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GOVERNMENT POLICIES ON BIOTECHNOLOGY INDUSTRY 1. The Central Government’s Development Strategy on Biotechnology Following its policy on “Developing hi-tech, realizing industrialization” in 1982, the Central Government has implemented a series of national programs to mobilize national resources in science and technology to build a nationwide framework for the industrialization of high technology. It has repeatedly indicated in a number of recent policy documents that biotechnology is one of the national priorities and has ear-marked various programs and funds to support both basic and applied research, as well as technology •Encourages the study of bio-ethics and biosafety; transfers in biotechnology. •To further strengthen international cooperation in The “State Policy on Industry and Technology commercial and intellectual endeavors. 2002” re-confirmed biotechnology as one of the nation’s In 1994, the Municipality issued the first statute key hi-tech areas. The government: (1) encourages for the biotechnology industry in , entitled R&D in genetic engineering, cellular engineering, “Regulations on Supportive Measures for Developing enzyme engineering, biochemical engineering, and Biotechnology and Pharmaceutical Industry of bio-medicine; (2) follows closely the development in Shanghai”, with the following key proposals: the Human Genome Project, gene therapy and •The Municipal Government allocates special funds transgenic plants and animals; and (3) promotes the annually to support biotechnology and pharmaceutical application of biotechnology in agriculture, medicine, projects; energy and environmental protection. •The Shanghai Municipal Government supports R&D, industrial scale-up and technology improvement of 2. Shanghai’s Biotechnology Policy biotech-related projects; The Shanghai Municipal Government has issued a •Preferential policy and financial supports; series of policy guidelines to boost the local biotech •Provision of preferential and low-interest loans to the industry. The city government: biotech industry. •Encourages original innovation in science and In the “Regulations on accelerating the developing of technology especially the biotech enterprises; hi-tech industries in Shanghai” issued in 1997, the •Promotes commercialization of achievements in Shanghai Government further reiterates the important science and technology; economic role of the biotech industry and has implemented the following measures to speed up the •Encourages biotech enterprises to increase their own growth of the industry: R&D input and technological innovation; •Encourage original innovation, and the integration of •Fosters investment atmosphere, improves intermediary industry with education and research; services, and creates multiple investment markets for •Encourage the introduction, assimilation and the biotech industry; innovation of advanced technology from overseas; •Gives the green light for the recruitment of skilled •Issue passage of legislatures to facilitate the talent; commercialization of R&D achievements in •Enhances Intellectual Property Rights (IPR) protection; biotechnology;

188 APBN • Vol. 7 • No. 5 • 2003 •Significantly boost investment in the biotechnology •Various domestic and foreign capital (including private and pharmaceutical industry, by increasing input from capital) is encouraged to establish venture capital both government and enterprises, cultivating the bodies. Approved venture capital companies can invest venture capital market and attracting international with all of their funds. capital; •Hi-tech achievements can be used as intangible assets •Strengthen the effort of talent recruitment; for the investment. •Improve the leadership for the commercialization. •For vocational hi-tech achievements to be converted, accomplishers can be granted corresponding equity, To accelerate the process of commercialization of profits or bonus depending on different conversion R&D achievements, in 1997, the Science and methods. Technology Commission of the Shanghai Municipal • Productive factors such as technology and Government issued “Regulation on the Promotions of management are allowed and encouraged to participate High-Tech Conversion by Shanghai Municipality”. The in the distribution of profits. regulation was further modified in 2000 to emphasize the government’s commitment to the opening market • Enterprises are encouraged to increase investment and commercialization of R&D achievements. The into technological development. Expenses from the publication and implementation of these policies has purchase of special and crucial testing equipment for greatly stimulated the processes of commercialization the development of hi-tech and new products can be expensed once or in several times after approval by and lead to continual improvement in the supporting financial and tax department. system of technology, law, finance, and start-up investment. • Foreign investors are encouraged to invest into The essences of the regulation are: hi-tech industry, to establish research institutes and to transfer advanced technology. •The city has established a certification system for the conversion of scientific and technological achievements, • The hi-tech projects with proprietary intellectual, after the certification by the authority, brought to Shanghai and a special-purpose organization is set up thereby to by the central governmental departments, other carry out certification of the aspects as technological provinces, overseas students and foreign scientists can level, market potentials, project risk and intellectual enjoy the same preferential treatment, e.g. interest property rights for local or introduced hi-tech refund, financial guarantee and government’s priority achievements home and abroad. of purchasing the products, as the local projects do • Shanghai Municipality has set up Shanghai Hi-tech • Scientists of universities and research institutes are Service Center to coordinate the certification for hi-tech encouraged to take up part-time jobs to participate in achievements conversion projects. The center offers the commercialization of hi-tech achievements or to ‘one-stop’ service that covers company registration, tax establish start-up. registration and the implementation of other preferential • All the certified hi-tech projects that meet the policies for certified projects. It is also responsible for condition to apply for patents and suitable to get fostering and instructing other intermediary protection with patents ought to apply for patents. organizations involved in the conversion of high-tech Shanghai Intellectual Property Right Bureau will finance achievements; collecting and disseminating scientific part of the patent application and maintenance fee for information to promote foreign and domestic the corporations and individuals in Shanghai that apply achievements, and to facilitate information exchange for the foreign and domestic invention patens. between academic and industrial circles; establishing channels of communication among scientific circle, • Shanghai Hi-tech Professional Qualification industrial circle and financial circle, and helping hi-tech Appraisal Committee is established, whose goal is to enterprises to be listed on domestic or foreign stock appraise and grant the qualification of engineers, exchanges. technicians and managers who make contribution in the conversion of hi-tech achievements in Shanghai, •Shanghai Municipality has also set up Shanghai and the qualification of intermediate service Technology Exchange to serve as a specialized equity organizations. Shanghai Talent Development Fund is market facing the country and the world. It provides established to finance the high-tech enterprises to attract services such as property right exchange and equity superior talents, and to assist senior executives in the financing for hi-tech projects, hi-tech enterprises and conversion of hi-tech achievements to solve specific growth enterprises. problems.

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H IGHLIGHTS OF B IOTECHNOLOGY IN SHANGHAI cientists in Shanghai enjoy an excellent chimpanzee genomic project, have successfully international reputation in the following areas of constructed the world’s first genetic map of Oryza sativa S research: structural and functional genomics, spp. Japonica, and participated in the completion of neurophysiology, tissue engineering, biochips, the the sequence of rice chromosome 4 in the International modernization of Traditional Chinese Medicines (TCM), Rice Genome Sequencing Project. and drug discovery. Neurophysiology Shanghai is known for its research in the areas of developmental neurobiology, neurogenetics, systems and behavior neurobiology, and cognitive neurobiology, particularly in molecular and cellular mechanism of brain development and functions. The study of TCM application in treatment for cardiovascular diseases and Alzheimer’s diseases has recently led to a number of breakthroughs. Tissue Engineering Shanghai was the first to study tissue engineering in the nation. It focuses at seed cells, biomaterials, Structural and Functional Genomics construction of tissue and organs. Special attention is paid to solving key issues in tissue engineering, with Shanghai’s genome program focuses on the the aim to establishing new theories and techniques structural and functional study of human genomics and pertinent to the field. The scientists have been successful agricultural genomics, as well as the development of platform technology for genomic study. In the quest for in regeneration of bone, cartilage, skin, cornea and discovering the original/new gene drugs and gene tendon, and were the first in the world to regenerate therapies for major human diseases, a number of genes cartilage of auricle-shaped in nude mice. Progress has related to single-gene diseases and multi-gene diseases been made on the repair of damaged joint cartilage, such as cancers and diabetes, have been identified and skin, tendon, and skull of higher mammalians with cloned, and their structures and functions studied. normal immune responses. Significant progress has been made in the replication and expression of hepatitis viral genes, genetic breeding Biochips of new varieties of crop, and developing new biological The biochips research in pesticides. A number of the Shanghai focuses on the applied scientists, who were involved in research of DNA chip, covering recent international collaborations, gene chips, protein chips, tissue have received accolades for chips, cell chips, chip-on-lab, and determining 30 percent of the one percent of human genome platform technology related sequencing in the Human Genome research. The current R&D Project. These Chinese scientists, emphasis is on diagnostic DNA also active members of the chips for cancer, hepatitis and viral

190 APBN • Vol. 7 • No. 5 • 2003 blood diseases, as well as the related database. Progress has been made in the manufacture and application of gene chips, diagnostic chips for major diseases, MEMS MAJOR FORCES technology based chips, chip-related instrumentations and software for data processing and analysis. Modernization of TCM OF BIOTECH Shanghai is one of the international centers for TCM research. Scientists, in several well-established research IN institutes/universities, have harnessed TCM with modern RESEARCH biology, chemistry and bioinformatics to create a modern TCM system, characterized as “establishment of the chemical nature of the medicine, the chemical SHANGHAI components and delineation of the disease-causing mechanism”. The research has led to milestone achievements in the construction of a comprehensive TCM informatics database for the screening and hanghai is the cradle for ’s biotechnology. It characterization of active ingredients of TCM herbs, and S has a glorious past in biology research, hall-marked their standardization. by the total organic synthesis of the world’s first biologically active protein, crystalline bovine insulin in 1965. Thanks to the continuing efforts made by several generations of scientists, Shanghai has established itself as one of China’s most important and sophisticated research heartland. The three tiers of R&D organization — universities, national or municipal research centers and research institutes/centers under the CAS, form the backbone of biotech research in Shanghai. Shanghai is currently home to seven biotech-related Drug Discovery national research centers, including the Chinese Shanghai leads the nation in basic and applied National Human Genome Center at Shanghai and the research, and the commercialization of new drugs. In National Center for Drug Screening. These national addition to the traditional sciences of medicinal centers focus primarily on genomics, new drug chemistry of natural compounds, organic chemistry of discovery and modernization of TCM. To fully realize drug synthesis, pharmacology, toxicology, and drug the R&D potential of Shanghai, the Science and design, the scientists have acquired advanced Technology Commission of the Shanghai Municipal knowledge in combinatorial chemistry and Government has re-structured a number of local biotech computational biology from recent international research facilities into nearly 20 municipal research collaborations. Applying computer-aided drug design, centers of excellence in 1994. They are the Shanghai informatics based combinatorial chemical banks, high New Drug Research & Development Center, the throughput screening, transgenic animal models for Shanghai Center for BioInformation Technology, the disease screening and gene chips, the scientists have Shanghai Research Center for Biomodel Organism, and identified a number of leading compounds with the Shanghai Biological Chip Engineering Research potential clinical applications. In addition, a Center and so on. The national research centers and comprehensive drug discovery system starting from the the municipal research centers aim to be on the cutting screening of leading compounds, identification of genes edge of the life sciences. They form a joint force to deal with new functions, drug targets and ADMET with the fundamental issues in basic research and speed (absorption, distribution, metabolism, elimination and up the process of commercialization and toxicity) assessment, to clinical trial, have been industrialization of biotechnology achievements, established. actively pursuing breakthroughs in the key areas. These

APBN • Vol. 7 • No. 5 • 2003 191 www.asiabiotech.com public centers are also platforms for domestic and international collaborations, and close communications. Shanghai is one of the most important life science STATE research bases of the CAS and houses a number of main research institutes. Most of these research institutes/ centers were set up in the 1950/60s and their research BIOTECHNOLOGY programs cover cellular biology, biochemistry, plant & physiology, neuroscience, entomology, pharmacology, the chemistry of natural products, the chemistry of PHARMACEUTICAL synthetic drug and drug design. In 1999, the CAS conglomerated its eight biotech related institutes and two research centers in Shanghai into a comprehensive INDUSTRY BASE research park, named the Shanghai Institute for Biological Sciences of the CAS, in a bid to consolidate the expertise of the member institutes and optimize (SHANGHAI) resource usage. This would provide a more ideal environment for innovative research in the life sciences. n 1996, the State Biotechnology & Pharmaceutical The new institute focuses on fundamental issues in Industry Base (Shanghai) was established at the human health, promotes basic and original research, I Zhangjiang Hi-tech Park, New Area, Shanghai. while at the same time, encouraging the application With a total area of 8 sq. km under construction, the and expansion of biotechnology, particularly in the fields base ranks biotechnology and pharmaceutical industry of new drug discovery and modern agricultural as its priority areas of development and strives to make biotechnology. The Institute is also an important training itself an attractive investment environment to research base for advanced biotechnology scientists. organizations, investors, technology intermediary Shanghai is also home to 45 universities, one-third service, and large foreign and domestic pharmaceutical of which offer undergraduate or postgraduate programs companies. By 2001, there are 34 GMP firms and 20 that are biotechnology related. The famous Fudan R&D organizations in the base. The base offers University, Shanghai Jiao Tong University, Shanghai specialized services such as GMP facility qualification Second Medical University, of and CRO. Traditional Chinese Medicine, the East China University of Science and Technology, and the East China Normal University, have solid foundations in traditional biotechnology and have recently made significant progress in modern biotechnology including genomics and proteomics. These universities award thousands of Ph.D. and MSc every year, and power the development of biotech in Shanghai with these new scientists. More detailed information on some of the research centers and universities are described under to the section “Biotechnology Research Organizations”.

Over the last six years, especially since the implementation of the Municipal Government’s “Focus on Zhangjiang” policy, the base has made significant progress in the improvement of facilities, investment climate, and technology transfer service. The environment is more optimized for innovation, start-ups, investment and services. It has formed a complete chain of biotech industry, which includes R&D lab, industry incubator, start-ups and listed enterprises. Among the more tangible achievements are:

192 APBN • Vol. 7 • No. 5 • 2003 • A few dozen large multinational and domestic pharmaceutical companies have set up factories or R&D labs in the base. Nearly 100 small/middle sized biotech ENTURE start-ups have also called the base home. V • With the seven organizations including the Shanghai Institute of Materia Medica of CAS, Shanghai National INVESTMENT Human Genome Center, and National Center for Drug Screening as its core members, a comprehensive drug he diversified capital markets, including seed funds discovery facility, consisting of 20 R&D units that owns primarily financed by the government, venture its own proprietary technology and is capable of T capital (VC), securities market, and bank loans, have performing innovative R&D is shaping up. largely fulfilled the financial needs of biotech firms at • A diversified capital market has been established. the various stages of their development, from initial R&D • The technology intermediary service is improving. to IPO. The base will continue to concentrate upon technology innovation, incubation and industrialization of commerciable research, as well as optimize the climate for start-up, investment and services. To achieve these objectives, it is determined to adopt the following strategies: • To increase capital investment; • To improve the innovation capability and standards of biotech and pharmaceutical industry; • To actively recruit local and overseas talent; Shanghai’s venture capital market has only a short • To accelerate information exchange within and history, but has come a long way in the last ten years, outside of the park; thanks to the joint effort of the government and industry. • To upgrade professional services; In 1992, the government set up the Shanghai Science and Technology Investment Corporation as a new • To enhance the protection of IPR; investment initiative in the technology industry. In 1999, • To speed up the process of customs clearance; and the government financed “Venture Capital Funds” to • To improve the service quality and efficiency of the attract private and institutional investment in the venture government organizations. capital market, through collaboration, joint venture, parallel investment and other forms of investment. As a By 2005 Zhangjiang will be one of the nation’s top result, within a short period of two years, venture capital hi-tech parks, with an innovative and educational has increased 16-fold to a total sum of 10 billion RMB environment and state-of-the-art technology. The Park (US$1.2 billion) in 2001. In addition, as Shanghai is is also striving to become a world-renowned center for growing into an international finance center, more and technology, industries and scholarships. more overseas capital pours into the Shanghai venture capital market. The number of foreign venture capital investment companies in Shanghai has risen to 100 this year and is still growing. At the initial stage of cultivating the venture capital market, the Shanghai Municipal Government, based upon careful assessment of the local situation, has paved the way for the establishment of a venture capital market through the setting up of venture capital companies and various seed funds. The government has also formed the “Investment Steering Committee” to guide strategically the maturation of the capital market. The

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government’s participation in the venture investment • Shanghai Mandarin Challenge Venture Capital Management Co. market obeys the natural rule of the market, and is within Ltd. an indirect capacity, e.g. by setting up seed funds and • Shanghai Pioneer Venture Management Co. Ltd. authorizing professional investment management • Acer Asia-Pacific Technology Investment Co. Ltd. companies to screen, invest and manage the investment • Vertex Management (Shanghai) projects. By doing so, the government has effectively • IDG Technology Venture Capital Group catalyzed the rapid growth of the venture capital market, and avoided direct interference on the market. • Shanghai Fortune Zoom Investment Co. Ltd. • Huaan Fund Management Co. Ltd.

• Venture TDF Shanghai Co. Ltd.

Future Measures Policy To launch research on VC policies within the innovation system of S&T development, with which to stimulate and guide the development of VC. And legislate the city’s statute As the market matures, the government has on venture capital in a timely correspondingly toned down its participation to allow manner, to encourage and direct the the market to develop on its own intrinsic force of development of venture capital and innovation and self-regulation. In the coming years, provides incentives to the investor; Shanghai will follow the principle of “Government and to provide an equitable provides overall direction; the market runs its own treatment to both domestic and course”, and continue its successful policy on venture foreign investors. capital. Capital Actively introduces overseas venture Below are a tabulated summary of the future System capital to increase the size of the measures undertaken by the Shanghai Municipal fund to a critical threshold and to Government and a list of some of the Shanghai-based form a market of multi types of companies on venture investment. venture capital and diversified sources List of Some of Shanghai-Based Companies on Venture Investment Operation Continually improve the • Shanghai Science & Technology Investment Corporation Mechanism management structure of the venture • Shanghai Science & Technology Investment Co. Ltd. capital corporations, and help to remove the deficiency existing in its • Shanghai Venture Capital Co. Ltd. management mechanism and • Shanghai Lianhe Venture Capital Co. Ltd. functioning. • Shanghai NewMargin Ventures • Shanghai Science & Technology Investment Co. Ltd. • Shanghai Pudong Venture Capital Co. Ltd. • Zhangjing Venture Capital Co. • Shanghai Caohejing Venture Capital Co. • Shanghai Wisdom Valley Venture Capital Co. Ltd. • Shanghai Zijiang Venture Capital Co. Ltd. • Shanghai Pacific Ocean Technology Venture Capital Co. Ltd. • Shanghai Synergy VC Management Co. Ltd. • Shanghai Star River Digital Investment Co. Ltd. • Fullgoal Fund Management Co. Ltd.

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TECHNOLOGY INTERMEDIARY AGENCY

ver the last 20 years since China opened her doors Below is a list of some major technology agencies of O to the outside world, the Shanghai technology biotechnology in shanghai intermediary market has grown from scratch into a fully-fledged support system indispensable to the rapidly • Shanghai Intellectual Property Service Center developing biotech and other hi-tech industries in www.ssip.com.cn Shanghai. The service has: • Shanghai New Hi-tech Transfer Center • facilitated information exchange among government, www.hitec.net.cn research institutes, universities and enterprises; • Shanghai Technology Stock Exchange www.saviaq.com • sped up the commercialization and industrialization of scientific and technological achievements; • Shanghai Patent & Trademark Law Office www.sptl.com.cn • assisted the transformation of government function from a market participant to a market regulator, • Shanghai Technical Transfer Exchange expanded the functions of the city; and www.stts.sh.cn • empowered Shanghai’s progress in economy, science • Shanghai Technology Innovation Center and technology. www.tic.stn.sh.cn • Shanghai Torch Hi-tech Industry Development Center www.innofund.stcsm.gov.vn

• Shanghai Foreign Investment Network Information Center www.investment.sh.cn • Shanghai Science and Technology Consulting Service Center www.shconsult.com.cn Shanghai intermediary services for biotechnology is supported by biotech-related associations, Shanghai • Shanghai Pudong Overseas Talent Center Productivity Promotion Center and its branches, www.pudongs.com technology enterprise incubators, technology transfer • Shanghai Pudong Productivity Center centers, technology stock exchanges, technology www.sppc.org.cn consultation and assets evaluation centers that provide • Shanghai CaoHeJing Hi-Tech Park evaluation of intangible assets. These agencies generally Innovation Center satisfy the need for intermediary services requested by www.scic.online.sh.cn clients of various types and abide by international • Science & Technology Park customs and government regulations to provide a wide http://sp.fudan.edu.cn range of services. The services include registration of • Shanghai University Science and Technology Park new drugs, GMP certification, CRO services, technology www.shu.edu.cn/kjyq stock exchange, commercialization of technology achievements, enterprise incubation, venture capital, • Shanghai Jiading Incubator Park www.shjd-rspark.com evaluation of intangible assets, personnel recruitment, registration of trademark, taxation consultation, • Network of Technology Incubator in Shanghai www.tic.stn.sh.cn/fhq_net.htm advertisement, customs declaration, and legal, accounting, auditing, consultation and information • Shanghai International Business Incubator SHIBI services. www.tic.stn.sh.cn/fhq.htm

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