China's biomedical sector is transforming itself from a manufacturing base to an innovation hub, investing billions of dollars and setting up innovation centers in a bid to catch up with the west by the end of the 12th Five-Year Plan, according to Lux Research, which provides advice and ongoing intelligence for emerging technologies.

The R&D investments—reaching a cumulative $160 billion last year and close to surpassing Japan's spending—have increased pharmaceutical-related patent filings, moving China past the U.S. and Japan. China has also established 15 new drug innovation centers and clusters, with super clusters forming around five major provinces.

"Rising income levels and a shifting demographical landscape are creating a faster growing market space for innovative biomedical products in China," said Kevin Pang, Lux Research director.

"While the Chinese domestic market provides ample room for all players now, Chinese pharmaceutical companies will naturally look outside to lucrative markets in North America and Japan over time," he added.

Lux Research analysts examined the state of China's biomedical sector, with particular attention to its R&D. They found sustained investment is key to rapid growth, the Major New Drug Innovation Program (MNDIP) is driving innovation, oncology has received the most attention and timely changes to patent laws are spurring growth.