The China Basic Medical Insurance Program was created in 1999 with three objectives: equal accessibility, affordability, and quality. Today, it has become the biggest medical insurance program in the world, covering 95% of China's population. Since 2015, China's healthcare ecosystem has been reshaped by increasing innovation, which has in turn been driven by regulatory reform, enhancement of research and development capability, and capital market development. There has also been improved regulatory efficiency to reduce lags in launching drugs. In 2022, nearly 20% of novel active substances launched globally were from China. China has also risen to become the second biggest contributor to innovation in terms of pipelines. Using a “fast‐follow” strategy, many locally developed innovative drugs can compete with products from multinational companies in their quality and pricing. However, China's pharmaceutical and biotechnology industry will continue to face challenges in pricing and reimbursement, as well as a shortened product lifecycle with rapid price erosion. The government has already accelerated the timeline for updating the drug reimbursement list and is willing to create a high‐quality medical insurance program. However, some obstacles are hard to overcome, including reimbursement for advanced therapies, limited funding and an increasing burden of disease due to an aging population. This article reviews the trajectory of medical innovation in China, including the challenges. Looking forward, balancing affordability and innovation will be critical for China to continue the trajectory of growth. The article also offers some suggestions for future policy reform, including optimizing reimbursement efficiency with a focus on high‐quality solutions, enhancing the value assessment framework, payer repositioning from “value buyer” to “strategic buyer”, and developing alternative market access pathways for innovative drugs.