China healthcare sector hit by regulation, biotech uncertainty

The sector stayed Overweight, supported by innovation and global deal activity.

China’s healthcare sector is facing pressure from tighter domestic regulation and rising uncertainty in cross-border biotech activity, according to UOB Kay Hian in a Greater China sector update.

The HSHCI fell 4.0% between 15 April and 29 May, underperforming the Hang Seng Index, which declined 3.0% over the same period.

UOB Kay Hian said recent weakness reflects both broader technology-related capital market volatility and a more restrictive policy environment in healthcare.

Despite near-term regulatory and policy headwinds, the brokerage maintained an Overweight rating on the sector, citing innovation and globalisation as key long-term growth drivers for Chinese healthcare companies.

On the regulatory front, China has tightened its anti-corruption campaign in healthcare and introduced new rules for pharmaceutical sales representatives.

UOB Kay Hian said this is shifting industry practices towards compliance-led, evidence-based promotion, away from relationship-driven sales models.

It added that the changes are likely to support more transparent and innovation-driven companies, whilst creating near-term pressure for firms reliant on traditional sales structures.

In internet healthcare, new guidelines for online prescription drug sales introduce stricter compliance requirements, including tighter prescription verification and limits on promotional practices.

The brokerage said this may raise compliance costs and weigh on short-term demand, whilst supporting longer-term industry consolidation.

UOB Kay Hian also highlighted rising uncertainty in cross-border biotech activity. Chinese biotech out-licensing reached $60b in the first quarter (Q1) of 2026, up 73% year on year, accounting for nearly half of 2025’s total deal value.

It noted that potential US restrictions on outbound investment in sensitive biotech areas, alongside possible Chinese controls on technology transfers, could increase uncertainty for licensing transactions.

Separately, Innovent Biologics entered a strategic collaboration with Pfizer covering 12 early-stage oncology assets, with total potential value of up to $10.5b including milestones and royalties.