HONG KONG -- At 28, Dai Wenyuan quit his job developing artificial intelligence software for Chinese internet giant Baidu to launch his own company. It was a smart move: his AI start-up quickly attracted an initial $4 million investment from Sequoia Capital China in 2015.

Three years later, Dai's company is capturing attention for developing a medical tool that uses AI to predict whether patients are at risk of developing diabetes. His company, 4Paradigm, said its accuracy rate was 88%.

Key to that success is access to reams of patient data. 4Paradigm's AI software scanned medical information -- including gender, blood sugar levels and weight -- collected from 170,000 patients by researchers at Shanghai's Ruijin Hospital. From there, it used machine learning to predict which patients were most at risk of developing the disease.

Dai says that as the company refines its methodology, the techniques can be applied to other diseases -- from heart disease to hyperlipidemia and kidney disease.

"Our mission is AI for everyone," Dai said.

Dai is among the scores of engineers and computer scientists who are combining IT and big data to identify people at risk of developing diseases, then using that information to make early diagnoses and plan the best treatment.

The field is booming in China, in large part because researchers have access to patient data that would be off-limits in other countries.

"China has a very good chance to lead the world in biotech because of the data," Dai said. "A lot of foreign scientists want to apply to work in China because of the [availability of] data."

Beijing has identified the pharma and biotech sectors as two main pillars of future growth as China shifts away from the export-led manufacturing that has left its skies yellow and its waterways polluted. Now, some in the U.S. worry that China could soon eclipse it in key areas such as predictive medicine, gene editing and stem cell research.

"A lot of foreign scientists want to apply to work in China because of the [availability of] data" Dai Wenyuan, founder of 4Paradigm

China has some distinct advantages. Scientists on both sides of the Pacific believe early detection and treatment for diseases such as cancer will come from applying AI and machine learning to the personal health data of large numbers of people -- and no country on earth has more such data with fewer constraints on access to it than China.

"The bottom line is whoever has the largest, most diverse data sets of different populations wins the day," Edward You, a special agent in the FBI's Biological Countermeasures Unit, told a congressional hearing in Washington last year. That committee was looking into the potential threat that Chinese biotech could pose to the U.S.

To accelerate growth in the sector, China introduced a swifter regulatory system in 2017 that expedites approvals for innovative drugs. Pharmaceutical companies are encouraged to focus on high-priority diseases and then manufacture the treatments locally.

Many scientists believe the next generation of medical breakthroughs will come from what Kenneth Oye, director of the Program on Emerging Technologies at the Massachusetts Institute of Technology, refers to as the blurring of the lines between information technology, biotechnology and "the great conjunction of DNA sequencing, data, pattern recognition and gene editing."

This big idea has translated into an investment boom. Last year, biotech startups in China, broadly defined, raised almost $30 billion, according to data from McKinsey. And while venture inflows in other Chinese tech sectors have slowed, $32 billion was raised in the first half of this year, suggesting that 2018 will break last year's record, Beijing-based merchant bank China Renaissance calculates. International private equity firms such as General Atlantic and Warburg Pincus have also become big investors in the sector.

Building a U.S.-style model

There is also a darker side to Chinese life sciences, however. China doesn't have the same level of concern about personal privacy as the U.S., and there are far fewer constraints on human trials. Moreover, the scandal now raging on social media in China over unsafe vaccines is merely the latest in a series of such scandals involving tainted medicines and contaminated foodstuffs.

Of even greater concern is the fact that leading-edge research in China in gene editing has the potential for malign purposes. One of the great hopes for gene editing is that it will allow doctors to tweak the DNA of so-called bad gene babies to prevent susceptibility to disease and congenital handicaps. But what is the definition of a "bad gene" baby? And who gets to decide?

Those questions were thrust into the limelight in April 2015, when a team of researchers in China announced they had used a cutting-edge gene editing technique known as CRISPR/CAS-9 to alter the DNA of human embryos. Though the experiment itself was a failure, scientists in the West were swift to condemn the attempt on ethical grounds. The National Institutes of Health in the U.S. responded with a statement that said: "The concept of altering the human germline in embryos for clinical purposes ... has been viewed almost universally as a line that should not be crossed."

At least nine gene editing studies for various forms of cancer are underway in China, including for lung, bladder, cervix and prostate, some of which are using human patients. Meanwhile, there are four gene editing cancer studies active in the U.S., two of which are seeking human participants, according to clinicaltrials.gov, a site run by the U.S. National Library of Medicine.

Mainland researchers who have studied and worked in the U.S. have helped China build an ecosystem modeled on the American template, with the same sort of close relations between government, academia and private companies.

Funding is also plentiful from public pockets, but that government money doesn't come only from Beijing. It also comes from local governments eager to see their region make the transition from polluting activities such as mining and manufacturing to more environmentally friendly, higher value added activities.

Shanghai and Beijing each have earmarked 10 billion yuan to help young ventures. Others such as Suzhou in Jiangsu Province are creating life science parks. A third group, including wealthy Shenzhen, offers to match private capital funding on a 1-to-1 basis and subsidizes patents to attract biotech companies to the city. Policy banks also support the sector through funds such as China Development Bank's Kai Yuan Capital, with $10 billion under management. And then there are tax breaks and other incentives.

Moreover, the Chinese regulatory agencies have been slowly transformed in the last decade, after the then head of the Chinese equivalent of the U.S. Food and Drug Administration, Zheng Xiaoyu, was executed for corruption. When its most recent head Bi Jingquan took over, he let it be known that if his inspectors detected fraud in applications for drugs or trials, he would enforce a five-year ban for applications from offenders, thereby reducing the queue by 80%, says Wang Xiaodong, co-founder of biotech company BeiGene.

Bi was recently forced to resign over the vaccine scandal in the face of widespread criticism in China -- underscoring the challenges that remain in regulating China's drug industry.

Two-way traffic

Much of China's success in life sciences is thanks to close ties with U.S. drug groups. Cross-border research and development deals that involve Chinese biotechnology companies have increased by 70% since 2012. Licensing is one of the most critical areas of cross-Pacific cooperation.

In the past, that traffic was just one way, with companies like Pfizer or Celgene licensing drugs to Chinese drug companies such as Fosun Pharma. Indeed, in the past year China was the recipient of drugs in 27 cases. But increasingly, mainland companies such as Wuxi Biologics are licensing their products to U.S. players, data from McKinsey shows.

Few companies better symbolize the close relations between the U.S. and China when it comes to science than BeiGene. The biotech company, which is developing innovative cancer treatments, is headquartered in Beijing with listings in Hong Kong and on the Nasdaq in New York. It imports technology from the U.S., but also licenses its technology to companies in America, demonstrating that intellectual property in the exploding field of biotech now travels in both directions.

But there are signs that Washington is now trying to sever such ties.

In August, the Trump administration signed into law a harsh new investment regime under the Committee for Foreign Investment in the U.S., or CFIUS, that seeks to guard emerging technologies -- including genetic information -- on national security grounds.

The overriding aim of the "new" CFIUS is to reverse this collaborative trend with China. The result is likely to be a chilling of the relationship, and at least a partial freeze on both the capital flows and human capital movements that contributed so much to recent progress.

Such actions reflect the acknowledgment that data is what defines competitive advantage today, giving China increasing influence across many different technologies -- none more critical than in life sciences.

BeiGene is just one player at the frontier of life sciences with one foot in China and the other in the U.S. Most American pharmaceutical companies, such as Eli Lilly, have venture arms in China that provide both funding and scientists to young mainland startups.

BeiGene's two co-founders are John Oyler, an American, and Wang Xiaodong, a native of Beijing. Wang was one of the earliest beneficiaries of the China-U.S. Biochemistry Examination and Application program that brought hundreds of Chinese Ph.D. students to the U.S. in the 1980s. Today, in addition to his role at BeiGene, he is director general of a government-backed life science center in Beijing.

Such happy stories may now be coming to an end in the face of fears that are partly about competition and partly about legitimate concerns over how data is obtained and used in China. Indeed, the cross-pollination between the U.S. and China -- including flows of both human and financial capital -- that has improved early detection and treatment of disease is increasingly at risk.

Collaborations used to be considered a good thing. Now they are being scrutinized and questioned as part of broader U.S. soul-searching about whether the country is losing its technological edge to and its national security is being impaired by an ascendant China.

"In life sciences we are catching up. ... Our data is better. The technological gap with the U.S. is disappearing" Chinese entrepreneur Han Yusheng

"If China does prove to be successful, outcompeting America in a high technology sector like biotechnology, it would represent another way in which many of the key assumptions that have guided globalization forward in its modern era have been proved to be either inadequate or simply rhetoric," said Ben Shobert, founder of Rubicon Strategy and a senior associate for international health at the National Bureau of Asian Research, in his testimony before the U.S. Congress.

Yet even while scientists, policymakers and politicians in the U.S. debate the scale of the competitive thrust of young Chinese companies and the potential for malign use of their innovations, many of those who are the object of that concern believe the outcome of any contest is already clear.

Han Yusheng, a Chinese entrepreneur with a background in biology, is one of them. Han founded Burning Rock in 2014 to promote the early diagnosis and treatment of cancer, especially lung cancer, using next-generation gene sequencing-based cancer diagnostics. For him, it is clear the lead the U.S. has enjoyed over China in biotech is quickly eroding.

"In life sciences we are catching up," Han said. "Our data is better. The technological gap with the U.S. is disappearing."