards.

Asia in general has seen a remarkable surge in investment, both foreign and domestic, in many industries, including biotech, mainly due to the availability of a large, low-cost labor pool. China has a very large labor pool but also has poor patent protection and poor regulatory control. In technology-based industries, the availability of abundant, low-cost workers is not enough for producing good results. Low costs are of little benefit if quality and innovation cannot be maintained. Quality and regulatory controls and protection of intellectual property are equally necessary, not only for the successful development of a domestic biotech industry, but also to attract needed capital and scientific input from abroad. If biotechnology services in China were to match international levels, there would be great potential and opportunities for synergistic collaboration between the US and Chinese biotech/pharmaceutical companies. Therefore a key objective must address how to gain trust and how to build a stronger relationship between the US and China.

Reinhard Ebner, Principal Scientist at Avalon Pharmaceuticals, formerly a scientist both at Genentech and Human Genome Sciences, emphasizes “In recent years, China has already begun becoming a more attractive place to return to. While education and technology planners in the United States should watch this trend closely, and with some concern, Chinese research administrators should anticipate it openly. But development of a fully modern biopharmaceutical industry will still depend on some infrastructural changes. Here, adjusting patent rules and harmonization of intellectual property (IP) protection standards remain to be among the foremost hurdles.”

A role for Hong Kong

In this context, Hong Kong (HK) could become an important biotechnology bridge between the West and the mainland China. Will HK help with the building of such trust between the US and China? Clearly, in biotechnology, trust must include protection of intellectual property rights. HK is an internationally well-known business and financial center. HK was ruled for a long time under British law . As a result, HK is recognized for adhering to intellectual property laws, a crucial ingredient to building a sound intellectual property infrastructure in today's developing markets. HK has another important advantage: English is widely spoken there, which can make a big difference for foreigners who do not speak Chinese. The English-speaking milieu can make doing business and conducting research much easier. HK also has a strong clinical research infrastructure. Clinical trials in HK using patients from mainland China can take advantage of the benefits of both worlds (good IP protection and a huge patient population), and they can include parallel trials in HK and mainland China. Participants’ privacy and the guarantee of individual patients' rights can be ensured in HK. HK also has closer access to the huge mainland Chinese market than Taiwan, Singapore and several other Asian countries. HK may thus serve as a unique gateway to mainland China.

To position HK as one of the leading biotechnology hubs in Asia, for example, a new biotech centre and laboratories with modern equipment could be set up in the HK Science Park (HKSP) which is only a half hour by train to mainland China. A new CEO should be hired and a new web site (www.HKbio.org) should be created. Regular biotech meetings could be organized to enhance networking. Biotech scientists from the US, Europe and Asia could share incubators and common equipment at HKSP for new drug discovery and collaborate on cutting-edge biotechnology. Clusters of HK biotech companies and academic organizations could host international conferences or seminars to fulfill a common desire to catch up on advances in biotechnology. With HK’s advanced social system, highly developed infrastructure, and favorable business conditions, HK can match international standards in biotechnology science and business. As a bilingual society with excellent legal and regulatory systems to safeguard IP rights, HK can form a bridge between the Chinese market and the rest of the world.

Making use of HK’s advantages, HK can serve as a niche allowing a strong IP position with good Quality Control at its Biotech centre (of new biotech or pharma products). A centre like this may or may not have innovations of the highest level. Essential ingredients include for its staff to be disciplined, serious, efficient, excel in communication, and for them to be highly ethical in their conduct at all levels. This last point will take some time and skill so that its relevance can be understood by others in the newly developing Asia Pacific economies, where product quality needs to meet international standards. Product quality will speak for itself at a time where one bad apple can delay opportunities for a long time to come.

Ideally, China could at this stage become the biotech/pharma factory, and HK the reliable Quality Control workplace. In this way, the HK Government can maintain its cost-effectiveness approach, no sweeping reform of science in the universities is required, college graduates can get rewarding jobs dealing with cutting-edge science, and people in HK will have a feeling that they are doing valuable work that contributes significantly to China, while Mainland China is helping HK succeed,

Promoting biotechnology in HK can confer benefits in terms of better research funding, enhanced economic growth, increased job opportunities for life science students, VC investments and recruitment of foreigners to HK. HK without biotechnology is like a plant without fertilizer. HK needs to increase public appreciation of biotechnology and boost funding of biotech innovation to take advantage of its excellent infrastructure and human capital (to harvest the fruits of many years of HK-British investments). Does China no longer need HK; or is it independent of HK since there is already research activity in mainland China? With support, HK will enrich, enhance, and speed the progress of mainland China’s biotechnology industry. HK will have the potential to become a leading bridge to China and a solution to the central problem of building trust between the world biotech community and the emerging Chinese biotech industry.


Hong Kong’s advantages for developing biotech/pharma in this region include strong Intellectual property protections, excellent infrastructure and human capital, reliable quality control in the workplace, a bilingual society, high standards for regulatory systems and close access to the human capital of mainland China. This should allow Hong Kong to serve as the catalyst or a unique bridge for the development of the biotech/pharma industry in mainland China.

To reach this goal, the Hong Kong Government must continue its efforts to develop and support R & D and new biotech start-ups by increasing research funding and infrastructure development, enhancing biotech education and training, promoting job opportunities for life science students and recruiting experienced biotech workers from around the world. The US $1.5 billion investment that the Hong Kong Government has made to build the HKSP is a major step toward the future and is an example of the Government's efforts to establish a strong knowledge-based industry in Hong Kong.

USA Biotech and pharma
Hong kong-China

Through this long-term, pro-active approach, Hong Kong will not only ensure its own place in the expansion of global biotechnology, but also strengthen and facilitate the relationship between the world biotech/pharma community and the emerging Chinese biotech/pharma industry. Over time China 's “low-cost labor “ advantage will apply less and less: low-cost labor will cease being the main factor in China’s industries. A more skilled workforce in an expanding business sector will lead to higher quality, higher value production and higher and competitive wages and a better standard of living for the workforce. Biotech innovation and higher standards could become the engines that elevate China’s economy to the level of a global powerhouse.

HKSP: http://www.hkstp.org/eindex.php