[Edaily Reporter KIM JUNG YOU ] Global capital has recently been flowing into Chinese biotech companies. As the AI rally in global Shinhung stock markets has slowed, investors seeking high-growth alternatives are turning their attention to these companies.

According to a Bloomberg report on the 27th, the Bloomberg Shinhung (EM) Technology Index entered a bear market over the past month. This was driven by declines of 40% and 29%, respectively, in SK hynix(000660)and SamsungElectronics(005930), which had been leading stocks of the “AI boom.” In contrast, more than 10 Chinese biotech stocks posted double-digit gains during the same period, emerging as the sector with the strongest growth within the Bloomberg Shinhung Technology Index.

Market analysts interpret this shift in capital flows within Shinhung as reflecting caution stemming from the high valuations of AI stocks and the concentration of profits in certain tech stocks. In effect, the Chinese biotech sector is emerging as an alternative to AI.

Nelson Yoo, Head of Equities at global asset manager AllianceBernstein, emphasized that Chinese biotech companies are accelerating their overseas expansion through licensing agreements with global firms. He said, “As investors become increasingly concerned about the risks associated with AI and related investments, biotech is being viewed as an attractive alternative that can simultaneously deliver innovation, structural growth, and profitability.”

In fact, the stock price of CSPC Innovation Pharmaceutical, a Chinese biotech company developing an RNA-based treatment for kidney disease, has risen 52% over the past month. Recently, global pharmaceutical giant AstraZeneca signed a deal to secure global rights to the treatment for up to $1.8 billion (approximately 2.635 trillion won).

In the past, it was common for major global biotech companies to develop new drugs in-house and then outsource clinical trials or production to low-cost countries. However, there is a growing trend where Chinese companies develop innovative drug candidates, and global firms acquire them through licensing agreements. It is reported that the revenue structure is also shifting away from simple production and service contracts toward revenue generated from new drug development.

Analysts note that while biotech-related intellectual property (IP) used to flow from the West to China, the increasing number of cases where the reverse is occurring is also a factor driving the shift in global investment flows. The market assesses that these changes in the biotech industry’s research and development (R&D) approach, coupled with China’s growing prominence, are positioning the local biotech sector as a long-term investment target.

Won Chang Ma, a portfolio manager at the British asset management firm NinetyOne, said, “China is transitioning from a producer of generic drugs to an innovation-driven nation,” adding, “With the rapid growth of its innovative new drug pipeline and technology export (out-licensing) agreements, it is attracting the attention of investors.”

Furthermore, some analysts suggest that China’s recent biotech innovation strategy will be relatively less affected by the generic drug tariff policy proposed by U.S. President Donald Trump. Marcus Beyerer, an investment strategist at global investment advisory firm Franklin Templeton, remarked, “Biotech is another reason why China is becoming an increasingly attractive investment destination,” adding, “Recent innovations can be found not only in technology and AI but also in biotech.”