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U.S. companies racing to develop a promising gene editing technology are up against a formidable competitor -- the Chinese government.

China has long set its heart on building an expertise in genomics and its government is pouring funds into a new -- and sometimes controversial tool -- called Crispr, encouraging its researchers to advance the technology. Chinese scientists say they were among the first in using Crispr to make wheat resistant to a common fungal disease, dogs more muscular and pigs with leaner meat.

The scientific research bankrolled by the Chinese government could eventually be tapped by agricultural and pharmaceutical companies. Programs funded by Beijing are, among other things, working on disease-resistant tomatoes, breast cancer treatments and increasing the oil content in soy beans. In the southern city of Guangzhou, researchers who received government funds went a step further, sparking an international ethical debate last year after tweaking the genetic make up of human embryos using Crispr for the first time.

Formally called Crispr-Cas9, the genetic editing tool acts like a pair of low-cost and highly precise molecular scissors that can cut...