context: China allowed foreign-owned hospitals in seven regions in August 2014. In June 2015, policies tightened again, moving healthcare institutions to the restricted category, limiting foreign investment to joint ventures. On 7 September, MofCOM and the NDRC eased PRC policy on foreign investment in healthcare institutions.
A new Notice on expanding pilot projects to open up the medical sector proposes allowing wholly foreign-owned hospitals (excluding traditional Chinese medicine and mergers with public hospitals) in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen and across Hainan Island.
Compared to a decade ago, the new round of pilot projects has a narrower scope, no longer covering entire provinces. Aside from Beijing, Shanghai, Guangzhou and Shenzhen, it only includes the provincial capitals and key cities from the 2014 pilot.
Industry experts believe this Notice has significant implications for attracting foreign investment into China’s healthcare market, expanding the supply of medical services, and providing patients with more diverse and higher-quality options.
However, the domestic environment affecting foreign investment in healthcare remains complex. Practical issues such as staffing and payment systems are still unresolved. Most critically, the differentiation between public and private hospitals is unlikely to change in the short term, and substantial barriers for private capital in healthcare persist.
Foreign investment in PRC medical institutions has long been subject to ownership limits, requiring PRC partners to hold at least 30 percent, explains Gu Yang 顾泱 Han Kun Law Offices lawyer. Gu notes
- collaboration between regulatory bodies signals this opening is based on improved oversight and clear functions
- the PRC’s healthcare market, with over 100 foreign-owned hospitals, shows strong growth potential, and foreign investors are keen to expand
- the notice and industry discussions indicate government support and positive market responses to increased foreign involvement in hospitals
Zhao Heng 赵衡 Latitude Health founder points out remaining issues to be resolved
- doctor shortage
- domestic hospitals offer status, reputation and institutional support, making it difficult for private and foreign hospitals to attract top talent
- foreign hospitals will struggle to recruit doctors, especially specialists
- while foreign hospitals can offer better salaries, working conditions and international training, top specialists are hesitant to leave the public system
- domestic hospitals offer status, reputation and institutional support, making it difficult for private and foreign hospitals to attract top talent
- payment issues
- foreign hospitals usually target high-end patients, resulting in high fees
- public health insurance, focused on basic care, rarely covers these high-end services
- even when it does, reimbursements are minimal compared to costs
- private health insurance is underdeveloped, and out-of-pocket payments limit the potential market for foreign hospitals, keeping patient numbers low
- public health insurance, focused on basic care, rarely covers these high-end services
- foreign hospitals usually target high-end patients, resulting in high fees
Gu notes that despite the recent Notice, the 2024 foreign investment market access special management measures (negative list) still restricts foreign investment in medical institutions to joint ventures.
China Health Policy Research highlights
- the PRC's current legal framework for foreign-funded medical institutions is incomplete and inconsistent
- lack of long-term stability undermines foreign investors' confidence
- the absence of legal mechanisms to balance profit motives with policy risks hinders the further development of foreign medical services