SECTION 3: U.S.-CHINA LINKS IN HEALTHCARE AND BIOTECHNOLOGY Key Findings • Longstanding problems in China’s public health system, in- cluding funding shortfalls and bureaucratic weaknesses, have undermined the country’s epidemiological preparedness. These vulnerabilities are compounded by a political atmosphere that silences and punishes healthcare workers who raise concerns about potential disease outbreaks because the Chinese Com- munist Party (CCP) fears such disclosures could undermine so- cial stability. As a result, the risk of another epidemic in China will remain heightened even as Beijing attempts to improve its public health system in the wake of the novel coronavirus (COVID-19) pandemic. • Chinese regulators have officially encouraged foreign participa- tion in China’s healthcare sector but maintain regulatory barri- ers that disadvantage foreign firms and hinder free competition. Most notably, Beijing has placed increasingly tight restrictions on foreign firms’ ability to access and share healthcare-related data collected in China. • The Chinese government has made the collection of domestic and foreign healthcare data a national priority and has sought access to U.S. healthcare data through both licit and illicit means. Chinese entities have gained access to U.S. healthcare data through investment in U.S. firms, sales of equipment and services, and partnerships with U.S. universities and hospitals, even as Beijing prevents U.S. entities from gaining reciprocal access to Chinese data. Chinese state-sponsored groups have also obtained U.S. healthcare data and targeted COVID-19 re- search by hacking U.S. healthcare providers and businesses. • Through its scientific talent recruitment programs, the Chinese government has systematically targeted the U.S. research com- munity, particularly participants in the biological and medical sciences. Although there are many benefits to research coopera- tion, Beijing has used financial inducements and other means to encourage foreign researchers to establish shadow laboratories in China that mirror federally funded research conducted in the United States and facilitate the transfer of commercially and medically valuable research to China. • While China has made significant improvements to its health- care system, substantial shortfalls remain. In particular, China lacks a long-term care infrastructure for its aging population and its healthcare system is underequipped to handle challeng- es posed by the rise in chronic disease. (293) 294 • China’s policymakers are making major efforts to improve the quality and affordability of healthcare, prioritizing innovation in technologies and treatments to manage rising chronic disease. Prior to the outbreak of COVID-19, infectious disease monitor- ing and prevention have received comparatively less attention. Recommendations The Commission recommends: • Congress enact legislation to require ancestry and health test- ing services to (1) require explicit consent from customers to sell, lease, or rent to any party individual data that are aggre- gated for the purposes of research; and (2) disclose to customers any parent company or subsidiary relationship. • Congress establish a new U.S. national laboratory focusing on biotechnology or designate an existing U.S. national laboratory to focus on biotechnology. • Congress consider establishing a “Manhattan Project”-like ef- fort to ensure that the American public has access to safe and secure supplies of critical lifesaving and life-sustaining drugs and medical equipment, and to ensure that these supplies are available from domestic sources or, where necessary, trusted allies. Such a project would supplement the recommendation the Commission made in its 2019 Annual Report that Congress hold hearings with a view toward enacting legislation requir- ing the U.S. government to procure medicines only from U.S. production facilities or from facilities that have been certified compliant with U.S. standards. Introduction The CCP views its ability to deliver high-quality healthcare as an important pillar of its continuing legitimacy, especially as China’s population ages and chronic disease is on the rise. Developing new healthcare technology not only helps China improve its strained healthcare system but also promises significant economic gains— another crucial component of CCP legitimacy. As such, China’s gov- ernment seeks to position China as a global leader in healthcare innovation. Chinese policymakers have set ambitious targets for im- provements to the healthcare system and view the development of a strong domestic biotechnology (biotech) sector, a digital health eco- system, and precision medicine capabilities as key means to achieve these goals. These priorities also align with Beijing’s industrial pol- icy goals, and Chinese economic planning documents identify the development of biotech, artificial intelligence (AI), and precision medicine as areas where China wants to move up the value chain. Beijing’s efforts to improve the quality of China’s healthcare sys- tem should present a range of opportunities for productive U.S.-Chi- na engagement. Instead, recent developments in China’s healthcare system typify Beijing’s asymmetric vision for economic development. Beijing has displayed only a limited willingness to allow foreign com- petition in its healthcare sector, collaborate on scientific research in an open and fair way, or share crucial public health information; instead, it has prioritized the development of its domestic health- 295 care sector at any cost. Even as it erects high barriers to foreign en- try, Beijing has benefitted from the openness of the U.S. healthcare market and gained access to valuable talent, technology, and data. The CCP has also exploited vulnerabilities in the U.S. scientific re- search ecosystem to acquire and transfer new biomedical discoveries and innovative treatments. The Chinese government continues to prevent and even punish sharing of vital public health information under the guise of maintaining social stability. The COVID-19 pan- demic, which has infected tens of millions of people and sent the global economy into a recession, has demonstrated the worldwide ramifications of Beijing’s policy priorities. This section reviews recent developments in China’s domestic healthcare and public health systems, including the vulnerabilities revealed by the COVID-19 pandemic and policy challenges in de- livering high-quality healthcare to an aging population. It also de- scribes linkages between the U.S. and Chinese healthcare systems, each country’s policies governing access to valuable and sensitive healthcare data, and the risks China’s scientific talent recruitment programs pose to federally funded research in the biological and medical sciences. This section is based on the Commission’s May 2020 hearing on “China’s Evolving Healthcare Ecosystem: Challeng- es and Opportunities,” contracted research, consultations with gov- ernment officials, industry experts, and academics, and open source research and analysis. China’s Healthcare Aims Tempered by Long-Term Problems The Chinese government’s healthcare policy goals are aimed at building the capacity to meet the growing demand for high-quality healthcare services from China’s large and rapidly aging population. Beijing is therefore pursuing a wide range of ambitious goals to spur the transformation of its currently underequipped healthcare system to meet this demand. Beijing is also encouraging investment in emerging-technology-based healthcare solutions such as biomedi- cine, telehealth, and AI in order to develop precision medicine capa- bilities that can mitigate the healthcare system’s challenges. Chronic Diseases and Aging Population Strain China’s Healthcare System Over the past decade, China has made significant progress in re- ducing the burden of diseases and disabilities caused by maternal, neonatal, and communicable conditions. For example, China’s infant mortality rate fell from 13.1 percent in 2010 to 5.6 percent in 2019 and the maternal mortality rate fell from 30 deaths per 100 thou- sand to 18.3 deaths per 100 thousand over the same period.1 Simi- larly, incidence rates of common communicable diseases such as vi- ral hepatitis, measles, and malaria have all decreased significantly.2 As people live longer, however, the burden of chronic disease has risen, becoming a significant focus of Chinese healthcare policy. As of 2018, 270 million people in China were estimated to suffer from hypertension, and 116.4 million lived with diabetes as of 2020.* 3 * China now has the world’s largest population of diabetics, though in percentage terms the burden of the disease is still slightly less than in the United States—10.9 percent of adults in China compared to 13.3 percent in the United States as of 2020. International Diabetes Feder- ation, “IDF Western Pacific Members: China,” May 14, 2020; International Diabetes Federation, 296 A variety of lifestyle and environmental factors, such as smoking and pollution, have also contributed to the rising incidence and le- thality of chronic disease. As of 2017, high blood pressure, smoking, high-sodium diets, and particulate matter pollution were the four greatest health risk factors and leading causes of premature death in China.* 4 China’s healthcare system is underequipped to handle the grow- ing burden of chronic disease. It is over-reliant on urban hospitals to provide basic care, and the primary care system, which should play a significant role in chronic