- Geopolitical Strategist
- Boston
Singapore, Intermediary
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Deepening US policy risks in the biotechnology sector have garnered some well-deserved attention from many of my colleagues lately. Given biotechnology’s potential future importance to US policymakers in the context of the ongoing US-China “great-power” competition, I’d like to share my own thoughts on what’s driving the rising geopolitical risk and national security concerns.
Why the Defense Department is worried
The US Department of Defense (DoD) takes a broad view of the national security implications of biotechnology, as does the Chinese military, which sees the sector as one of the new “strategic commanding heights” of national defense.
Beyond the obvious medical and economic benefits that biotech can provide, national security officials perceive it as an emerging front of warfare that encompasses a broad range of sciences, including (but not limited to): gene editing, human performance enhancement, and neurology. A potential intersection with artificial intelligence is also of concern, given the “big data” aspects of biotechnology.
Accordingly, US officials have observed closely in recent years as China has funded research projects in several related areas and then institutionalized much of this research, particularly the weaponized aspects of biotech.
These are the kinds of developments that tend to set off alarm bells at the Department of Defense and on Capitol Hill. Indeed, it’s often signals and the potential intent that matter most to US policymakers and military planners, making many keen to increase the strategic focus on the sector. Not surprisingly, official concern regarding biotech has been cropping up in national security strategy documents in the past several months.
Some key takeaways for investors
- Recent developments reinforce my long-standing message that US policymakers are taking a more structured, coordinated, and expansive view of what constitutes a strategic industry as great-power competition with China becomes more entrenched. I believe we should now consider placing biotech in the same national security “bucket” as semiconductors, aerospace, next-generation technologies, and other industries on the frontlines of shifting geopolitical and military doctrines.
- This type of “all-of-government” policy direction seems to be accelerating under President Biden’s administration, not only for the structural geopolitical reasons described above, but also for cyclical domestic political ones. I’m thinking specifically of the upcoming 2022 midterm elections and the next US presidential campaign, when candidates from both parties will likely be trying hard to appear tough on China.
- One question I’m asking myself about biotech and other strategic industries is whether the US might apply a more nuanced policy scalpel going forward (e.g., sparing certain Chinese companies from punitive actions). If not, perhaps escalating geopolitical tensions will lead to a cruder, more heavy-handed policy approach, where more Chinese companies are lumped together as national security “threats” and treated that way.
- We don’t yet have a definitive answer to this question. I’m hopeful some degree of “manageable nuance” will be possible, given the strong linkages some US biotech firms have with Chinese entities, not to mention the inherent challenges of decoupling in such a complex and interconnected industry. But domestic politics and persistent geopolitical frictions in the US-China relationship will likely render that exceptionally difficult.
- Both short- and long-term calculations factor into my thinking on this issue: Nearly 70% of Americans currently have an unfavorable view of China, so the political incentives for US leaders and officials to adopt a more hawkish policy stance on China are clear. At the same time, as discussed above, the national security implications of biotech make for a compelling longer-term argument for such a stance.
Bottom line
The growing role of biotech in US-China relations is becoming (and will continue to be) a hot topic of conversation — both in and outside of Washington. I’ll be watching with great interest.
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