A Drug Company’s Forced Sales, and a Family Feud in Shanghai

By Doug Young & Rene Vanguestaine

The recent decisions by WuXi Biologics and WuXi AppTec to sell their overseas assets underscore a profound shift in global pharmaceutical manufacturing dynamics, largely spurred by the Covid-19 pandemic. When the virus first appeared, many Western nations suddenly realized their risky dependence on China for critical medical supplies and pharmaceutical products. In response, both the U.S. and Europe have moved aggressively to reshore vital medical manufacturing capabilities, reshaping the global healthcare supply chain.

The strategic choices by the WuXi family — WuXi Biologics selling its European vaccine production center to Merck and WuXi AppTec divesting its overseas cell and gene therapy operations — represent more than just routine transactions. They demonstrate a proactive effort to address escalating national security concerns and acknowledge the fundamental shift in the geopolitical climate. By selling these assets now, WuXi may be seeking to secure better terms than it would receive if forced divestitures were to occur under mounting regulatory pressure.

Western apprehension is far from hypothetical. During the pandemic, countries scrambled to obtain essential medical supplies and medications, highlighting the dangers of globalized supply chains. This experience has fundamentally altered how Western governments view foreign ownership of critical healthcare infrastructure. Concerns have extended beyond mere supply chain disruptions to include potential technology transfer and data security risks, especially in fields like biologics and gene therapy.

China’s relatively subdued response to these biotech divestitures is notable, especially given its forceful defense of TikTok in the face of similar national security concerns.  One explanation may be Beijing’s acknowledgment of its own role in pandemic-era supply chain vulnerabilities, or its recognition that healthcare sovereignty is now widely viewed as a national security imperative. Another possibility is that social media platforms such as TikTok are deemed more central to China’s soft power strategy than overseas biotech facilities.

Family Business Drama

Meanwhile, a billion-dollar family feud at a Shanghai-based company called Jiacheng offers vital lessons for investors in Chinese family-run enterprises. The dispute, which revolves around succession plans between the founder’s son and his stepmother, has resulted in a freeze on a luxury villa compound reportedly valued at over a billion dollars, plus parallel legal proceedings in both the British Virgin Islands (BVI) and Shanghai. This case highlights the vulnerabilities that can emerge when generational succession meets complex corporate structures.

Chinese entrepreneurs commonly register companies in offshore jurisdictions such as the BVI or the Cayman Islands — even if the actual business is located in China. This arrangement allows them to list on foreign markets, including U.S. exchanges, and to maintain some personal wealth outside China’s reach. Technically, investors in these “Chinese” companies often hold shares in a BVI or Cayman entity that controls the China-based operations. While this structure can be advantageous for financing and tax planning, it becomes problematic during disputes.

The Jiacheng saga shows how such complexities can cause serious legal uncertainty. Despite the company’s offshore registration, Shanghai courts have asserted their authority over assets nominally owned by the BVI entity. This challenges the common assumption that offshore registration offers robust protection from Mainland legal judgments. International investors, in particular, may see their theoretical safeguards undermined if Chinese courts step in — especially if the underlying assets are physically located in China.

Enforcement also poses a major challenge. Even if an offshore court rules in favor of an investor, it can be all but impossible to seize or control real estate and other assets within China. Such scenarios underscore the risks for global investors who may discover that, in practice, physical assets on the Mainland remain beyond their reach.

Looking Ahead

Both the biotech divestments and the Jiacheng family feud underscore the importance of assessing geopolitical trends and corporate governance structures when investing in Chinese companies. As national security concerns intensify, more Chinese firms in sensitive sectors may proactively offload overseas assets to forestall regulatory crackdowns. At the same time, closely held family enterprises in China face growing scrutiny around their governance practices and succession arrangements. For investors, navigating this landscape requires a clear-eyed view of both international politics and the particular dynamics of Chinese corporate ownership.

About China Inc

China Inc by Bamboo Works discusses the latest developments on Chinese companies listed in Hong Kong and the United States to drive informed decision-making for investors and others interested in this dynamic group of companies.

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