COINS Act and China’s New Biotech Export Rules: Which China Deals Still Work

The Short Answer

Two rules published a week apart in October 2026 change how China biotech deals are structured. In the US, the COINS Act proposal from the Treasury Department would prohibit US persons from investing in Chinese companies that use biological systems to make medicines, from antibodies to cell and gene therapies, or that build biotech tools such as sequencing and lab automation. In China, Announcement No. 48 from the Ministry of Commerce (MOFCOM) and the Ministry of Science and Technology proposes export controls on five biopharma technologies and already requires their export to be registered.

Neither rule stops the main channel for Chinese innovation: licensing a drug candidate for cash, milestones and royalties. What changes is everything around it. Equity in a Chinese licensor, Chinese equity in a US NewCo, profit-sharing co-development and the transfer of whole technology platforms are now where deals can fail. Structures that worked in 2025 need a second look before they are signed, and deals with an equity component have a window that likely closes around the end of the first quarter of 2027.

Key Dates

The US Rule: What the COINS Act Proposal Covers

Since January 2, 2025, the US Outbound Investment Security Program has prohibited, or required notice of, US investments in Chinese companies working on semiconductors, quantum technologies and AI. The Comprehensive Outbound Investment National Security (COINS) Act, enacted on December 18, 2025, put the program into law, added hypersonics and high-performance computing, and let Treasury add sectors that support a country of concern’s military, intelligence, surveillance or cyber capabilities. Biotechnology is the first sector Treasury has proposed to add on that authority.

The program is already being enforced. In October 2026 Treasury announced its first civil penalty: $200,000 against a US investment firm that failed to notify Treasury of a roughly $92,000 investment by a Chinese fund it controlled in an AI and robotics company.

Which biotech activities are covered

The proposal covers the development, engineering or use of a biological system to produce or modify:

• Pharmaceutical compounds: small molecules, polymers, vaccines, blood products, allergenics, cell and gene therapies, monoclonal antibodies and other recombinant therapeutic proteins, and their delivery mechanisms;
• certain agents and toxins, energetic materials, novel functional materials and biofuels.

It also covers brain-computer interfaces, certain biomanufacturing equipment, and tools such as biological sequencing, certain flow cytometers, cell sorters and LC-MS instruments, bioinformatics software, and lab automation and cloud labs. Unlike AI and semiconductors, biotech has no notification tier: every covered biotech investment would be prohibited.

The key term “biological system” is not yet defined, and Treasury has asked for comment on it and on whether “pharmaceutical compounds” should be limited to advanced or frontier technologies. Sidley reads the draft as covering antibodies, bispecifics, ADCs, recombinant proteins and cell and gene therapies; mRNA and oligonucleotides if produced biologically; and chemically synthesized small molecules possibly not at all. AI drug discovery, bioinformatics and sequencing would be covered whatever the modality.

Which companies count as Chinese

The rule applies to investments in a covered foreign person engaged in a covered activity. Countries of concern are China, including Hong Kong and Macau, and, under the COINS Act, Cuba, Iran, North Korea and Russia, plus Venezuela under the Maduro regime, which Treasury says no longer qualifies. A company is covered if it is organized or mainly based in one of those countries, if persons from them hold 50% or more of its equity, votes or board seats, or if they control it, including by contract. There is no exclusion for US-organized companies, so a Cayman holding company with a Hong Kong subsidiary, or a Delaware company controlled from China, can be covered. Chinese-origin intellectual property or royalty income alone does not make a company covered.

Which transactions are covered

Covered transactions include acquiring equity or contingent equity such as warrants and convertible notes, loans with equity-like rights, joint ventures, greenfield investment, certain fund investments, and knowingly directing such a deal. Treasury uses a plain-English test for a joint venture, a contribution of capital or assets and a sharing of profits and losses, so no new entity is needed and a joint venture can exist anywhere, including in Delaware.

Exceptions, penalties and timing

• Exceptions. Listed shares are excepted if the investor has no rights beyond standard minority protections, as are fund commitments of up to $2 million. The $50,000 de minimis exception applies only to notifiable deals, so it does not help in biotech. Binding, uncalled commitments made before the effective date are excepted, but an ordinary signed agreement is not enough on its own.
• Exemptions and feedback. Treasury can grant national-interest exemptions, with US public health an express factor, though Sidley expects them to be rare. A new feedback process lets parties to a real deal ask Treasury’s view once the terms are in a binding document; the answer is not binding.
• Penalties. Civil penalties of up to the greater of $250,000, adjusted for inflation, or twice the transaction value, and Treasury can order divestment. Treasury tests what the investor knew or would have learned through a reasonable and diligent inquiry.
• Timing. Comments are due by December 7, 2026. The COINS Act requires final regulations by about March 13, 2027; Sidley expects the rule to take effect around the end of the first quarter of 2027. It is not retroactive, but every closing and equity tranche after the effective date is tested on its own.
• Licensing could follow. The Biotech Investment National Security Act, introduced in June 2026 (H.R. 9102 and S. 5316), would extend the rules to licensing certain technology from covered foreign persons. It has not been enacted.

The China Rule: What Announcement No. 48 Covers

On October 16, 2026, MOFCOM and the Ministry of Science and Technology published Announcement No. 48, a draft revision of China’s Catalogue of Technologies Prohibited and Restricted from Export under the Foreign Trade Law and the Technology Import and Export Administration Regulations. It proposes adding 40 technologies: 23 in artificial intelligence, 12 in photovoltaics and 5 in biopharmaceuticals. MOFCOM’s spokesperson said 14 of the 40 would be prohibited from export and the rest restricted. China already prohibits the export of human cell cloning and gene editing technology, added in its December 2023 revision; the new draft reaches the platforms that make Chinese biotech companies valuable licensing partners.

The five biopharma technologies

Two definitions do most of the work. A platform is a reusable set of underlying technologies that can support several drugs; the process for developing a single drug is not a platform. A target is wholly new if it has not been publicly disclosed anywhere in the world, and Morgan Lewis notes that an unpublished patent application does not count as disclosure.

Registration before export, starting now

The draft list is not yet law, but registration is. From October 16, 2026 until the revised catalogue takes effect, a Chinese technology exporter must register on MOFCOM’s technology trade system before exporting any listed technology. Registration covers four cases:

1. assigning ownership of the technology abroad, such as an IP assignment;
2. licensing the technology for use abroad;
3. a change that makes a foreign company the owner or actual controller of the technology in China;
4. other cases MOFCOM specifies.

Exports that have started but are not finished are included, so a signed deal with deliveries still to come is not exempt. The filing records the parties, destination, technology, intended use and estimated value. Registration on its own is not an approval and does not bring the draft prohibitions into force, but it gives MOFCOM a full view of the deals in progress.

How licensing is treated

The announcement says licensing models that do not transfer ownership will get facilitation such as automatic licensing. Morgan Lewis reads the two platform prohibitions as aimed at transfers of ownership, so licensing a product, or outsourcing research or manufacturing to a Chinese company that uses its platform, falls outside them, and products made with listed technology are not controlled. How automatic licensing will work in practice still needs clarifying. For technology that ends up restricted, the existing process applies: a letter of intent before substantive negotiations, and a contract that takes effect only when the export license is issued.

The draft also raises a new question for acquisitions. Treating a change of owner or actual controller as an export means a foreign buyer of a Chinese biotech may now need to register even if the Chinese company keeps legal title to its technology, and how the platform prohibitions apply to such share deals is unresolved.

Which China Deal Structures Still Work

Taken together, the two rules sort the common structures into four groups. The assessment below applies the US proposal and China’s draft as published; both may change before they are final.

Two patterns stand out. First, cash beats equity: a license paid in cash and royalties is the one structure that is clean on both sides, as long as it does not move a listed platform out of China. Second, the NewCo model needs redesigning, not abandoning. A US NewCo that licenses a Chinese asset for cash and royalties, with no Chinese equity, board seat or profit share, avoids the joint-venture problem; Morgan Lewis cautions, though, that simply swapping equity for cash may leave joint-venture questions open if profits are still shared. Our NewCo blueprint and guide to pharmaceutical licensing agreements explain these structures in more depth.

If You Are Not a US Company

The US rule applies to US persons: US citizens and permanent residents, US companies and their foreign branches, and anyone in the United States. US parents must also take all reasonable steps to stop foreign companies they control from making prohibited deals, and US persons may not knowingly direct them. A European, Swiss, Japanese or other non-US licensee or investor is outside the US rule unless a US person is involved, for example a US subsidiary, US executives or board members who direct the deal, or US investors in the vehicle. Mapping those touchpoints early is part of structuring the deal.

China’s rules apply whoever the foreign recipient is. A Swiss licensee of a Chinese cell therapy platform needs the Chinese licensor to register just as an American one does. For Chinese companies looking for partners and capital outside the US, our guide to China biotech investors covers the funds active on both sides.

What to Do Now

US licensees and investors

• List pipeline deals that include licensor equity, warrants, milestone-linked share purchases, NewCo equity or profit sharing, and plan to close them before the rule takes effect. Test each later tranche separately.
• Add a change-in-law clause that replaces equity with cash if the shares cannot lawfully be issued or acquired, and check that the cash version does not still look like a joint venture.
• Prefer upfront, milestone and royalty payments to profit-and-loss sharing, and keep development decisions with the licensee.
• Keep a written diligence file on each Chinese counterparty. Sidley advises assuming that essentially every innovative Chinese drug developer is a covered foreign person.
• Comment by December 7 if the rule would block a deal you need; comments are public.

Chinese licensors

• Check whether any part of a deal transfers a listed technology, such as a platform, new-target discovery work or pathogen modification, and register before export, including for deals already under way.
• Separate product rights from platform rights in the license and in the technology transfer plan.
• Run a worldwide prior-publication check on targets before transferring discovery work.
• Plan for cash consideration in deals with US partners, and close any equity element before the US rule takes effect.
• Comment by November 15 if the draft affects your business.

NewCo sponsors

• Follow the technology: what is licensed, what is contributed, and whether a later option would require assigning a listed platform, which could make the option worthless.
• Make sure the license and support arrangements let affiliates and contract manufacturers use the technology, with step-in rights if the Chinese party cannot perform.
• Decide who holds equity. A Chinese licensor with equity and a board seat is the structure the US proposal treats most harshly.

In every deal document

• Who registers in China, what evidence the buyer receives, and which steps come before disclosure, signing and closing.
• Conditions that separate a required registration from a discretionary license, a realistic long-stop date, and remedies if rights or support cannot lawfully be provided.
• Payments tied to rights that can be delivered separately, and representations on ownership and filing compliance backed by technical evidence.

Our cross-border term sheet guide and due diligence checklist cover the rest of the negotiation.

BIOSECURE and Other Rules

• BIOSECURE Act. Enacted with the COINS Act, it restricts US federal procurement from designated biotechnology companies of concern; the first list is due by December 18, 2026. The COINS proposal also adds the BIOSECURE list and the Defense Department’s 1260H list to its restricted-party triggers. Our BIOSECURE Act analysis explains the timeline.
• Human genetic resources and data. China’s rules on clinical samples and data apply separately from export controls, and an exclusion under one does not clear the other.
• Existing technology-export filings. Even unrestricted technology licensed abroad needs a contract registration in China; our guide to in-licensing from China covers the steps.

What This Means for China Deals

China has become big pharma’s largest external source of new drug candidates. IQVIA found that 40% of the assets in-licensed by large pharma companies in 2025 came from China, and that the announced value of licensing deals for Chinese-originated assets reached $92 billion in the first half of 2026, already 88% of the 2025 total. Neither rule targets that flow directly, and we do not expect it to stop.

We do expect four shifts. Deals will lean more on cash: larger upfront and near-term milestone payments in place of equity for the licensor. Regional splits, in which the Chinese partner keeps Greater China and licenses the rest of the world, will become even more common. NewCos will be redesigned as cash-and-royalty license vehicles or financed by investors outside the US. And deals with an equity component will try to close before the US rule takes effect. Our China out-licensing tracker and biotech licensing deal tracker will show how the year’s transactions respond.

The Bottom Line

The COINS Act proposal and Announcement No. 48 do not close the door on China biotech deals. They close some structures, chiefly US equity in Chinese companies and the export of whole platforms, and leave the core licensing model open. The companies that do best over the next six months will check every live deal against both rules now, close equity-linked deals while they still can, and design new deals around cash, clear decision rights and technology that can lawfully leave China.

Vision Lifesciences is one of the leading cross-border business development and licensing advisory firms in life sciences, with teams in Hong Kong, Shanghai, Zurich and Chicago. We structure licensing, partnership and NewCo transactions between China, the US and Europe so that they work under both rules, alongside each party’s US and PRC counsel. If you have a China deal in progress, talk to our team.

This guide summarizes proposed rules as of November 1, 2026 for business planning. It is not legal advice, and both rules may change before they are final.